Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in
Greenville South Carolina I am your host
as always Stan McCune realtor right here in
the Greenville area and you can find all
of my contact information in the show
notes if you need to reach out to me for
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appreciate just you listening just that
alone helps but these other things help
as well today I'm I'm very excited
about this show because I put quite a
bit of of work into this I'm I'm excited
actually aside from the content of the
show I'm actually now in my house that I
moved into as if you guys have been
listening you know I'm relocated from
Greer to Greenville that relocation is
complete I always record these
episodes from my home office and I am
now in a new home office now I had to
completely reconfigure my office this
office that I'm in now is smaller
than the old one it's a completely
different configuration if you guys
know me well you know that I love board
games at the moment we don't have a
clear-cut place in my house to put the
board gam so they are now in my office
now I do have some nice Ikea
shelving that is currently keeping the
board games tame and and making them
look like it's just kind of a part of my
Decor but it but it is very cluttered
but that being said I am excited to be
in here I did quite a bit of
experimentation with the audio I have
a completely different setup when it
comes to that so hopefully the audio
quality is still going to be good I know
it's not ever 100% awesome but I have
tried to make it as good as possible so
hopefully that is okay for you guys
and I will continue to try to improve on
all of that as we go but I'm excited to
be in this new office I'm also just
excited about this episode because
this episode started with a question
that I had in my mind and it's a
question about the
multifam world of real estate now
when I say multif family it's really
hard it's really important for me to
Define terms here because that word even
though it might seem straightforward it
means different things to different
people when I'm talking about multif
family I'm talking about multif family
that would appear in Greenville MLS
here's the type of multif family that
would typically appear in Greenville MLS
duplexes triplexes quadruplexes
packages of small packages usually 10 10
doors or less of houses condos Etc
and mobile home parks those are those
are kind of the the standard multif
family types of things that we see in
MLS I'm not talking about you know
apartment complexes or communities that
would pretty much never appear in
Greenville MLS those are more commercial
deals and I'm not as knowledgeable about
commercial deals
as a commercial broker would be so
I'm talking more about what what people
would typically call small multif family
that is what we're discussing in this
podcast and the question I had in my
mind was I know that a lot has changed
with multif family the past 5 years are
we heading into or do we have some kind
of multif family bubble that is about to
burst that is the question that I had in
my mind because multif family has just
has gone crazy it's got gotten a lot
more expensive and I've seen this
from firsthand because I have a lot of
investor clients I've always had a lot
of investor clients and a lot of them
have kind of put things on pause as
they've waited for the balance waited
for the market to just cool off a bit
because it's just been so intense the
past few years from a multif family
standpoint and so here's the analysis
that I did I went in Greenville MLS and
I looked at all multif family sold in
Greenville County from the past year
okay October to October of the past year
and then I did that same thing for each
previous year going back to October 2017
to October 2018 I looked at what
prices and price per square foot these
properties sold for and took took some
averages there then I went into the
rental section of Greenville MLS and did
basically the same analysis for
properties that were rented October
October of this year and then going back
each year going back to 2007
2018 now here's a really really
important caveat is I did not
strictly look at rents for multif Family
Properties there's not really a good way
to do that I had to analyze just all
all rents basically including single
family properties condos Town Homes all
of that and that's an important
detail because multif family tends to
not rent for quite as much as single
family because single family has some
benefits you're further away from your
neighbors in theory you may have a
garage you often times will have a
larger yard etc etc so some of the
rental numbers are a little bit inflated
in contrast to what they really would
be if you were renting a multif family
property but that being said I still
think that the data when you look at it
from a meta level and look at the trend
I still think that it's helpful
helpful to see and helpful to analyze
so I'm just going to jump right into
this data and tell you guys what I what
I saw so let's go back 5 years ago to
when the market was a little bit less
crazy 2017 October 2017 through October
2018 what was happening in the
multifam world of Greenville at that
time that period of time
exactly
100
doors were sold so I analyzed this on a
pero basis I felt like that was the
fairest way to do this rather than
looking at properties because there
might again a quad is a lot different
than a mobile home park so I just looked
at doors during that period of time
in Greenville MLS based on the
parameters that I searched 100 doors
were sold and they sold for a little
north of $6 million that averaged out
per door to
$61,000
$126 per door the average square foot
was
$835 Square fet per door which comes
out to the average price per square feet
as $73 and 15 all right are you tracking
