New Boston/Cambridge investor

[Andy M]

Hi everyone,

I'm a begininng real estate investor in the Cambridge/Boston MA area. I would love to get in touch with other investors in the area, so give me an email or PM if you are nearby.

Anyway, I'd like to describe my first deal and show other potential investors that I've got a good grasp on the numbers involved.

Originally I was looking at buying a single condo in the Cambridge area. I'm getting a PhD at Harvard and thought buying rather then renting for 6 years was smart. However, there are NO condos of reasonable size (900+ sq ft) in all of cambridge for under 300k.

Noting this, I started looking at multi-family buildings. Fast forward 6 weeks, and I've just signed the P+S on a three unit, 3000 sq ft multifamily building for 655k. The building seems to be a real gem. All systems i.e plumbing, electrical, roof, heating, etc. have been updated recently and are in good working order. The building inspector and I agree that no major work needs to be done, expect for adding a "landlord" electric meter, cost ~1500. I plan having 1 minor construction task done: filling in one doorway to a cubby on the 3rd floor and then knocking down a wall from the master bed to form a walk-in closet, and then professionally repainting and cleaning the place. Meanwhile I will legally turn the building into condos. After the painting, etc. I will hire a staging company to furnish the first floor. Hopefully this will let me sell all the units.

Here are the numbers (in k):
Purchase price: 655, of which I'm putting 20% down and financing the rest
at a 6.5% 3-year ARM. The loan rate would jump greatly after 3 years, but I'll be out way before that so it doesnt matter. PITI cost: 3700/mo.
attorney fees, architect fees, title insurance: 7
painting, cleaning, 1 new dishwasher, misc fees: 6-10
holding costs for 2-4 mo: 7-14
Staging, misc decorations: 2

total cost: 676-688k.

Now, I've toured lots of comparable units in the area. Right now, my best estimate of a comp unit is 310k. My realtor agrees. Because we dont know exactly how the units will look when re-painting and set, and also the cambridge market can be pretty volatile, (the units will be on the market in roughly 10 weeks from now) I'm going to project a per-unit price of =/- 10%, ie roughly 275 to 340k.

Thus:
Total sale price: 825-1020
Commision (somewhat low, the realtor I am working with to buy the property said she would give me a deal if I also made her the selling realtor for the units): 35-45
Transfer taxes, attorney fees, etc: 12k

gross sale price: 778-963k

So we get a net profit of:
102-275k

Looks pretty solid. I plan on doing a 1031 exchange with the proceeds.

What do you think?

Andy