New Member from Central Massachusetts:

[David B.]

Hi All

I have been learning, listening to podcasts, reading blogs and posts on BP for several months. BP is a super excellent place to learn about REI

I live in Worcester County Massachusetts and am interested in buy and hold cash-flow investing.

While, there are few opportunities for cash flow investing (IMO) in the Boston area, I do see some in Worcester county.

I have been following the market here in Central Mass and have looked at some three deckers and duplexes.

However, I do see several issues with investing in Massachusetts:

1.  Landlord - tenant laws that favor tenants and seem very unfriendly to landlords.

2.  Lead paint law.

3.  Tenant pool that seems challenging (i.e. tenants that are able to game the rules and laws)

4.  Most properties seem to have have years of deferred maintenance.  Most properties are 100+ years old.  I feel like maintenance expenses may be really high here.

5.  Lack (I may be wrong here - so don't get offended) of larger, professional, transparent real estate management companies.  This is a big issue if I want to buy here in Central Mass.

I'd love other folks on BP to comment on my above five issues.

I am pursuing my REI goals by working on a couple out of state investments.

Cheers

[Derreck Wells]

@David B. 

Issue #2 on your list is an asset, not a liability. If there's lead paint in the house, or if the current owner gives you the standard "unknown" paperwork, then you can use the lead laws to negotiate a better deal on the property. Figure that it costs 2-5K per unit to delead and count the exterior as a separate unit and you have a ballpark on what it should cost to delead. Since everyone thinks the cost is obnoxiously high, use 5k or more per unit to negotiate. So if it's a 3 family, figure 4 units and say something like "Since it's not deleaded yet, and MA law says I can't rent to families with kids unless I get a lead certificate, it's going to cost over $20k to delead this building, so I can offer you $XXX,XXX for the building."

There are loan programs in MA that allow you to borrow the money to delead and defer the payment until you sell the building, so you only pay for the deleading when you sell the building. So, knowing this, you can buy cheap using the fact that it needs to be deleaded, then sell it for a premium using the fact that it is deleaded to get a higher price, then pay off the deleading loan. So the fact that there are strict lead laws in MA can actually make you money in the long run. Especially if you get lucky and there's not much to delead in the unit and it only costs around 2k per unit.

This goes for all of you MA investors, @Rich N., @Marko Scretchen, @Justin Bioc, @Ryan Short, and @Paul Timmins, if you send me the address of any buildings your interested in I can check it in the database to see if it's been inspected or deleaded yet. It only takes me a minute and you can use that info in your negotiations on the property.

If a building has been inspected, the homeowner cannot do construction until the building has a lead certificate, if they do it'll get flagged for Unauthorized Deleading (UD) and it will never get a lead certificate. You could then jump through hoops and get a "Letter of Environmental Protection", but that will raise your insurance and lower the value of the property, but at least you could legally rent to families. 

It also happens frequently that the property has a unit or two that was inspected in the early 90s the inspector puts in "No Hazards Found", but when you go to have the other units inspected, or to have a PCAD inspection done, they find evidence of deleading. Well, if there were no hazards found on the initial inspection, why was there deleading done? This ends up getting flagged as UD and creating headaches. 

The solution if you have a building that the database says "No Hazards" but there is evidence of deleading is to basically undelead the illegal deleading. which is to say replace the doors that are scraped to 5', replace the door jambs that are scraped, etc.. Sometimes door jambs or other areas are covered with luan, that's to cover lead paint. The luan needs to be removed, exposing that lead paint again. This is legal to do. You're not trying to delead the unit, which would be illegal. What you're doing is removing the illegal deleading, which is legal. When the new inspector comes through, they will find lead paint that will need to be addressed and you then address the issues legally. 

Send me colleague requests and let me know if I can be of any help in the lead paint area. Good luck in your investing!