with me about $61,000 per door and about
$73
per square fet all right going on to
2018 to
2019 that number jumps up so now we had
79 doors that sold for a little north of
7 million that average number per door
now jumps up to $
9,729 so almost
$90,000 with an average square foot
of
$895 $895 squ ft and so in that year
the average price per square foot jumped
up to 100
$122 that's a a big jump now here's the
important thing again looking at this on
a meta level is helpful but you do
have to keep in mind from one year to
the next it it's it's helpful to look at
over the fiveyear trend but from one
year to the next these are going to go
up and down just based on the different
things that are sold in and you know
there might be one year that some
very expensive multif Family Properties
sell there might be other years that
cheaper multi family multif family is
more volatile than single family so
looking at it over the 5year period of
time is helpful but saying oh wow it
went up
from $73 a square foot to $100 a
square foot in one year yeah that
that's interesting but from one year to
the next you you will see those types of
fluctuations when it comes to multif
family when we go to the next year to
2019 to 2020 so now this is the
period of time where we shift from non-
pandemic to pandemic we had 100 doors
that were sold for
7.75 million so that came out to
$77,500
52 square fet and the price per
square foot shifted back down to
$814 cents a square foot still higher
than what we had in 2018 so we can still
see that the number is going up and
then as we get to now we're in
full-blown pandemic here's where things
start to get crazy when you look at
October 2020 through October 2021 the
number of doors jump up to 121 so by far
the most up to this point with a
total amount paid of 15 million 15.15
million with an average price per door
of 125
,000 125 270 the average square foot
was
$969 per door so that comes out to an
average price per square foot of
$129 a massive massive jump from from
anything and then the last 12 months
that shifted down a little bit but it
but we still see extremely elevated
numbers in comparison to what those
earlier numbers were it was 107 doors
the past 12 months sold for 13.35
million the average square footage
interestingly was higher
1,24 so that's the the first one on
here that broke over a
th and so we come up with a average
price per door of 124 857 so that's very
close to the $
1225 ,000 that we had the year
preceding so
basically B basically staying stable at
25,000 per door and then the average
price per square foot came down a little
bit off of its peak of October 2020
through October 2021 it came to $1
121.9 so over the course of five
years we have seen the price per
door more than basically more than
double it started in 2017 2018 at
61,000 and then 5 years later we're at
125,000 the price per square foot 2017
2018 started at
73,5 that didn't quite double but it
went up substantially it went up now
like I said it's sitting at
around2 basically
$122 per square foot so absolutely
insane increases for for multi family
when you look at it on a per door price
per door and price per square foot basis
and normally when you have this type of
thing happening that's not good for the
market you had the price double
basically
double are we going to experience some
kind of bubble bursting in multif
family well we have to then look at the
rents what were the rents like in 2017
to 2018 and again remember these numbers
are going to be slightly elevated so
the average
rent based on the Greenville MLS that I
was looking at was about $700 it came
out to$ 70188
$700 now remember that the average
price per door was
61,000 and the average rent was 701
now you're going to think if if you're
investor minded you're like oh wow
that's well above the 1% % rule that's
like 1.15% yes again these numbers
are are going to be a little bit
inflated they also don't factor in
maintenance any kind of deferred
maintenance which a lot of multif family
has deferred maintenance when it comes
on the market that's just what happens
but I did look at the average rent
per square foot and the average rent per
square foot was 84 cents okay now that's
important because I feel like that helps
us to really assess how things are
changing over the years so let's look
at I'm not going to analyze it for each
year let's just jump to the Past
calendar year what have we seen in terms
of rents in Greenville MLS so it was
$701
$700 per month for your average
rental in Greenville mls in 2017 2018
the past 12 months that number is
1393 almost 1,400 almost exactly double
just a hair below
doubling the average rent per square
foot
$1.36 again very comparable to how the
price per square foot went up it didn't
the the remember the the average
price per door doubled the average price
per square foot didn't quite double but
it went up substantially very similar
almost exactly the same thing happening
with rents the average rent basically
doubled the average rent per square
foot went up in a very comparable Manner
and so I actually came up with this
this metric I don't know if anyone else
has done this before probably someone
somewhere has but for me it's the first
time I've ever looked at this number
have ever really considered it but I I
looked at the I I basically created a
a ratio of price per square foot and
rent per square foot so we'll just call
it just that cuz I'm not very creative
when it comes to this kind of stuff the
price per square foot to rent per square
foot ratio basically I took the average
price per square foot and just divided
it by the average rent per square foot
and essentially the lower the number the
better the rental is so if you have a
higher rent per square foot and you're
dividing that number into the average
