Hi BP Worcester - this is my first post!

[Tarik Kafel]

Hi Everyone,

I've been meaning to write this for a bit. One of my goals for 2023 is to meet more fellow investors and professionals in Central and Eastern MA. Looks like this is a pretty active forum with great content.

For the sake of this post, I figured it'd make sense to share a recent deal I did in Worcester, what went well, what I've learned in self managing, and what I'd like to do next.

About me:
My name is Tarik. I'm originally from Shrewsbury MA so I'm a 508 native :). Most of my family including my parents still live there. Now I'm living in East Boston with my wife and son. A career in tech sales brought me to the city about 7 years ago, and that is still my W-2 gig. I bought a condo as my primary residence in Dorchester in 2016 and sold in Oct 2021 for about a 40% gain, due almost solely to market appreciation. I purchased my current condo in Eastie in July 2021 and have lived here since.

First Deal Summary:

I purchased a turn-key triple decker off Shrewsbury St. in Worcester a year ago for about 680k. Two 3 BR, 1.5 Bath units, One 3BR, 1 Bath unit. Interestingly enough, I was looking at turn key duplex deals in the Greater Boston area (mainly Malden and Revere) for a couple of months before this and struggled finding anything that would cash flow. One of my best friends has been investing in Worcester for 10+ years and talked me into it, and actually sent me this MLS listing on a Thursday. The seller was a jack of all trades - agent, GC with plumbing and electrical licenses, and my friend was a common connection. We met him directly on Friday ahead of weekend open houses, and shortly afterwards made an offer with 25% down. According to him it was slightly below other offers he received (which were also cash), but he liked that I was a local guy and that helped us.

What went well:
- Location: Being from the area, I've always loved Shrewsbury st, and it's continued to grow well. Good selection of restaurants, bars, diners, a nice park, and close proximity to downtown and UMass Medical school

- Locked in a great rate: I knew 3.99% was great at the time, but I am even more thankful for it now! It will be tough to cash out refi down the road (though it'd be a good problem to have :)

- Turn Key property: It's funny, because for my next property I want something where I can force some appreciation, but I do believe purchasing a turn key property was helpful for me to take the leap into multi family investing. As I mentioned above, I bought this from a GC, so all electrical was updated (knob and tube all removed) along with plumbing (all PVC, and new on demand Navien combi systems for each unit installed in the past year). Also, units 2 and 3 had their kitchens and bathrooms recently updated (vinyl floors, new appliances, granite countertops, half baths added)

- Easy to rent out: units 2 and 3 were delivered vacant - I got tons of interest once I listed them. Families, students, people about to begin medical residencies at UMass (less than a mile away). 

- I did a good job finding and choosing tenants: Once I listed on zillow rentals, many people wanted to check out the property. (BTW - I did the listing myself and have no regrets. I have an iphone 13 and used the .5 zoom setting to take pictures, which made a massive difference as I was able to get the entirety of even small bathrooms in the frame)  

I made sure to do a phone screen prior to any showings to ensure they met income requirements, credit check, and just get an initial feeling for why they were looking, how serious they were, and if they'd be respectful tenants. Once through that, I set up a window where I'd be at the property, and scheduled showings back to back. It only took two different days of my time, which living an hour away was important.

Once showings happened and tenants were still interested, I used "avail.co" to create written leases (though they are TAW) and perform credit and background checks. They could then sign electronically through the software. I even had an audit log on when they received it and when they signed. I required first months rent and security deposit of first month at signing.

I credit each step through this process, a good location, along with just plain luck (because everyone needs some of that!), to the fact that I have two low maintenance, responsive, and respectful families living there now for the last year.

