All Forum Posts by: Alex T.

@Thomas S. The problem is that paragraph iii further expands on what kind of inspection is allowed, so I'm guessing the 6-month window would not fly with the city (Douglas' response seems to confirm that as well):

to inspect, within the last thirty days of the tenancy or after either party has given notice to the other of intention to terminate the tenancy

@Thomas S. What about the following clause in the MA Legislature (the last paragraph seems to imply that I can only inspect it within the last 30 days of their lease, doesn't seem like I can do regular 6-month inspections):

Section 15B. (1) (a) No lease relating to residential real property shall contain a provision that a lessor may, except to inspect the premises, to make repairs thereto or to show the same to a prospective tenant, purchaser, mortgagee or its agents, enter the premises before the termination date of such lease. A lessor may, however, enter such premises:

(i) in accordance with a court order;

(ii) if the premises appear to have been abandoned by the lessee; or

(iii) to inspect, within the last thirty days of the tenancy or after either party has given notice to the other of intention to terminate the tenancy, the premises for the purpose of determining the amount of damage, if any, to the premises which would be cause for deduction from any security deposit held by the lessor pursuant to this section.

I just purchased a triplex in Chelsea (East Boston area). My plan now is to slowly update the units and improve the quality of the tenant base. 2 of the units are occupied, I'll be updating kitchen and bathroom in the vacant unit. Previous landlord did some lipstick on a pig updates that I'll need to do right, and previous tenant did some damage before moving out (and stole the fridge). As a result, the updates won't be cheap, and I want to make sure I protect myself from tenant damage in the future.

Problem is that Massachusetts has some of the worst security deposit laws in the country: https://malegislature.gov/Laws/GeneralLaws/PartII/TitleI/Chapter186/Section15B. I don't expect tenant damage to be astronomical, but may need to update an occasional damaged/stolen wall/appliance/etc and clean the premises after the tenant. Could some of the seasoned MA landlords provide some guidance? Are the security deposit laws not as bad as they seem if I create a correct system? Could I collect last month's rent instead and use that to cover damage/repairs? Can I collect non-refundable move-in fee like other states do? Thanks

I assume this is the article that the author is referring to: https://www.bostonglobe.com/business/2015/11/24/new-tax-bills-come-shock-owners-multifamily-homes/gfvjN2ZpEbhEyfdZbJ51BK/story.html

That's what I meant, there is no voting on day-to-day tasks, the voting applies to larger issues, such as the one you brought up in bullet 5 of original post.

Thanks guys. @Joe Fairless your bullet #1 keeps going through my mind as well. As far as I know, the syndicator isn't putting his personal money in (although the PPM says he reserves the right to - I think that's just a standard agreement). And that makes me wonder about the alignment of interest as well. Sure, we both benefit from the upside, but only one of us would fear the downside.

@Joseph Gozlan When you say failing management is more common than syndicators would like to admit, how common? Is it in the double-digits in terms of percentages? Are there any patterns that lead to this? Also, when you say "negotiate", isn't that more relevant when number of investors is small and/or they negotiate together?

As for voting I was told each investor gets 1 vote, regardless of equity. Actual property management is handled by a different person, who managed a few local hotels in the past. I should also mention that both individuals seem very punctual and organized, which speaks favorably about their ability to manage this.

But as I said, not being able to see who else is in the deal does concern me a bit, so I wanted to see if that's standard or not. However, I should also mention that one of the advisors for this deal is an experienced syndicator who even came to do a talk here in a local university a while ago, and I was able to speak to him on the phone, he spoke favorably of the deal as well. So all in all, I'm more concerned with me evaluating the deal correctly and getting the promised return rather than some red flags it's raising.

Hi everyone,

I'm considering being a passive investor in a Syndication deal. The deal makes sense to me, I understand how the syndicator will be adding value to the property, and he seems like a friendly and knowledgeable guy. I talked to his references, and am ready to proceed. There are only a couple minor concerns I wanted to run by you to understand if I should be concerned about them or not.

1. This is his first syndication, however, he has been in real estate for 20+ years and has a network of more experienced syndicators who advise him.

2. The fees going to the syndicator per PPM are a bit higher than normal (with normal being based on my understanding of this article: http://www.biggerpockets.com/renewsblog/2010/08/30...) but there seems to be enough meat left on the bone for the investors based on the pro-forma (which does use conservative estimates).

3. I was able to talk to references and advisors but was told I couldn't talk to other people investing in the deal prior to making the decision for legal reasons. Is this ok? My main concern is being sure I'm not the only one putting my money on the table.

Thanks

In real estate there are a couple things rookie investors notice pretty quickly:

- Paying cash is more attractive to the seller and tends to get the deal closed sooner (which could translate into a discount or winning when there are multiple bids)

- Refinancing (pulling the money out) becomes more painful if paying cash, many banks don't offer delayed financing (https://www.fanniemae.com/content/guide/selling/b2...) and those that do require more hoops to jump through, require 70% loan instead of 80% and don't allow you to extract repair costs

I've actually been bitten by this refinancing issue with my first purchase in Chicago.

This really hurts rookie investor's ability to start acquiring properties because we don't yet have good connections with hard money lenders/portfolio lenders, enough extra cash of our own to buy multiple properties outright, or enough properties purchased to stagger refinancing such that this doesn't affect us. This also prevents us from buying a property that needs extensive repairs since we won't be able to pull out any of the repair costs.

However, there seems to be a simple workaround for this and I wanted to ask others if it's a legitimate strategy or if I'm being naive and overlooking something. The strategy involves two investors deciding to invest in the same market. Investor A purchases a property for cash, and completes a rehab with his own cash. Investor B does the same thing with a different but similar property. Afterwards investor A sells his property to investor B and investor B in turn sells his property to investor A, with both using conventional financing. This strategy is then repeated as long as both investors have cash reserves and have fewer than 5 properties each. Is this allowed? Is there something that would prevent this? Is there anything I'm overlooking aside from having to pay for property title twice?

Thanks

@Brianna H.

@Nick Johnson

 I've been a bit slow on the start up process due to a combination of analysis paralysis and good deals being harder to find. So far I have only purchased one property, but want to ramp up the process in the next few months.

My strategy so far has been looking out of state, based on simple economics. A typical house in Boston will cost around $500k and rent for about $3k, a typical house in Chicago will cost around $100k and rent for $1.5k. Applying rent-to-price ratio, it's easy to see which one is the better investment, even after factors like property management fees and tenant quality are factored in.

The counter-argument I often hear is that you make more in appreciation here, but I disagree with that. A more accurate statement is that people "made" more money in appreciation here. Extending recent historical trends indefinitely and overlooking reversion to the mean is not a smart way to invest. Who is going to buy these million-dollar houses when they are 40 times the median income? What about 100 times? Coastal cities have been appreciating because foreign investors have been parking their money here. How long is that trend going to continue?

I'm still open to investing in Boston, but my criteria here is different. I try to find diamonds in the rough, last year I saw a couple but was too scared to pull the trigger. This year I'm not seeing any yet.

@Rodney Getsy The rental rate is what I'm mainly interested in, I've been comparing against other properties on the market over the last few months, so if my understanding of the rentals in this area is correct, I would be comfortable with the deal.

I factor in about 15% for vacancy and repairs and another 10% for PM, this property is in Crosby (a Houston suburb). The price I quoted includes rehab.