price per square foot the higher rent is
going to basically lower the overall
number that you get when you do this
ratio so the lower the number the
better that ratio in 2017 and 2018
was 87 okay so here's what I would say I
would say that there were a lot of
pretty I shouldn't say a lot of but
there were some pretty good multif
family deals in 2017 to 2018 and so
if we're looking at the number
87 that would be a pretty good number
like if if if we're in that range I
would say that that's that's pretty fair
like that you should be pretty happy
about a market where where that is the
number how does that compared to the
past 12 months well the past 12 months
was 89 so actually not that different
which makes sense again we're when we're
comparing these what happened in 2017
2018 to now rents and prices have come
up very comparably
and so I looking at all of this I'm
actually a bit surprised and I like this
I like when the data surprises me
because then I learned something and
what I learned is that I'm a lot less
concerned that we are in some sort of a
multif family housing bubble because
rents have gone up to account for the
price increases now I will say this
multif family tends to have more
deferred maintenance a single family so
there is that possibility that some
people bid off more than than they could
chew buying some of these more
expensive multif Family Properties
and there are you know the people are
having to take out bigger loans and
whatnot there's a higher risk of of
default fewer cash purchases than there
were back when things were $60 a door
$60,000 a door so there is the
possibility that we will have some sort
of a correction and and some of the
some situations where where landlords
can't afford their mortgage can't
afford the the property etc etc but just
looking at these numbers I would say
that we really shouldn't be super we
shouldn't be looking out for some kind
of a multif family Bubble Burst I I I
think that the
direction of rents and and the direction
of pricing all of that leads me to come
to the conclusion that actually we're
we're probably just going to see people
just renting out their properties and
being able to hold them for a long time
now I have a lot of other conclusions
from this data as well one one thing
that I found very interesting was that
average rent per square foot because
this is an important number I I have a
lot of rules of thumb that I operate
from in in our market and one rule of
thumb that we kind of used pre pandemic
and into the early stages of the
pandemic was that average rents in
Greenville was about a dollar per square
foot so that made it very simple you buy
1,000 squ foot property you can assume
to be able to rent it for about
$1,000 well that number the past 12
months is
1.36 now I will say so $1.36 per
square foot now I will say the way I had
to calculate this is a little bit
inflated I would say and I'm not
going to get into all of the details on
that it's a quirk of Greenville MLS
so it's not quite
a136 I I wouldn't quite go that far
but it's definitely more than a dollar
per square foot so I think it's safe to
say now that that the rule of thumb for
rentals that we should start to say that
is probably about
a125 per square foot that is what you
can expect to rent for in in
Greenville County at least now outside
again I was looking specifically at
Greenville County for the most part
so outside of Greenville County maybe
not so much but for sure within
Greenville County you can operate under
the assumption a general rule of thumb
a125 per square foot is what you'll be
able to rent a property that's in
good condition
for here's another thing that I found
very interesting I already mentioned
this but multif family went up per door
it doubled in price it actually
doubled in price in in four years and
then you know remember the past year
it's basically the same as what it was
the year before so it doubled in four
years or in five years depending on how
you want to look at it and compared
to single family that's a a big increase
single family only went up about 1.5
times during that same span so if you
bought multif family 5 years ago you are
you're in great shape you are very very
happy with what has happened in the
market go you know get yourself a nice
Starbucks coffee a nice drink you can
treat yourself if you bought multif
family 5 years ago that's something to
that's something to celebrate
assuming you didn't overpay but even if
you overpaid and it doubled in value
you're probably in good shape now I I
don't think that we're going to see
multif family continue to double in
pricing every 5 years I do not think
that that's possible I think it was
undervalued for a long time and I
think the market just kind of caught up
to that and I think that the market is
now readjusting as I've said prices have
basically flatlined the past year I
think that we're going to still see
steady appreciation but I don't think
we're going to see it out pay single
family to to the degree that it has I
think the market caught up and and
now I think we're going to see some
substantial tapering of multif family
prices moving forward now I will
say people have gone crazy with some of
these properties that I've seen listed
recently some duplexes and whatnot that
I just don't see how people could
could justify the prices I don't see how
they could rent how the rents would
would would justify you know buying a
duplex for
$400,000 where each side you you know
might rent for $1,600 a month something
like that those numbers don't make sense
to me but I don't know we we'll have to
monitor and see if if the market
continues to you know if it's just a
supply and demand thing and of course
multif family Supply is always very very
low in this area maybe there is someone
that just needs to SN $400,000 into
