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All Forum Posts by: Dan K.

Dan K. has started 2 posts and replied 251 times.

Post: Househacking in Boston

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

Welcome!

I have done it in Cambridge. Agree with @Nick Riccioand other that you are going to get better returns in most cases as you go further from the city. It's all about priorities. 

Personally I like to invest in areas where people want to live, not where they need to live. There are certain areas in Massachusetts that look like terrific investments, but once you take into account potential problems, the cash-on-cash and other metrics are destroyed.

There are forced equity-add plays in Boston still by fixing up units and re-renting for a higher amount. I'm not talking huge renovations, instead new tiles in the bathroom, new laminate flooring, new bathroom fixtures, swapping in granite and painting kitchen cabinets, and new kitchen appliances. Also fresh paint goes a long way!

As @Lien Vuong mentioned, you should be able to do a refinance and pull out a lot of your cash if you make some smart improvements.

Post: Modifying basement in Medford to claim it as square footage?

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

The Commonwealth's Code versus Medford may differ. That's why it is very important to understand your zoning regulations.

Generally in Massachusetts 7' and 6" is the minimum ceiling height. However there are many caveats. You can view the code at: https://up.codes/viewer/massac...

Exceptions to the code are made regularly, but ceiling height is very important from both a safety perspective as well as livability, legal, resale, rentability perspective.

Post: Modifying basement in Medford to claim it as square footage?

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

For the egress window installation you should be able to find a local company that does it all for a reasonable cost. I wouldn't go with a GC. If you already have a door to the outside through the basement as well as an entry to other stairs and door you should be okay.

Absolute cheapest heat to install is electric. You might want to go with a heat pump because it's less expensive to operate. Depending on use, you could even get away with an oil filled radiator heater that runs on 120 volts versus installing a 220 circuit.

The way I did it was to utilize my central gas boiler. We created a "wet loop" off of the boiler to give the basement its own zone with baseboards -- it wasn't expensive because I used a reasonable plumber and the finished basement is right next to the boiler.

Now having the space "legal" for Medford is another story. They will require an inspection, certificate of occupancy, etc. You also need to figure out if you can have the space by right -- research your allowable FAR and your property's zoning. If it's larger than a two-family you will need a GC. Having the space "legal," will allow you to use the square footage in a listing. 

Post: 3 Tips for Choosing a Realtor for Your House Hack

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

Agree with @Lien Vuong -- without local knowledge you could use an agent or broker from anywhere in the world.

As for Running the Number -- I would on rely on an agent or broker to run the numbers on comps, area rents, etc. Agents and brokers aren't in the insurance, mortgage, investment, management, legal, etc. markets. You need to do your own due diligence. An agent or broker has zero "skin in the game" after a transaction. It is within their financial interest to make a deal look lucrative. 

It's important to keep in mind that agents and brokers make money based on transactions. A good agent is focused on relationships, but they make money on transactions.

None of my comments are meant to be anti real estate agent or broker. These professionals play a very important role in the investment process. However, they play a role and serve a function.

Post: Newbie College Student in Boston, MA area (Househack)

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

Hi @Ben Sylvester,

One of the best ways to start out with "house hack" before you have a steady W-2 income and financing in place is to rent out rooms in an apartment. Can you rent a 4 bedroom apartment and rent out three bedrooms? Even better if you can purchase a condo to do the same.

Post: Most Important Rule To Know For House-Hackers

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

My Point of View: As @Lien Vuong says, think about more traditional options. Federal programs are great, but they need to consider 50 states plus Washington DC, Puerto Rico and other US territories. Local banks understand our market and are supported through federal programs that support financial institutions. 

Post: Intro/Property Management Questions

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

Welcome! You might want to put the post in the Boston area forum.

Here are some thoughts.

PM Questions:

I'm not entirely sure what you're asking here. Three percent is low, but is that what your employer is going to pay you? You are an in-house employee. The company needs to make money to pay for office space, insurance, unemployment insurance, benefits, your bosses, corporate registration fees, etc., etc.

8-12% is what investors expect to pay a third-party property management company to manage units. In addition, large investment groups that self-manage will charge investors approximately 8-12% for property management.

