The Warren Group recently had a report that dove into the details of the foreclosure numbers in the state and took a look at how multifamily foreclosure numbers stacked up against the rest of the stock.

Petitions to foreclose are the first step in the foreclosure process; for all property types in Massachusetts, there were 2,835 such petitions in February, up 27 percent from the same month in 2007, the Warren Group said.

Of those petitions, 635, or 23 percent of the total, were filed against owners of multifamily homes even though two-and and three-family homes represent only 11 percent of the Massachusetts housing stock, the Warren Group said; in February 2008, there were 1.8 petitions to foreclose filed against two-and three-family homes for every sale transaction for that property type.

The fact is that most of the people who are having their multifamilies foreclosed on overpaid. It’s that simple. The rents that the units support don’t support the required payments.

According to MLSPIN in Massachusetts in the year 2000 7,512 multifamilies traded hands at an average price of $209,238. In 2005 10,079 multis traded hands at an average price of $406,056. Good grief. That just about a 100% increase in 5 years. At the same time rents were sagging during this period.

This unsustainable run happened for 2 reasons

1. Stupid loans
2. and Condos

We could go on about the stupid loans but I think the media has covered that enough. The other piece of that is condos. Every guy with a hammer and a white van became a developer. Multi’s of any size were being snatched up at any price and then converted to condos. This drove prices artificially high. Now the music has stopped and there are a lot of people looking for their chairs.

The name of the game today is to buy on the fundamentals. As more and more homes are foreclosed more people are displaced. I haven’t seen hundreds of people moving into tents in the streets. Have you? So foreclosed upon displaced people are living somewhere, and that somewhere is in rental units.

Buying a rental property at a price that makes sense, taking care of it properly, and holding it for many years has always been and will continue to be one of the best ways there is to build wealth. There are properties that make sense out there right now today, and if you’re in the market there isn’t much competition for you. You can pick and choose and negotiate and wait and you will find something that makes money for you for now and for the long term. Don’t be put off by the media.