The New York Times had an article about our triple-deckers this month. Besides quoting what Dennis Lehane thinks of them, Abby Goodnough quoted these statistics about foreclosure in this kind of housing:
In Boston, three-family homes represent 14 percent of the housing stock, but made up 21 percent of foreclosed property in 2008, according to the city’s Department of Neighborhood Development… Ms. [Evelyn] Friedman, [chief and director of the Boston’s Department of Neighborhood Development] believes the foreclosure rate on triple-deckers is even higher than the data indicate, because many were converted into condominiums in recent years. These are counted in a separate category that made up 48 percent of the city’s foreclosed properties last year.
I am a huge fan of owner-occupied multi-family housing. The Times’ reporter reiterates what I think:
Best of all, three-deckers put homeownership within reach of the working class. Buyers could live in one unit and rent out the others, assuring they could afford payments and upkeep for years to come.
For years, two- and three-family ownership has not been a viable option. As purchase prices increased far beyond rental rates, the owners of a two- or three-family home found themselves paying more to live in their properties that their tenants.
1996: A two-family house costs $200,000. The PITI mortgage cost is about $1550 a month (with 20 percent down payment of $40,000. 7 percent interest rate.) Rent for a two-bedroom unit is about $1200 a month. Owner is out-of-pocket $350 a month, plus expenses and upkeep. A three-family would give the owners a positive cash flow of $850 a month.
2006: If a two-family house sells for $600,000, the PITI mortgage cost is about $3350 a month (with 20 percent down payment of $120,000. 6 percent interest rate.) Rent for a two-bedroom unit is about $1400 a month. Owner is out-of-pocket $1950 a month, plus expenses and upkeep. Even if this was a three-family home, the owners would still be out-of-pocket $550 a month.
Is it any wonder that developers bought these properties and flipped them for condos? There was nothing to be gained by owning rental property of this type.
Multi-family housing prices are coming down now. When do they approach the “worth-it” level? Are we there yet?
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