All Forum Posts by: Brady Graham

I met with a property owner today sitting on an inherited 2-family in Needham MA. Very dated and most likely best use is conversion to 2 townhomes. The family is planning to list the home on the market within a week or so. The family says they have one letter of intent from a contractor for $1M. 

Please connect if you work in the area or know of anyone that might be interested.

@Jessica Lohr

I would double down on @Ryan Thomson's perspective going into your search. 

Secondly, many people are unaware of the self sufficiency test for 3-4 unit MF. With rates where they are, I haven't personally seen anything on market that would pass this test for financing. In short, this test requires 75% of all the units to cover the debt service on the loan. A duplex, on the other hand, does not have this restriction.

Third, layering on an MTR or STR and your ne cash flow will be better, in exchange for additional work. Maybe your current workload would allow for this extra work, but perhaps not.

Lastly, I would challenge you, as I do with two of my clients going down the same path, to look at your calculations not based on cash flow but money saved. Since you mentioned you listen to the podcast, David Greene regularly talks about this. I believe it is critical in todays market. 

If you current rent(s) in Cambridge for you and your partner are, for example, $3000/mo, and you purchase a duplex that generates $2500/mo LTR and your mortgage is $4000/mo. Your net cost of living has been reduced from $3000 to $1500. You're essentially "cash flowing" $1500/mo via savings, not to mention any tax benefits, amortization on the loan, and any appreciation be it forced or natural market.

I hope this help...

Now to actually answer your question of towns, how far are you willing to commute and what kind of financing are you qualified for?

Hi Brittany,

I would recommend you first talk to another lender. I know of lenders willing to do 5% conventional on duplexes. 3-4 units mostly don't pass any sort of self sufficiency test with where interest rates are right now. The downside with conventional, this is just my understanding of it, is that the DTI thresholds are way lower than FHA, so FHA is usually the route that most go. If you want to talk to some trusted lenders, connect and I can make an introduction for you.

After you've vetted your lending options, the next steps I think are predicated off the lending. I like what others have mentioned in terms of finding distressed deals and forcing equity through appreciation. I personally believe if you have project management experience and can leverage any construction contacts that flipping is a solid strategy in today's market.

Buyers are looking for perfection in homes. The majority of home I'm seeing come to market are the result of a family death, relocation or divorce of some kind. Sprinkle in a downsize and you've got an inventory of fixer uppers that most buyers aren't keen on buying. That said, if you can find a fixer upper and a discount, put some smart renovations into it that will make it stand out, then you can almost definitely expect to sell in today's market with multiple offers and a short closing timeframe. If you were to do this 1-2x in a year, you would probably have enough for your next primary down payment.

Last thing to consider, can any of your units be converted into an STR or MTR? If you're close to downtown, hospitals, or TF Green, you might be able to put some money into furnishing some units and renting to traveling professionals. More work...more reward.

If you're interested in chatting more just shoot me a connect and we can discuss further.

Cassandra,

I would mirror others that if renting the other unit long term, let that tenant have their own utility for cable/internet. In the event that the utility isn't properly separated, I'd say adjust your monthly rent by an appropriate amount within market rates to cover the expense. If for STR or MTR, then definitely should be an amenity you'd want to include.

@Darryl Ribeiro Sr.

Is your electric municipal or corporate (Nat Grid or Eversource)? If municipal owned and operated, you would likely want to contact your local electric company as they will likely have a representative that can discuss details with you. If its not municipal, call MassSave and setup a consultation with them. Then follow the multiple quote advice and do some independent research.

Chris,

Depending on your reserves and monthly cashflow, you might consider at least setting up a consultation with a company like Power Home Remodeling. Its not "cheap" but they often offer financing terms over 15yrs without prepayment penalties. I can provide a contact if you are interested.

As a Boston based Realtor, most landlords will leave water/sewer/garbage in their name and the tenant will cover heat, electric, internet, etc. A few have mentioned that in a multi-family, if the meters aren't separated those needs to stay in the owner's name. If you can't separate them out, generally those units rent for a higher monthly amount, and if you have smart thermostats installed in the unit(s), you can set limits on how hot/cold the tenant is allowed to adjust the heat.

@Keith Davighi

I will mirror some of the other comments regarding 3mo being a good amount of time to get your whistle whet but potentially not very long in the grand scheme of things. As a Realtor, finding deals is literally not any bit different than prospecting. It is a numbers game. The more you look at the easier it becomes.

Secondly, I'd say that it SEEMS like you might be stuck in what many investors would classify as "analysis paralysis." It might be worth committing to submitting offers to get over the initial fear. This is something I regularly do with buyer clients to help shake out the jitters and get yourself over that hump. Remember, you can always use contingencies appropriately to protect yourself if the market in Orlando is sustaining that sort of thing.

Lastly, to your mention of flipping a few projects. I genuinely think this is a good strategy with rates being where they are. Cashflow is tight everywhere, but a properly executed flip could net you (even after capital gains) what might take years of true cash flow to achieve. Turning those funds directly back into your investment business could amplify nicely.

If you decide to do anything with the flips in the northeast, I am licensed in MA and RI and have connections with NH and MA realtors as well. Best of luck!

David,

It sounds like you should connect with a good real estate focused CPA based on the direction of your question. I am guessing your question means who to list as the property owner on the lease and whether that is you or your S corp?

I have heard anecdotes of people transferring primary homes into a trust, paying the trust rent, and the trust services the actual mortgage. I honestly am not sure exactly how all that works, as I prefaced at the beginning, an attorney or CPA might be your best bet to answer this one.

Hi Ameir,

Lots of great comments already for you to consider, the biggest I would say are you looking to invest locally or out of state? Your answer to that would depend on the best next steps to take. 

As some mentioned, you can totally put $25k to use in less expensive markets than RI. Bigger pockets has some great books your can pick up that deal with out of state investing and how to approach doing that.

If you decide to stay local in RI, I would say $25k might be a bit difficult to get you into your first investment unless you can find a motivated seller willing to embrace a creative finance scenario.

What you could also do, is continue to build your wholesale business and refund your $25k back into scaling your wholesaling while you do the above mentioned steps of connecting with the local groups as well as the bigger pockets community. Can you put $5-10k into marketing for your wholesale and turn that into $50k within a year? That might be a better return as you make additional contacts with builders, developers, etc and learn some new skills.