This about Realtor fees. Let's say you are selling a house -- the agent says there is a 5% fee on your $1m property -- that's a lot of money! The agent must be rich. Half goes to the buyer's agent and maybe another half or so goes to the agent's broker. So what looks like 50k in the agents pocket might be $12,500 or less -- of course they then have to pay taxes on that.

PM Tips: You really need to have all of your documentation is in order. If you take security deposits, know the MA security deposit laws like the back of your hand. Personally, I think cash payments are fine so long as you have a receipt -- but I've had one cash payment in over a decade. You really don't want tenants who only operate in cash. Other tips really depend on the type of properties / locations you are managing. Young professionals / recent college grads close to Boston are very different than lifelong renters.

Non PM Questions

There aren't a lot of 4-plexes around Boston. I have one in Cambridge (added the 4th unit) and I think only 2 or 3 4-unit buildings have sold in the last year in Cambridge. As for targeting specific areas, you might want to reach out to @Lien Vuong or another investor friendly agent.

For house hacking you're not going to use other people's money (besides a bank). The structure doesn't work. What would you offer to an investor? At that point you're going to need to pay rent to the investor which basically kills the entire concept of a house hack.

In a city like Boston, notwithstanding COVID, you can even house hack a condo. Buy the largest condo you can afford and fill the bedrooms with tenants. The city is full of fun, interesting people around your age that are looking for a bedroom and roommates because either (a) rents are too expensive and/or (b) they don't want to live alone.

Post: Converting Oil Boiler to Gas?

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

Look at Mass Saves. I currently have a 0% ten year loan for upgraded heat.

If you have gas on the street, you should be able to get the utility company to bring a line to your house for free if you use enough BTUs. We recently had a new line brought to a property for free.

Some Mass Saves discounts and grants are for off season upgrades. If you can limp through this winter you might do well.

Post: Any good 90% bridge loan options?

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

@Justin Rank -- Got it, didn't realize you are holding other RE -- just saw you mentioned flips a number of years ago.

I have gone down this route, but I really thing you'll do best with traditional lenders. The fees involved with hard money are going to kill your numbers on this deal. I haven't done a hard money deal as a borrower (besides representation from the legal side), but the structure is best when you are looking at a very big spread between purchase price and ARV.

I have done a couple of discrete hard money deals and happy to take this conversation offline. To be honest I'm not sure what upside you're offering to somebody who is willing to parking $1m for 6-12 months.

Post: Any good 90% bridge loan options?

Dan K.Posted
  • Rental Property Investor
  • Boston, MA
  • Posts 257
  • Votes 139

@Justin Rank 

Two subject --

Renter prospects

What sites did you use to find prospective tenants? We find that Craigslist has much better potential tenants (they need to be able to send an email and tell us about themselves) vs. Facebook. However, it seems like the world has moved to Facebook.

To be honest, we have great products in Cambridge and it's very difficult right now. I'm not overly concerned, we have enough cushion to absorb short-term market changes.

Keep in mind how different April was compared to now. If you work for a larger Boston company, how many "young professionals" have moved back in with their parents? In my experience a lot.

Exit from private money loan

If you alone or you and a married partner or co-investor make "low 6 figures," qualifying for traditional financing might be difficult to be completely honest. You said you have access to a HELOC on your primary. I assume you have debt on that.

I'm not asking about your personal finance, instead I'm asking the types of questions that a traditional lender will ask. Keep in mind, they aren't going to take into account rent on the property, instead they are only going to look at your W-2 income (other investment income if it has been established), current assets and debts. When using a portfolio lender they have some flexibility, but they still need to look at ratios like debt to loan, etc.

The easy way of looking at it -- could you right now buy a house on the Cape or Islands for $1.3m and receive traditional financing? Your lender will look at current leases and future leases for 2021-2022, but those will be mitigating factors to help push you over the edge if you are on the edge.

It's frustrating -- I'm sure your underwriting shows that you can pull it all off with a comfortable margin of safety. However banks (even small local banks) still have pretty stringent underwriting standards. If you have very large deposits 6+ figure with a bank, that does help.