I've seen a tremendous drop in per unit costs for multi-unit residential properties in the last 12-18 months. My experience is that per unit costs in the Merrimack Valley seem to have dropped 20-25% on lower end 2-4 unit properties. That said, a word of caution before anyone considers taking advantage of these "buys".
By way of example, say an investor finds a 3 unit property listed at $170,000 in Methuen which, believe it or not, actually exists. A savvy (or not so savvy) investor thinks he/she can purchase this property for $150,000 and get the steal of the century.
Maybe...maybe not.
These properties often have many hidden costs associated with them. Some common issues are lead paint and mold, to name just a few. It would not be unusual for a neglected property to have renovation costs of $30,000 per unit. Investors, especially novice investors, may be better off paying $225,000 for a similar property with de-lead certificates and in move-in condition. It is all a risk vs. reward analysis. The $225,000 property may yield a similar return to the property listed at $170,000 (with minimal risk) once renovation costs are factored into the investment. Renovation costs are always an unknown and even the most experienced investors sometimes underestimate these projects. Remember that "sweat equity" involves opportunity costs.
In short, my point is that you need to do your homework and know what you are getting into so that you reap the rewards of your investment. With that said, I am a firm believer in investing in real estate and am always available to assist investors through this process.
As an aside, Countrywide Financial Corporation appears to be expanding its efforts to mitigate the fallout from the subprime mortgage mess. Do not hesitate to contact your mortgage company in this regard, irrespective of whether or not it happens to be Countrywide, as other mortgage companies are sure to follow suit. (Source: WSJ)
Finally, it appears that President Bush on Wednesday will raise the limits on jumbo loans from approximately $417,000 to as much as $725,000. Given the market in my geographic sphere of influence, this is very good news! Anyone who needs to sell, or wants to buy, a home in the $550,000-$800,000 range will be in a much better position if this adjustment is indeed signed into law. (Source: NAR, CNBC)
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