something maybe they have a 1031
exchange or whatever who knows but
the point is that we've got housing
multif family housing that went
tremendously up in value the past four
to five years and and I would
anticipate that it's not going to keep
up that pace now here's another thing
that I want to hammer into everyone's
head okay we've talked about this before
it is really important when you're
looking at purchasing rental properties
that you project the rent do not I'm
telling you do not get fixated on what
the current rent is or what the past
rent is that drives me crazy as a
realtor when I'm showing properties
to someone that it it drives me
particularly crazy when I'm showing
properties to a someone that has
invested before and they ask me and
they get it's one thing to ask what the
current rents are or what the previous
rents are but it's another thing to get
fixated on it and I and I'll have run
into this from time to time you know
I'll list a a rental property and I'll
get someone that I don't know that calls
me up and they're just like what what
did it rent for what could it rent for
and you know it's like well I mean
last time it only rented for 700 a month
you're saying it could rent for a th000
a month well why did it only rent for
700 a month and it's like do we need to
have this
conversation you know usually it's
very obvious right when you're walking
in the property you can see why it only
rented for 700 a month when the
projected rent should be a th000 a month
the kitchen appliances are garbage the
floor needs to be replaced so you have
to factor in all of that you have to
factor just like you project what the
expenses will be to bring the property
up to where it needs to be to rent
you have to also project the rents focus
on what a property can rent
for
but here's where I'm going to say
something that I haven't focused so much
on in the past you also have to take an
account future projected rents how much
rents might go up in the future because
as we see here rents have gone up
tremendously the past 5 years and this
is one of the the powerful aspects of
owning rentals is that typically your
costs stay relatively flat each month
and each year but your rents can go up
and they will go up in an area like
Greenville that is highly desired now
even within Greenville obviously certain
areas will appreciate in rent more than
others but this is really really
important to think about not just okay
you there there are basically a lot of
different ways to look at rents again
you've got the people that are fixated
on what it used to rent for or what it
currently rents for then you've got well
what can it rent for right now and then
you've also got to what I'm saying
also consider what is the potential that
this could be renting for in 2 3 four 5
years because that is how you identify
the opportunities at the end of the day
it's not by getting the rental that's
already tapped out it's already renting
for as much as it possibly can and it's
in an area that's that you know isn't
probably going to be become much more
desirable in the upcoming years the
people that do real estate investing
really really well are the ones that can
project what the rents will be now
and also project that there is a high
likelihood of the rents going way up in
the future that's really really
important and I've had a lot of clients
over the years shame on you if you're
one of those clients now I'm just
kidding I've had a lot of clients
over the years that have passed on quote
and quote okay deals because they were
looking for quote endquote great deals
but now when you look back the okay
deals were actually great because they
were okay by the current standard but
because of how the market has shifted
now they are great deals and you would
say you know I'm sure some people would
say yeah but we couldn't have
anticipated the pandemic and all that
who cares you can't anticipate you have
to be able to anticipate the possibility
for just about anything right people
that invested in real estate they invest
in real estate or you know now or in the
past if they invested in the past or
they're currently investing one of the
reasons why you invest in real estate is
because you know it's a stable asset
that is going to continue to go up in
value again this isn't investment advice
don't take it as that but that is why
people invest in real estate and so you
have to be future thinking you have to
consider what one of the things for me
that I think about is let's say that we
go let's say that the entire world
economy bottoms out like what are going
to be the things that are are important
to people is it going to be gold is it
going to be crypto is it going to be
stocks or stons as as the kids
call them now one of the things that
will retain value is land housing all of
that type of thing again that's not
investment advice but my point is that
when you're real estate investing you
have to be forward future thinking and
you have to be prepared for okay this
might be an okay deal right now but this
has the potential to be a great deal
down the road there are some deals that
are like that that may might not be you
know the best deal of the year but when
you look back five years from that from
that moment in the future what am I
trying to say when you go 5 years from
then and then look back you might be
like okay that was actually a better
deal than some of the others that looked
like better deals at at the time and
so that's a very important consideration
don't be one of those that passes on
on an okay deal that because you don't
have the foresight that that's going to
be a great deal in the future all right
that's my rant on that a few other
things that are going through my mind
as I look at this
data there has obviously been and and
we've been seeing this for a while now
