All Forum Posts by: Brian J Allen

There are a lot of deals all over New England.  But the most important thing is to find something that works for you.  Keep in mind you are likely looking for both CASH FLOW and APPRECIATION.  Some markets offer one or the other, few offer both.  Over time Worcester, MA has had a solid mix for those willing to wait to buy appropriately and hold long enough.  Keep in mind that management eats into a lot of your income.  you could pay $225/month for management of a 3 decker which is $2700/yr.    If you find something close to where you live and reduce that management fee you can make more money.  

another trick you can do to get rid of humidity is to get a hybrid electric hot water heater that will work as a dehumidifier.

. You can also use a normal dehumidifier and keep it on constantly and draining into the whole house P trap, or use an ejector pump like on your FHA heating system to pump it outdoors

It is not necessarily the town/city that gives you the best investment return, but how you go about the process. You can explore cities that have different levels of cash on cash return, or appreciation but these are linked to risk. The best way to mitigate risk is to work with people who you trust in the markets you are looking for. Find yourself an agent who works with investors and knows the questions you are going to ask! I work Worcester, but if I were to invest somewhere else I would rely on someone with local knowledge. You should explore a couple areas in MA and see if that is where you want to put your money, then find the right agents to help you make things work. Some of the best CAP Rate locations in MA are, Springfield, Holyoke, Worcester, Fitchburg, Lawrence/Lowell, Southbridge, Brockton, Fall River, New Bedford. These give you the highest return on your investments, but they come with Risk. There are other markets like Boston/Cambridge/Somerville which give extremely low CAP rates, but the investments appreciate faster as they are tied to demand for housing not tied to the rents that the properties command. In the HIGH CAP RATE Cities, the values of the properties are typically more dependent on the rents, then any other factor.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $294,000
Cash invested: $75,000

Bought for $294k, appraised at $350k on Day 1, will hold, raise rents then sell to one of my children to recoup my cash.

What made you interested in investing in this type of deal?

I picked it up when i was the agent for a 12 unit building

How did you find this deal and how did you negotiate it?

It was a throw in I needed to buy to make the 12 unit purchase happen

How did you finance this deal?

conventional small bank, portfolio loan

How did you add value to the deal?

raising the rents

Lessons learned? Challenges?

Make sure you confirm current rents

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

yes, ME

Sam,

if you are doing worcester, MA then refinish the floors or vinyl plank.  You should be able to refinish hardwoods for about $3/SF and plank for $4/SF.  PAINT everything neutral, tan or grey.  Make sure the BATHROOM is nice and clean, nothing fancy, just home depot quality clean and new.  replacing the tub is probably the best thing you can do, and get a big vanity with a cabinet mirror so people can put their stuff.  Kitchen you can do granite or solid, but make sure the cabinets are clean even if you just paint them white.  If you want to spend $, then maybe a dishwasher, and W/D in the unit always gets you a better tenant.

@Tony Alvine. I typically do not recommend home inspectors. That being said make sure if you hire in inspector they have been doing it for a while so they know where to look. Also if you know something is wrong. Get someone in that trade as well. Think of thr inspector as a general practitioner and you may want a surgeon

it is super hard to find anyone.  I figure around $2500-3500 depending on the number of breakers, the issue is that once you pull the permits you need to bring everything up to code.  You will need GFCI's in the kitchens and bathrooms, along with a whole list of other things.  That is where you might get up to $5k.  Also you now have to use AFCI breakers for everything which is minimum $50 per breaker just to buy them.  Most electricians are 4 weeks out at this point to do a new project

John, 

Keep in mind that you may have difficulty replacing the roof if you have issues.  Often in Worcester they call the roof "historic" so you have to apply for a waiver to replace it with asphalt shingles if you want to do that.  It can take as little as 6 weeks and as long as a year to get approval to remove the slate roof.  Good thing is that there are reasonable prices for roofers in Worcester.

i have had many and some are good and some are not.  The key is to have someone who is familiar with the product you are buying.  If you are doing a worcester 3 family, find out how many they have inspected.  I just did an inspection on Sunday and asked the inspector if they checked to see if the knob and tube wiring in the back hall closet was live.  And they had forgotten to test it.  To any buyer's agent that is the first thing that we look for.  Inspectors often treat SF homes the same as MF which is an issue.  Also, I recommend getting an inspector team that works together, they are faster and often find more things.  There are at least 3 that work in Worcester.

One of the easiest moves is this.  You have the Pantry kitchen and bathroom back to back on one side of the house.  In most 3 deckers this is the only "wet wall" in the place, that is it has the Waste stack and the hot and cold water.  Many times you will see someone put a washing machine in the kitchen on that wall since it is so easy to do on the plumbing side.  I think the cheapest and easiest way to add value is to put the kitchen sink on that wall facing the kitchen.  Now you have taken the sink out of the pantry and you can make that into a 1/2 bath with laundry or a 3/4 bath.  Since most places have the storage shed on the back porch you can either cut into that to make the back bedroom or closet in that room bigger, or you can run a new plumbing stack and put washers (and dryers) out there.   I have been in 1500 multis in worcester in the last 4 years and sadly the "modern kitchen" or the multiple bathroom situation is in only about 150 of them that had hit the market.  People either are keeping these or they don't exist.  I think your rent goes up and you have lower vacancy so people are more inclined to keep these, once they get them to that point.