What I've Learned

- Understanding all costs: I read "Becoming a multi-family millionaire" by Brandon Turner a few months ago, and cannot recommend it enough! I wish I had just read it before I purchased the property to have a better understanding of "pure cash flow". Luckily for me, the building is still cashflow positive after all costs. We did have to reserve enough cash to replace the roof in November, but we knew that from the jump.
Net-net, we started with a CoC return of about 4.5%, and will bring that up to 6.2% in May with rent increases. My goal is to get to 9% CoC by 2026. (This is the expected CoC return for a B-/C+ asset per "Becoming a multi family millionaire")

- Being remote isn't that difficult: I self manage and I haven't been to my property in 6 months. I've had several repairs done, my roof replaced (my dad did stop by for that one), my boilers serviced, and pest control. I also signed up for a liberty home warranty last fall to both A) create more predictable repair costs and B) alleviate finding vendors for issues. so far this has worked well on 3 calls. 

- Inherited tenant: I mentioned above two units were delivered vacant, but one was a leftover tenant from the previous owner. I can't complain too much - they haven't been awful, but they've been my only real headache of the three units. two rent checks have bounced from them in the past year, but they caught up both times, and now do electronic transfers. They've had a ton of repairs as well - due to both age of unit, but also their lack of care (ex they told me about mold in the bathroom, I later found out the bathroom fan had been broken for months).

The biggest thing is they are well under market rent (400-500 dollars under). I did an increase after 7 months - I met in the middle and brought them up by $250. Bringing them up to market in a single increase from where they were just felt too significant. 

Going forward when purchasing properties, I plan on asking for them to be delivered vacant. Just the psychology of inherited tenants - they feel like it's their apartment, not yours as a new owner. I'd rather set the precedent and first impression with my tenants that it's my building and my rules; I believe this has gone a long way with the tenants I brought in.

-Be available, but Don't be too available: I pride myself on being a responsive landlord - with me being somewhat long distance, it's important to be a strong communicator. I also believe it builds up good will, so that when I do introduce a rent increase, the tenants will consider the quality of the landlord in deciding whether to stay or not. With that said, I got in a habit of taking every call right away or calling back, and there has been stuff that don't fall in my set of responsibilities. (the next door neighbor putting trash on our property, a car getting broken into on the street, etc)


What's next?

For this property:
- if and when unit 1 turns, I'd like to add in a half bath (there is underutilized portion of the kitchen where I can do this), and do some updates to the kitchen. All bedrooms and living room have carpet at the moment, I'd consider removing this and putting in laminate flooring. This, along with a driveway for the 1st floor, should get me to 2000 per month. 
- potentially pass burden of water utility onto the tenants. My meter is already split out for each unit, so half the work is done. Most comps in Worcester the landlord pays for water, is this true?
- once CoC returns are good enough and/or I purchase another property, hire a property manager for help and ease my ability to scale.

For my next property:
If I want to hit home runs, I need to find something where I can force some appreciation. Where this is and what property type, however, I'm in a bit of analysis paralysis. A few different options I'm considering:

A) invest in another multi-family in Worcester: preferably 6-8 units (going by Brandon Turner's "stack" method), with opportunity for forced appreciation

B) invest in Florida - I have family in SW florida and have gotten to know the Fort Myers, Naples, Cape Coral markets fairly well, I also lived in Tampa for a bit. take advantage of population growth, do a single family BRRRR (not much small MF properties down there). Books like "the BRRRR method" and "Long Distance Real Estate Investing" (both by David Greene) have fueled my interest here. Candidly, the idea of managing a rehab is out of my comfort zone, but a challenge I'd like to take on and feel I must to get to the next level.

C) diversify with a STR. I have family members gaining experience and seeing initial success here with a property in NH. We may see how it does for the rest of the year, and decide if it makes sense to partner on another one.


Hopefully this is an interesting read to others, if not at least it was helpful to get my reflection down somewhere! Thanks for reading and let me know if you have any thoughts, advice, or comments. I'm all ears. Hope to meet some of you soon!

[Stormer Santana]

Hey Tarik - Great post and story. My girlfriend and I have a similar background. Started renting in Back Bay in 2018, house-hacked a duplex in Malden in 2020 and reduced living costs by 40%, moved out in 2022, stabilized the property with a CoC of 35% and now living in Eastie as well.

Let's connect offline and chat!