What Would You Do In My Position?

Question

Calling on the collective brain power of the BP community. As you have all shamed me through your ability to act and your knowledge to bring deals together, I come to you hat in hand, a frustrated yet anxious man.

My wife and I recently moved from CT to MA for my work, and we're currently a single-income house (well, apartment) hold, as my wife is now staying home to care for our new baby. I see you all putting together so many deals, so I figure why not put my life out there to see how you would all move the chess pieces.

My Goal: Purchase a primary residence and a second investment property.

What's Holding Me Back: Lack of savings, knowledge and a thinning hair line, but mostly the first two.

Tools at My Disposal:

• 2-unit house purchased with an FHA loan; Purchase price of $200K (30-year fixed @ 3.25%) $181K remaining $1600/mo mortgage payment with $2400 in rental income Area has appreciated with unreliable Zillow estimates assuming a $230K sales price
• Purchase price of $200K (30-year fixed @ 3.25%) 
• $181K remaining
• $1600/mo mortgage payment with $2400 in rental income 
• Area has appreciated with unreliable Zillow estimates assuming a $230K sales price
• $87,500/yr salary (take home of approximately $5K/mo)
• Approx. $20K savings (a reserve I'm loathe to touch)
• 800+ credit score
• Very low monthly debt

• Purchase price of $200K (30-year fixed @ 3.25%) 
• $181K remaining
• $1600/mo mortgage payment with $2400 in rental income 
• Area has appreciated with unreliable Zillow estimates assuming a $230K sales price

Right now, my rent in this part of MA is $2100. My soul dies a little bit each month and I'm not sure I can take another year of renting.

What I'm Currently Looking At:

• Primary residence for less than $350K
• Lakeside cottage in Upstate NY for $120K to be used as a short-term/vacation rental

So, with all of this, what would you fine people do in my position? Bonus points if you live near Boston and want to make yourself feel great by watching me bungle my way through this all in person.

Steve McGovern · Answer

@Cosmo Iannopollo Seriously, look in Lowell.  Yes, it's a city.  Yes, there are a couple of bad parts, but there are also GREAT Areas, MUCH more house for the money, multis are available, your renters have bus routes,  and there's phenomenal culture.

For the record, I lived in one of those "bad parts" of town for 12 years...   NEVER, Never had an issue. Not me, not my neighbors.  The place is quietly coming around, which means appreciation is slower than other areas, but much more 'real' and earnest than if a neighborhood suddenly flips in a 'trend'  and gentrifies overnight.

I grew up on the South Shore.  All my life I heard "Don't go to Lowell!"  My wife & I landed there and fell in love.   I'd be happy to grab coffee with you.

Shannon H. · Answer

Steve, I understand because all my life I heard the same thing. Now, with starting my search for a multi family to live in and rent out the other half, we are always reacted to the seething, or sharp breath intake about moving there. We have checked out a few "tiny" single families before we made the decision to invest in our future. But the constant belittling of Lowell and Haverhill is exhausting.

Cosmo Iannopollo · Answer

@Shannon H. @Steve McGovern Not being from the state, I was definitely told to stay away from Lowell, haha. Considering it's really the only city in the area that hasn't bubbled beyond belief, I may expand my search.

@Stefanie Willie-Bonglo Wish I had known a little more in advance, but I'd like to make it to the next one. I'll keep an eye out. Thanks for the heads up.

@Steve DellaPelle Really liked Wilmington when I was doing my apartment search. Couldn't find anything there, though. The schools look insanely good, which probably means high property tax, right? How's Haverhill? I know nothing about it.

Steve DellaPelle · Answer

@Cosmo Iannopollo Hey! I grew up in Wilmington (5 minutes from Wakefield) and also lived in Malden and Everett before purchasing a 4-family in Haverhill. I'd like to help out if possible just let me know if you have any questions. There are such good deals at reasonable prices and we are on the commuter rail line straight to Boston.

Stefanie Willie-Bonglo · Answer

@Cosmo Iannopollo  @Shannon H. Welcome to the amazing world of real estate! I know that it's short notice, but based on the questions you have, it sounds like you would both get  a LOT out of our real estate meet up networking group tonight! We are meeting up in Haverhill at 7PM. Message me for more details!

Michael Pallotta · Answer

Sounds good @Cosmo Iannopollo. Send me a PM and we can talk more with you about the situation and your goals! I would be happy to help!

Cosmo Iannopollo · Answer

@Michael Pallotta I work in Waltham, looking in the surrounding area (currently stalking a house in Billerica). Right now we live in a complex. I hate it. Hate. It.

Michael Pallotta · Answer

Hey @Cosmo Iannopollo, Wakefield is a great area. I currently live in Burlington which is not far away. Where do you work?

It is tough in the area to find a duplex in that price range currently without moving further away from Boston. What type of apartment are you living in in Wakefield? Complex/duplex?

Cosmo Iannopollo · Answer

@JD Martin 20 years of aerodynamic prowess.

Wife and I did the house hacking thing in our 2-unit and it was great, but even more impossible to find an affordable duplex or more in MA.

Right now we live in Wakefield, MA and 2100 is about the best we can do. I've resigned myself to the fact that I won't be able to save enough to really rely on that as a way forward, so I'm looking for some creative suggestions (which basically rules out my credit, salary, etc.).

JD Martin · Answer

@Cosmo Iannopollo  LOL. If the real estate thing doesn't shake out, look into writing for late-night comedy! I sympathize - but only a little - with the thinning hair line, as I've been close to bald for 20 years.

OK, thoughts in no particular order:

1. I assume you own the first property you mention in your tools? So it appears you've got - before expenses - another $800/month income on the rental property?

2. The reserves look pretty adequate. I would ignore those as any real source of funds. 20k isn't really a ton of money for covering two units, so you're wise to avoid messing with it.

3. Unless you have the time to buy a dump in Upstate and fix it up yourself, I'd forget about that for now as an income property. That's super-seasonal and if you can make a vacation home that you're going to use just break even you're doing pretty good.

4. It sounds like you need to significantly lower your monthly living expenses in order to get anywhere. You're spending over 40% of your take-home on rent alone. That's going to make it pretty difficult, especially with a new kid, to put aside any extra money. If you can find a duplex, buy one side and rent the other, or a triplex, that's probably your best short-term bet. I'm guessing your wife's not crazy about living in a house with someone else next door at this point. Where are you in Mass? Is 2100 the best you can do, or the best you can do based on the type of living you want to do right now?

What Would You Do In My Position?

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