Mailers and off market marketing for a first househack?

Question

Hi everyone!

I have a quick question that I would love to hear the communities opinion on! So I am currently on the hunt for my first 2-4 family househack in Lowell, MA or Haverhill, MA under 350k. The on market volume is still pretty low in my neck of the woods and I have been considering sending out mailers/driving for dollars ect. to have some extra firepower to create more opportunities. The only thing that worries me is I only have about 20k in cash that would comfortably fit a 3.5% down payment on market with reserves and a small amount to start repairs. I am very attracted to a seller financing deal but started checking out lists for 100% equity to avoid the due on sale clause and haven’t found many results on list source. I envision using wholesaling as a secondary method to attempt to try to satisfy the leads that are not attractive as a househack.

Would it be worth it to market to motivated sellers for a first property with a small amount of capital or keep waiting for the on markets?

Thank you,

Kyle Curtin

Tanvir Sattar · Answer

@Kyle Curtin have you considered inbound marketing to find a seller? You could use GeoTagging and let them come to you.

Michael H. · Answer

Absolutely, it's an achievable number with an aggressive saving strategy for young guys like ourselves. For areas, in Worcester, I'm very interested in the Green Hill Neighborhood, Bell Hill, Britain Square. Studying up on Highlands St. around WPI, Crown Hill, and the neighborhood just north of Shrewsbury St.. For Lowell, I like South Lowell, the upper and lower Highlands, and around UML South and North campuses. I'll look at any two's or threes for myself or for clients, especially if they are under market ($100PSF or under ~120K/unit in Worcester, $130PSF or under $150K/unit in Lowell . Some value add doesn't scare me if the numbers work.

Kyle Curtin · Answer

@Michael H.Thank you so much Michael! That is a really good point, I like that number much more in this market. I will definitely let you know as I experiment with more marketing to motivated sellers. Do you have any price range or area?

Michael DeLaMarre · Answer

If you are buying an older 3-4 family building I can't stress how important it is to go in with extra reserves. I went into my "turnkey" duplex in Worcester with $16k in reserves in March and just about everything that could break this year has. An oven went out, I had to have an electrician out because I discovered electric for the units wasn't split correctly, water heater had to be replaced, we discovered serious water issues in the basement and had to gut it, and most recently the sewer line backed up 4 times in the last two weeks and needs to be excavated/replaced. Between reserves, my salary, and the rent I have been able to cover all of this. If I had gone in without healthy reserves I would be in a tight spot though. My story is probably a worse case scenario and due in part to inexperience, but remember that unscrupulous sellers could hide all kinds of things from you and if you aren't prepared you could step in something that's pretty hard to get off your shoe. No regrets so, but I'm very glad I was prepared!

Andrew Chapman · Answer

Hi Kyle, finding deals is always great if you can do it. An effective mailing campaign takes some time and patience. Don't expect to send out 500 letters and have your phone ring off the hook. I would suggest trying to network with some agents/wholesalers/investors in the area and see if you can turn up something that way. Keep saving for your down payment and reserves. Have you been pre-approved yet? Let me know if I can help in anyway.

Michael H. · Answer

Hi Kyle,What I tell my friends and clients who are looking to house hack in MA is you should have about $50K in the bank. $25K for the downpayment and $25K for reserves/closing costs. Lowell especially is very competitive right now and you are going to be hard pressed to find a good duplex for less than $400K and a good 3 family for less than $525K. If you work for off market leads, you may get better traction. Keep me in the loop if you wholesale and find any opportunities. I looked in Lowell for several months before finding a househack 3 Family in Worcester that has worked well for me. Happy to chat more if you want. Thank you,Michael

Sam Lewis · Answer

Kyle, congrats on saving that much money and being in a solid financial spot. A ton of people would kill to be in your situation. My response will of course be biased to my own experience. I started with about 15K in a savings account and had no idea what wholesaling was at the time. My agent explained to me that the best way to start would be to find a "turn key" property that required little work, maybe some paint worst case scenario. The issue with wholesaling is a couple things - a lot of wholesale deals have the property in poor condition, which means a) you will have to make repairs, b) a traditional FHA or conventional 3 or 5% loan wouldn't work given the condition of the property, and c) (building on b) a seller would most likely sell for less if you gave them an all-cash deal with a hard money lender, where in this case you would most likely require a 4-6 week closing period with your 3-5% down lender (assuming property is in good enough condition). There are definitely a lot of moving parts, but it can be done in theory. I highly recommend working with an experienced agent who can find you a great property hot off of the MLS. You could also have your agent ask for seller help (up to 3%) where seller covers 3% of your closing costs. This is what my agent did which allowed me to purchase a 350K property with $14.5K out of pocket. Wishing the best of luck to you, Sam

Kyle Curtin · Answer

@Michael DeLaMarreHi Michael! Thank you so much for your answer! I’ll definitely keep that in consideration to make sure to have really adequate reserves and try to decrease the risk of going underwater as much as possible! Thank you!

Kyle Curtin · Answer

@Andrew ChapmanHi Andrew, Thank you so much for the response! I’ll definitely keep that in consideration and stay consistent. I am pre qualified for 350k, I’ll send you a message! Thank you,Kyle

Kyle Curtin · Answer

@Sam LewisHi Sam! Thank you so much for the great response. I am a Realtor and the MLS has been pretty dry for my criteria, but I’ll definitely remember asking the seller if he/she would consider a carry back on closing costs, that’s a really smart idea! For wholesaling, that is also a really good point, I will have to look more into it! Thank you,Kyle Curtin