but there is a massive shift happening
in terms of who the landlords and
landladies are in Greenville Greenville
just quite frankly has traditionally had
a lot of poor landlords that's why when
you go into an area like Po Mill that
has a lot of rentals it's run down
because those are just quite frankly
poor landlords and and it's not just
poor landlords that let properties get
deferred maintenance it's also cheap
landlords there are some very wealthy
cheap landlords I I need to clarify that
but green so let me rephrase that
Greenville has traditionally had a lot
of cheap landlords now to the the
point of being poor I owned rentals in
my 20s when I didn't have very much
money so I I'm not accusing anyone or
applying a label like that label applied
to me I was a poor landlord in my 20s
but I had an opportunity and I took
advantage of the opportunity I took
advantage of the money that I
had but with the cost per door
doubling now we're seeing a massive
shift happening these
landlords must now have more money and
also not be as cheap as the ones in the
past you've got with the cost per door
doubling obviously now the down payment
that you have to pay doubles now the
monthly payment if you get financing has
to double etc etc so duplex that you
could get 5 years ago for
$125,000 you could you could have
potentially put $25 to $30,000 down and
gotten that now that same duplex cost
$250,000 now you have to put $50,000 to
$65,000 down that's a different type of
person it's a different type of person
that has 50 or $60,000 lying around
that they have nothing better to do with
than in invest in real estate than a
person that has $25 to $30,000 okay so
the type of landlord is Shifting to a
wealthier perhaps more abundance
mindset type of landlord than what we've
had in the past and and you know
again you have to consider that what it
took to qualify for
$125,000 mortgage on a rental property
back in the day now that same person has
to be able to afford a
$250,000 mortgage they have to be able
to qualify for that their debt to income
has to allow them to do that so the
type of landlord that is able to the
type of person that's able to purchase
rental properties and become a landlord
or a land lady has shifted it takes a
lot more money now remember as well
that a lot of these properties have
deferred maintenance too so you also
have you have all this more money that
you're shwing out on the front end and
but you still have a lot of the Deferred
maintenance issues that you still
have to come out of pocket for right
away as well so all of these things are
things going through my head about
how the market is Shifting and and again
it leads me to think okay I don't think
that we have a major multif family
bubble that's about to burst people have
more money the the people that have
purchased these properties obviously
have more
money the rents have come up so
they're making they're still making
money they're still making a profit and
everyone I think everyone that bought
multif family the past 5 years is
probably pretty happy about it even the
past two years when things have doubled
in in pricing that being said and
I've said this before but I'm going to
say it again the best strategy when it
comes to multif family has not changed
the best strategy is the bur method
by
repair rent refinance repeat I I may
have gotten some of those RS
reversed I think I got that right I
don't know that method is still the
best method if you have the cash to
purchase something cheap that needs work
that is the way to go because in
Greenville the number one expense that
you have besides your your mortgage is
property taxes property tax in
Greenville County are insane if you're
renting but they tend to be lower if
you purchase a property for cheaper so
it's better to purchase a property for
$100,000 and then put $100,000 into it
than to purchase a renovated property
for
$200,000 because Greenville County when
they reassess it they're more likely to
reassess it based on the $100,000 value
than than they're more likely to
reassess it based on what you purchased
it for okay now Greenville County is
still looking at areas and still hiking
up prices based on general areas going
up in value so it's not a perfect
onetoone type of thing here that if you
buy for 100,000 it's going to
automatically be assessed at that price
but it's more likely it's more likely
that if you purchase cheaply and then
put in the work that you will save
yourself thousands of dollars per year
on property taxes trust me I've done
this over and over and over again and
then you know if you want you can do
whatever work needs to be done to the
property and then do a cash out type of
refinance and go that route and then
everyone come home happy right we we all
end up with a good multif family
property lower property taxes it's
renovated you're making your monthly
payments all of that great stuff and
listen multif family is a great in my
opinion again this is not investment
advice but in my opinion and for me
personally it has been a great
investment it's just they're hard to
come by but one thing that you need to
consider again is when the supply is low
like it has been now for several years
there are opportunities that are out
there you just have to be Forward
Thinking you have to consider what is
going to happen in the future and
sometimes for me there have been
sometimes where it's like you know what
I'm just I just need to do a deal I just
need to break into this Market and
for me that has worked out very well
over the years and if that's something
that you're interested in doing I'd love
to talk to you about it so all my
contact information is in the show notes
please rate review subscribe download
episodes all of those good things and we
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