All Forum Posts by: Brian J Allen

The market is tight according to the MLS but there is a lot of off market inventory. Worcester is not about ZIP codes it is about how quickly you can get where you want to go. The key is working with someone who does a lot of Multis so they are getting the information prior to things hitting the MLS

@Armando Montrond It is great that you are looking to buy more properties. As an active agent in Worcester, MA there are properties I am getting for clients but we are super choosy right now. There aren't many that I recommend to my buyers for purchase. The good stuff in this market is in the $650-700k range, and most of the rest of the stuff is simply junk that needs work. Most of these do not pass the FHA sustainability on the top end, and the stuff on the bottom end needs a lot of work. For my FHA buyers are looking at things with FHA 203K loans and 2 families to avoid the sustainability issue. Most of the good stuff in Worcester trades off the MLS because the agents are afraid of having them sit out there and lose value.

@Kyle Curtin. The best place in Worcester to chat is in the basement of a lousy 3 decker next to a snowman boiler with lots of asbestos floating in the air.  Then they know what they are getting into.

@Bob S. what do you guys get for year over year appreciation on your buildings at those big CAP rates. In Worcester 4 years ago we would get a 10% CAP on good buildings and anticipate 5% appreciation. Ironically over that time we had 20% annual appreciation. Right now we are at 5% CAP and anticipating 5% appreciation again year over year. When markets have gone down in the past. Values on A-B neighborhoods dropped very little and C-D areas dropped like a stone. Most of this is that the tenants in those locations were least able to pay their rents. On the latest run up, not many A-B stuff changed hands, it was just a huge run up on C-D stuff because the anticipated rents were increased due to HUD rents going up. Basically the A-B location rents were always higher, and the C-D rents increased to match due to lack of inventory

How do people balance the need for cash flow vs the risk of properties in areas where an economic downturn leads to a loss of the income you are purchasing these properties for?

Additionally in the last 3 years people would buy distressed properties and hope to fix them up and refi.  That is sort of off the table as values aren't really going up enough to get out of the original loans.

All,

This is a wonderful discussion.  The biggest issue we have in Worcester is that you have to grade the AREA and the HOUSE and the TENANTS.  You can get an A house on the side of a hill with no parking, which might have great tenants, or a terrible house in a desirable area, with tenants that don't pay.  Lots of issues here.  I wish it was so simple.  The question is what is most important to you/the client.  It is so rare to get a nice house on a nice lot in a nice area with the tenants you want.  $710k for a 3 family.  And all the bad stuff with tenants might cost you $500k for a 3, and you still have to raise rents, move tenants, fix the house.  Doesn't seem like a value to most clients when you explain things to the.  

The difficulty which arises with most people is that owning a multifamily is great in principal, but once you see where and how the tenants live, a lot of people are scared off.

@Scott E.. I guess my curiosity is how the buyers' agent and the buyers didn't know the age of major components.  This should be addressed prior to making an offer.  Roof, Windows, HVAC, Electrical, Plumbing.  These are as important as the rent roll, and the expenses.  But on the flip side, Sellers and their agents often do the same.  Take a higher offer from someone who they think will Retrade after inspection instead of the offer from an educated buyer.  They hope they end up with a higher price from uneducated buyers.  The goal of these transactions is for the agents to level the playing field on both sides so there is a mutual gain from trade.

@Kyle Curtin.  I try not to ever go back on anything in the deal, I would rather have my client walk after an inspection then try to renegotiate.  This is one of the biggest issues with agents that I encounter.  If you do not have the expertise to evaluate a multifamily and know 95% of the issues that will come up at inspection and price for them, you should sell single family houses and worry about colors and wallpaper.

The best way to address these issues is to PRE NEGOTIATE them.

eg. If the appraisal comes in short the buyer will pay X over the appraisal, or both parties agree to the bank's appraisal as the purchase price.

Negotiating after you have the property under contract is typically sign that you have not done your due diligence as an agent.  I had a listing earlier this year on a Flip that was great.  The buyer's agent tried to renegotiate so we told the buyers they could have their money back.  Turns out they were willing to take the house as is for the original price. Imagine that.

@Jourdan Mercer if you are looking for off market deals in Worcester, They are mostly with the agents. I have buyers who are searching for bigger properties and when they find one they have to unload smaller stuff right away. There is a constant stream of off market stuff that is just about to be sold. Additionally, the way the market is now, agents reach out prior to listing properties on the MLS. They would rather have a guaranteed sale than put things on the MLS and let them sit, even if they get less money. This allows you to negotiate on price, terms and timing which are very hard to do with an MLS property. Find yourself a good multifamily agent who does 10 or more multis a year and they will have a constant deal flow. We typically know of 10-20 off market properties at any given time that can be sold. If you like one, then they will agree and go shopping for something bigger. When you look at the MLS you will often see properties that are there, priced appropriately that don't sell, or drop in price. This is often because they are looking to 1031 exchange these properties so they want the best buyer at the best time. Best of luck with your search!

is there a link to this you can share?

lots of old heating systems in Worcester

It is all about value add.  Find out what rents are.  Find out what repair costs are.  Learn all the projects that are going on in your area.  Familiarize yourself with zoning.  Meet the people who are doing deals and learn from them.