All Forum Posts by: Brian J Allen

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.

I agree with Charles here. Worcester is Street by street for rental and turnover. Make sure you work with an experienced agent who knows the best places for rent and appreciation. You can still get 10 CAP, even on the MLS, but you will have some projects to do when you buy to keep that multiple going. The best places are down to a 5CAP, but you can find an in place building that when you get rents to market you can be at a 7 CAP.

I Echo Michael H. here.  The upside has been taken for properties with market rents.  Best way is to buy with below market rents and get the rents to market. That is the easiest strategy.  Owner occupant strategy is good as well, if you can find a place with a vacancy, as those tend to have the prices driven up.  Of the 18 we have closed so far this year in Worcester, we have done the best with low rents on solid properties in solid rental locations.

Ethan,

I would be glad to shed some light on things for you regarding Worcester.  First off you are correct, prices are lower in Worcester and returns are higher.  Rents in Worcester are creeping up and have gone up approximately 20-30% in the last 3 years, prices have followed.  As with any city, there are different sections which have different characteristics.  Geography plays a big role here due to the 7 hills and I 290 which cut its way through the city in the 60s.  Rents differ by neighborhood, parking situations and quality of units.  All of these can be explained to you by a solid multi family buyer's agent who does a lot of work in Worcester.  Do not get tricked by price without understanding the location you are buying, or the quality of the building.  Most of these places were built from 1890-1920 and it shows.  Time has not been kind to many of them, but others have been loved and maintained.  I have personally seen 1400 distinct properties in the last 3-4 years and I recommend you see at least 20 buildings before you make an offer so you can see the nuances of the market.  Best of luck, Worcester is a great city and has seen a renaissance over the past couple of years, most notably with Polar Park which opened this spring.