Newbie from Boston

[Alex T.]

Hi,

I've been lurking the forums for a while, but haven't considered investing until now. I have no background in real estate (I've only been investing in stocks before), but I am familiar enough with how the typical process works from reading. I have a full-time job, so I'd prefer income-producing property rather than flipping, which would be a full-time job in itself. I don't mind putting some sweat equity in, however. I was thinking of starting with a multi-family, since I don't currently own a house either (but my rent is also ridiculously low, so if there are better alternatives, I'm open to them).

One thing I'm discouraged by is that I can't seem to apply the advice from the forums to the properties I've seen here in Boston. Neither the 50% nor the 2% rule seem to hold anywhere near Boston area, and the kind of crazy appreciation we've been seeing in this area can't go on forever. I was considering looking at areas further out but I'm afraid of having to commute there several times per week. I'm also worried of buying a place in an area I know nothing about. I understand that a lot of my fears come from inexperience and hopefully the more experienced members living in Boston area can dispel them and provide some guidance.

Thanks

[Shaun Reilly]

I have not invested in Worcester, but I know a lot of people are in that area. The rent to price ratio is quite a bit better out in Central MA.

As far as going north that is actually where most of my local rentals are. I have several units in Lowell. Rent is fairly solid but the prices are a lot less. If you are willing to go a little farther out both areas are worth looking into.

Going the other way prices going towards the south coast seems good too. Fall River and New Bedford have pretty cheap stuff with the same kind of rents.

NH is an option too. Cheaper prices often and still solid rents. You do have a more landlord friendly state as well.

2% is still tough in any area around here. I have one place I got in Lowell that meets it. Nothing else is particularly close. Near Boston as I said you often can't find things at 1%. Most people will look at overall ROI (return on investment), CoC (cash on cash return) and the monthly cash flow. For example you buy a place (probably a condo) for like $80K and put 25% down. You are getting $1,100 for the rent. So the ratio is 1.375%. If you use the 50% rule (Use real numbers when you have them!) you would have $550 for mortgage and profit. If you get a loan for the $60K at 5% then your payment is like $322. So that would leave you $228/month of cashflow. So you have to decide if that is good enough for you and if the 13.68% CoC is good for you (CoC is cash recieved/cash in. In this case $2,736/$20,000 to get that number).

Also you would not be looking at a commercial loan. There are non-owner occupied residential loans. If you are looking at multis with 5 or more units it would be commercial and if you buy something with major renovations you could get commercial. Not where you would be looking on your first 1-4 unit rental.