All Forum Posts by: Account Closed

Evan Bell Make sure you check with the local zoning codes. I have realized first hand that inspections services will catch you if the property is not zoned to house short term tenants. Somerville MA has been cracking down big time.

Kevin Hayes ...small world. Which unit were you visiting? That is my 4th building and I had plenty of cash to make it beautiful. The renovations on my first few properties were much less nice.

Originally posted by @Andrew Merritt:

Thanks @Lee S., this is the counter argument to my strategy that I was thinking about and it seems like a good way to go as well. It just seems like you can get to a higher cash flow rate more quickly this way. Where do you find most of your deals, on auction or just off the MLS?

 Andrew, welcome. 

You need to develop a strategy for off-market deals. That's where the best deals are found. Currently the market is flooded with buyers and not enough deals. Even my partners who own 1,400 units struggle with the same thing. They raised money from Israeli and Chinese investors and they see a lot of capital flowing into MF properties. But going back to the offmarket, that's really the best to find quality properties.

One simple idea, find properties behind on taxes. Those sellers would be motivated. Or find properties that look a little shoddy compared to the area they are in. Go ahead and talk to the tenants about the property management. Or if the building is small enough, ask about the owner. Is the owner ever around or is managed by a 3rd party? 

We are are seeing is that investors from the East and West coasts are investing in places like AZ, TN, TX, etc. And the focus is on Class B/C properties. But absentee owners also a lot of times leads to mismanagement. We see that also where properties are mismanaged and they end selling because they couldn't make it work. Obviously the goal is to find such properties. But that requires a strategy and a plan. I'm not saying online you won't find anything, you certainly can. But having a more pro-active approach of going after them rather than waiting for them to pop up online is a better approach. 

Build relationships with MF brokers in your area. Google them. Tell them to put them on their email blast. Hope this bit helps. If you need any more help, I'd be happy to answer.

That's a great question. It definitely depends on location. But one only needs to look what some of the most successful investment firms are doing. Here's an example of a guy with $650mm in assets- http://houston.citybizlist.com/article/394545/nity....

They just keep buying and buying and buying. Clearly Nitya has it figured out. Buy and hold. Reposition from Class C/B- to B/B+. 

If you go after buildings that are 150+, you have an opportunity to remove inefficiencies and add value. You will create cash flow and give yourself a chance at capturing appreciation over the coming years.

Let me know if I can answer any questions.

John, multifamily would be a good place to start. At least in the MA area people are excited about Quincy, Dorchester and Worcester area. 

I started years ago in the MF space in Boston and have done quite well. Some of the areas I own property in is slightly over-heated though (which is a great position for me, but that's another story).

Since you already plan to start in multifamily, you should find a partner. This alleviates a lot of your fears, lack of knowledge and helps you take the first step. 

You mentioned you have $60k to put to work, you can find partners who are in a similar position as yours and do it together. You will see your confidence and desire to pull the trigger sky rocket.

Evan Betzler I finished a renovation of a 4-family in Somerville in December (purchased for $900k in May 2016 and put $750 into renovation costs. You will find nothing (3 or 4-family) in the Boston area for under $600k. Even chelsea and Everett are up there. Brockton 3-families are north of $400k. Stuff in Roxbury and mattapan isn't cheap either. You are going to need some partners...you don't want to spend you last dollar on down payment and closing costs. Liquidity is super important as you don't want to stick without tenants or with a busted boiler that needs to be fixed and not be able to make your monthly nut. Find a good deals and the partners will come. They are few and far between and the ones that are turn key are even more difficult to make work financially. Sorry to be the bearer of bad news...it is a tough market out there for those starting out. Worcester maybe?

Michael McMullen ...repost from above Some financing details for those interested... Property 1 was financed with a traditional 10/10/80 piggy back mortgage in 2007. Renovations were done with cash. Heloc through Sovereign Bank in 2013 (they did these on non-owner occupied buildings then, but not now) for $250k. Bought second building in Somerville in 2014 financed with the down payment from the HELOC. Financed renovation with HELOC. Rented that building out then put a $170k HELOC on it through Pentagon Federal Credit Union (PenFed). Did a cash out refi on the Cambridge property pulling out around $280k. This plus the 170k giving me $450k of dry powder. Bought property 3 in somerville and financed the construction with a construction loan. Renovations went around 80k over budget so I had to cover those costs with cash (not in bank provided renovation budget). Leased that up then took out another $200k through a cash out refi. Bought property number 4. Total gut. Way over budget as it was a historical building. Needed to finance $150k renovation with cash. It is beautiful now valued at $2.4-2.5 million. In the process of putting a $400-500k line of credit on that building to finance number 5. Of note, properties 3 and 4 were commercial construction loans. I am done dealing with residential lenders. Happy to answer more questions related to financing. I love financial engineering! Real estate is the greatest asset class in the world because you can leverage 75%-80% with debt.

Dimitri Bakllas , thanks for the advice. I am actually looking at a few properties this weekend and taking a general tour around the city with an agent that knows the market. What are people's thoughts on this new development east of WPI called Gateway Park? Looks like they are trying to bring in tech companies to leverage the WPI brain trust. Wondering how much traction it has got....

Doug M. - interest rate is not that much higher...deal from may 2016 is at 4.0%. However, it is a 5/5 ARM. They don't offer 30 year fixed mortgages. That being said, a commercial construction loan finances 100% of the purchase price up to 75% LTV based on the post renovation valuation. I'll take that trade off all day and sacrifice the 30 year fixed.

Daniel Bogart - went through my financing above. #1: $775k purchase price plus $225k reno #2: $780k purchase price pulse $105k reno #3: $782k purchase price plus $235k reno #4: $900k purchase price plus $750k reno I did and still have a day job. Great contractor who you trust is super important.