Encore: The decline of two-family home ownership

I certainly agree that cashflowing/affordable 2 and 3 families are hard to come by in and around the city these days.

My parents were sucessful in buying their first home as a 2 Fam in Malden. Eventually 16 year later it was sold. Before that equity was taken out to provide for a down payment into our home in the suburbs, a nice one at that.

They once were a great stepping stone. Even with prices down rents still don't reflect the true value.

I own a three family and it was the only thing I could afford what seems like ages ago...2003. The risk is finding good and decent tenants to help you pay the mortgage. I paid about $435K for it then, which was a bit of a bargain but needed a lot of work. Still working on it. I am single with no kids so perfect for me. I still want to get a 2 when I am ready to upgrade since I like the idea of having extra income to pay toward the mortgage and the deductions for having rental property. Aspiring landlord.

Very true.

The fact that rent cash flow isn't a good deal these days says something....

A shame, as it is a great way to provide housing and defray ownership costs.

The other downside of these two families being split into condos-the FIGHTING.
The two family next door to us was split into condos and the two owners can't agree on anything so they are not speaking. The police have been called on several occasions

We've been contemplating putting our 2 family on the market for a year or two. In the past 6 years, we've done siding, new windows, new boiler, new flues, new countertop, new refrigerators, etc. not to mention the regular painting and new carpeting and vinyl flooring as tenants turn over. Of course there's still more to do. We were shocked when one real estate agent said it was a "shame" that we had put time and money into fixing it up! We think he had his developer friends in mind who would only be interested in a "fire sale" price. All this expense and we are still getting the same or lower rent due to market conditions as when we started. We also see a lot of potential tenants with "champagne" tastes and a "beer" budget. We're discouraged, but happy that the mortgage is covered by the rents and are contemplating more work to be done.

I think a lot of two family owners, recognizing all the condo-ing and flipping investors were doing have priced the potential for condo-ing into the asking price of these two families in a lot of areas. Look at 2 families in relatively desireable towns like Arlington, Belmont, Watertown - anything decent and not falling down is well over half a million dollars - closer to $600K! If you're simply looking to buy a 2 family and use the other unit to help defray the cost of buying, it doesn't seem to make a lot of financial sense anymore.

My wife and I bought a 2 fam in Watertown with the intention of living there and having the second unit help defray our mortgage. But when our tenants abruptly moved out on us and we saw what condo conversions were going for, we realized that we were wasting money on our huge mortgage (and paying it without tenants was financial suicide). Condo-ing it and flipping it became such a clear option that it would have been financially imprudent NOT to do so.

I realize that it may not be the best thing for a community to have two families get churned into condos, but Walthamolian also makes a good point - our two family was in ROUGH shape when we bought it - and in order to sell the units as condos we had to put in two new boilers, new kitchens and do a ton of cosmetics. Two families may good for the community - but BOY do their owners let them get run down before they make repairs. At least with condos you have a certain pride of ownership wherein people will take the time and effort to reclaim some of these dumpy, run down properties and make them look decent.

You also can't diminish the advantage of condos as an option for first time homebuyers. Sure if you have kids it may not make sense, but if you have kids, you wouldn't be buying a two-family either under that rationale.

In truth, you won't get paid for putting in new vinyl and carpet, or any of the rest, on sale. Its still looked at as something that has to be ripped out by the developer. Not even a fire sale situation, just a matter of ripping out what won't sell, and not wanting to pay for something you are about to rip out.

I see this a lot, where places get "improved" into an awkward place in the market. The improvements aren't ones that most people are interested in (or realize the value of, like a new flue) but the owners still want to get paid for their improvements. Tough situation.

To Charles' point, I think real estate agents need to look past their developer friends to the kind of people Rona is helping buy properties. I think we're back in the economic place where it makes sense for someone new to real estate to invest in a multifamily -- to have the rental income to make the mortgage. The big plus -- you get to decide on who's your neighbor and what gets fixed, to a certain extent. I think its best for the community when places aren't dumps.

#8 - yes, but are you willing to take the hit to your property value that entails? A 2 family that sells for rental can't justify nearly the same price as a 2 family that sells for development.

Which is why multifamily owners sell to developers, and price at a price only developers could afford to pay.

Granted, the easy condo market is pretty much toast in any case, so the point is probably moot.