Multi-Family Properties
Seems awfully hard to find good cash flow properties these days, that make sense financially. In commercial real estate it is the numbers that matter to the banks, investors and of course to the owners. Banks want safety, investors want return and owners want all the cash they can get, and me to. No matter how great the property, it is only as valuable as the income. Trying to sell an income producing property like a house puts the property in an unsaleable position, eventually makes owners angry and buyers move on to the next deal. A property across the street from my office is listed very high and people look at it all the time, but no deal, could it be!! The reason is the income cannot support the price and it doesn't matter what the brick an mortar seem to be worth, it still comes back to income. I am always looking for good salable properties.
We are looking for properties that will actually pay their way. That means that income must be more than expenses and cover Debt Service. Lenders look for a 1.25 Debt Coverage Ratio and that means that debt is covered by 25%. Investors want and need to make their investment back and also make a return on their investment, otherwise it "ain't worth it". It is a rude awakening to realize one day that income is less than expenses. That is what seems to be happening in the market around this small town of Montrose. Sellers, and only because of their Brokers, are trying to get every dollar out, which means, just like in the stock market, if there is no upside, there is no investment. Income producing is all about selling rights to appreciation, depreciation and cash flow. Selling cash flow is as different from selling a place to live as a VW bug is to a Hummer, they are both vehicles, but that is about all. That price listed on a commercial or multi-family property must have a margin or its like the bread man selling at or below cost. It won't work.
If you find a property that is seemingly a good deal in western colorado, let me know and I will pay a referral if we get the deal together.