All Forum Posts by: Bill Thompson

I recently took the plunge with out of state investing.  I ended up buying in an area that is 6 hours away by car.  That distance works well for me since I'm not using a PM.  So far I am using "smart home" technology to help me remotely manage the property, and its working out splendidly.

The other nice thing about being within driving distance is it makes the property search easier.  There is no substitute for "walking the area" to get a sense of a location.  In my case, I did a fair amount of research online but also set aside a weekend to see properties in the communities I targeted.  The process was intense... I saw over 20 properties that weekend.   Fortunately, one of those properties met my criteria and I closed two weeks later.  Been a happy camper ever since. 

I find it helpful to research potential locations before reaching out to others for input.  I need a base of knowledge to cross-reference what they tell me.  As others have mentioned there is a wealth of information at your finger tips online.  The local planning / redevelopment agency is also a good resource.

I have the above setup in four of my MF properties that collectively yield between $400 - $600 per month. This equates to about $100 - $150 per property per month.  How much you make depends on the type of tenant... my buildings that have tenants with kids yield a lot more than the ones without.  

Operating expenses are very low because I use gas dryers (instead of electric), tankless water heaters for hot water, and high efficiency, front load washers to save water.  I've only had to call for repair twice in my eight year history as a landlord.

I chose to buy and install new equipment when I purchased my properties.  I've already recouped my initial investment via coin money.  Now everything I get from those machines is "gravy"...  just got back from a 10 day vacation in Hawaii paid for entirely with quarters... lol

@William Lumpkin Lots of good advice here but I have a slightly different take.  In addition to having a solid contract (that is comprehensive) and finding a good GC, I find it helpful to meet with the GC "on site" for 1/2 hour every morning.  I use that time to review completed work and discuss the specs of planned work to make sure everyone's on the same page.  This is my opportunity to talk about change orders and address potential delays to subcontractor scheduling and material delivery.  This is also a good way to build a strong relationship with the GC and learn about construction.  To be candid, the morning meeting is also a way to keep tabs on GC to make sure they are "on site" more often than not.  I can't tell you how many times work got screwed-up because the GC was not around to provide adequate direction.  As with any relationship, good communication is the key for success. 

@Cheng Bin Zhang Yes, I did a cash-out refi to pay for the addition.  The house is located in the Moss Hill neighborhood of JP.  All of the utilities in the addition were "tied-in" from the main house.  Modular specs will likely exceed "stick-built"... the look of the structure can conform to whatever you like but you will achieve the most cost efficiency by stacking the modular boxes.  You can still use modular if you need a variance... the main point is to have someone with experience guide you through the process... either your contractor (for modular) or architect.  I built a 2-fam house (as of right) in 2015 using modular and was totally impressed with the aesthetics, quality and energy efficiency... the cost wasn't too outrageous either.

@Cheng Bin Zhang I built a two story addition that included a great room on the bottom floor and a master bedroom / bathroom combination on the top floor. The house was located in Jamaica Plain. The addition was about 1,100 sf. and cost $180,000 (back in 2004/2005), although that figure included some upgrades to the existing house. If I had to do it all over again I would use modular construction because it more cost effective. Since Boston is Air BnB friendly, I'm looking into reconfiguring this particular house (my personal residence) to include a short-term rental unit.

Your first step is to research whether you can combine your two lots to meet zoning requirements to build as of right. If you need help with this process go to the City of Boston Zoning Clinic, held every Tuesday from 9:00 - 12:00 at 1010 Mass Ave. The folks at the zoning desk should be able to answer your initial questions to get you started. The next step is to hire an architect to draft plans for the proposed structure. A good architect can guide you through the process of obtaining a variance if you need one. For modular construction you do not need an architect… it’s more of a design/build process with you, the contractor, and the modular factory. I know a good modular contractor if you want to go that route... let me know. 

What MBTA station is your property near?

 @Cheng Bin Zhang If the unusable lot is adjacent to your existing property you should consider building an addition. I put an addition on a SFH back in 2004... needed a variance because my design did not conform to zoning requirements for FAR and front yard setback. The variance process took about a year and half but I think most of that was my architect's fault. In your case, you may be able to combine the two lots and build the addition "as of right". If that doesn't work out, it is still worth pursuing a variance for the addition... you will need a plausible reason though... saying you want to build a short-term rental unit won't cut it... call it an "in-law" apartment instead. Just about any location near a subway station is "gold" in Boston so you should get a fantastic return on year investment via rental income and market appreciation.

Lots of sound advice here. To pick-up on what @James DeRoest said, it's important to avoid escalating a contentious situation with a tenant.

I noticed the article specially mentioned the landlord was shot in an attempt to collect OVERDUE rent. An overdue rent situation is a potential powder keg and a landlord should not handle this informally with the tenant. Instead, the landlord should commence a formal eviction process if rent is not received within reasonable amount of time (say, 48 hours past the due date)... get a constable to serve a notice to quit and file for eviction after the notice period if the overdue rent hasn't been paid by then. This will certainly change the tone of the situation from one where the tenant is either evasive or combative to one where the tenant is engaged in trying to avoid a judgement against them. As James said, there is no need to argue with tenants or chase them for rent. If they don't pay, let the court system handle it.

Let me get this straight.  You're wondering if there's a market for multifamily properties in northern New Jersey that don't pencil out from a cash-flow perspective. You should have already done your homework on this before putting the properties under contract.  Hopefully, you are in a market where investors buy for appreciation.  As others have mentioned there is a much smaller buyer pool once you go beyond residential (1-4 unit) RE investment, and those buyers tend to be more sophisticated.  What was the basis for the purchase price in your offer?  Are you sure YOU didn't over pay for the property and how would you know if you did?  What is your exit strategy?  Hopefully, you have good answers to these questions... if not, you might end up being the stupid investor in this instance.

@Duke Hartman I feel your pain.  Been there.  Done that. 

To add to what @Ken P. said, taking out a loan from your 401K plan is a great option... you might even be able to spread the repayment over 30 years since the purpose of the loan is to purchase a house that you will occupy.  Regardless of the term, you can repay a 401K loan at any time without penalty.   

Some other options to consider since you only need the loan for less than one year (assuming you can get a HELOC or cash-out refinance as source of repayment)...

(1) Borrow from the cash value of your whole life insurance policy.  PROS:  quick access to cash and virtually no transactions costs.  CONS:  Interest rate is relatively high (expect 7% - 9%) and it compounds over time.  ONLY USE THIS OPTION FOR SHORT-TERM ("BRIDGE") LOANS because the compound interest effect is NASTY and the tax implications if you fail to repay is EVEN WORSE.

(2) Use private money (i.e. borrow from friends and family):  If you know people with idle cash this is your best option because you set the loan terms.  Of course you should formally document the transaction with a note and pay reasonable interest to compensate the "lender" for use of their money and risk associated with the transaction.  

Thanks Jaysen. My properties are located in an improving C/C+ neighborhood. The properties themselves are B+ level and above... basically condo quality. I suspect you are correct in that it's possible to achieve a better ROI with inexpensive stack units in each apartment and charging more rent to the extent you can get it. I do wonder how well the stacks will hold against the commercial machines, which have been rock solid in my experience. The other issue is most of my tenants are millennial types and I can see them inviting all of their friends over to do laundry if it was a flat price. I think that stack units and coin-ops are both good options to increase NOI. In my case, I'm estimating 30% ROI over ten years for the coin-op option... meh, I'll take it.