All Forum Posts by: Charles Situ

@Brian J Allen it is good to get some feedback from someone who has seen so many units. I am thinking you are right that if I modernize the kitchen and create an additional bathroom, I get higher rents, lower vacancy. I would also add that I would probably get fewer maintenance calls. These are the qualitative items you don't see on a spreadsheet. I am waiting for some estimates from my PM, who also owns a construction company. I do have the the back-to-back pantry-kitchen on one side and the bath on the other side. I am looking to move the kitchen like you described. Not sure where you mean by the wall facing the kitchen. But I am considering updating heating and therefore run up the plumbing for the new kitchen sink (& dishwasher) from that parlor wall between the kitchen and living room to form a peninsula coming out from that wall. I would install the new full bath from the old kitchen and also have the entry to that new bath coming in from the bedroom (to have a master suite) rather than the kitchen. My GC's plumber said its best replacing all the old plumbing while we are at and we will have to the ceilings on the floors to drop by a bid to fit the new plumbing. I do own another building where the washer is in the back hall closet. For this new one I am considering I seem to have plenty of room in the basement to do two sets of coin-ops. While the in-unit washer & dryer is a great seller to tenants when they see it, I reduced damage potential from a leak significantly. Also the first floor has the back bedroom already cut into the hall closet and the back stair for a supersized bedroom (the whole square footage of this apartment is now almost 1600 sq ft, which is unheard of in triple-deckers) and I didn't want to undo it. My PM is currently listings a few units like this for rent at $1900 to 1950. I am thinking I can get $2,000 with a slightly better location--3 bedrooms, 2 full baths, central cooling & heating, 1350 sq ft (or 1585 for 1st floor), and parking in a large driveway. 

@Jeffrey St.Laurent Got it. I actually own a unit that has this similar type of layout, but did realized that is you were talking about. Only difference is that the stove is on the opposite of the wall where the parlor is. I was talking about a peninsula. I attached both pictures--one of them is the one I own and the other is the one I am trying to do in the new purchase I am under agreement for. It all comes down to plumbing. I have to see if the plumbers can move the old kitchen sink (in the pantry area) to the new peninsula, so I can convert the old kitchen into a bathroom.

@Jason Hudson While HELOC are generally for short-term purposes, people have to used it to purchase properties---but mostly so they can act like an all-cash investor. Nonetheless, with HELOC the closing costs are much lower (appraisal + recording), which likely around $750. There are also lenders giving introductory low rates for HELOCs--I seen 2.40% for two years and 3 3/8% afterwards. HELOCs also gives you the flexibility to pay it back without late payment penalties. Cash out refi has a higher closing cost of $3-4K. But make sure you calculate theses into your DTI ratio. Also I don't know what kind of rates you have on your existing loan (where you have $150K left). A HELOC will keep that rate intact. But if you have a very low rate, the Cash Out refi will replace your existing loan with a new larger mortgage with new market rates.

If it is 4 units or less, most likely conventional. So you have no investment properties you own currently. To do the HELOC or cash-out refi, do you own a primary residence? And if you do, does it have enough equity? Some lenders would let HELOCs go up to 85% loan-to-value. But mostly likely its 80% for HELOC and Cash out refi. And even if you did that, would the proceeds you pull out be enough for the whole purchase of this new investment? If not, then it may be just to fund your down payment. Conventional investment would require 25% down. But you may be able to get FHA with 3.5% or less if the home meets certain conditions. Speak to a lender or mortgage broker and double check your debt-to-income ratios to make sure you qualify.

@Jeffrey St.Laurent I am going to walk through the place with a plumber tomorrow. But I think you are probably right about the half bath vs full bath and the L-Shape vs Island. My contractor works on many of these types of homes and there is a reason why the project manager suggested the L-Shape to me. 

@Jack Moran I am curious. Did you ever end up replaced the steam radiator heating system? If so, did you think it was worth it? I under agreement on a Worcester triple-decker where one of the unit has radiators and wonder if it is worth replacing with forced air? 

@Jeffrey St.Laurent I can't see removing the wall between the kitchen and living room being possible. I am pretty sure that is load bearing and that is normally where the gas pipes (one side is the parlor heater and the other side is the stove). But maybe we are talking about different types. And yes I seen rear bedroom extend to the stair case for additional square footage. I am under agreement to purchase one that is like that.  I am going back to the subject property with my contractor's plumber and electrician to get some rough estimates of the some of these conversions and changes. One of the things my contractor has done in other properties and suggested to me is doing that L-Shape peninsula you described.

@Michael H. I knew someone in this forum could relate when I describe those items.

Attached is a diagram. I hope I am not revealing too many trade secrets by posting it. The subject project currently has 1st floor (owner-occupied's unit) an extra half bath that was converted from the old kitchen/pantry (I wish they had done a full bath instead) and I am considering replicating this to the 2nd and 3rd floor. I drew the red rectangle island in the mid of the kitchen and asked if my contractor can run the pipes from the kitchen & bath (in the right) from the floor (I am pretty sure the joists run this way). My contractor drew the darker blue suggested L-shape and lighter blue refrigerator location. I also wonder if I can do a full bath instead of half, but we need to move the laundry location, which I have seen sometimes in the hallway instead. 

Does anyone have any experience in changing Worcester triple-decker lay-outs? Was it worth the investment?

Many of us know because these triple-deckers were built 100-150 year ago, the original layouts are horrible (lack of counter space, kitchen in a narrow area near the bathroom, wash & dryer out in the open kitchen, minimal counter spaces, lack of dishwasher, parlor heating/stove, etc.). I do love the pocket doors in the living though. When I first enter this market 8 years ago, it was not worth the investment to optimize the layout because rents were low. But as rent rose, I am contemplating that decision again. I am seeing some creative things at open houses recently--movements of kitchens to allow an island or peninsula, 2nd bathroom additions in where the old kitchen was, replacement of parlor heating with central forced heating & cooling or electric mini-splits, putting refrigerator in where the build-in cabinets was. I know it may depend on the situations--I am a long-term holder and I would consider it first for the larger 3-bedroom units, as opposed to the 2-bedroom units, where there is a higher rent potential. 

Generally if you are buying a triple-decker at today’s market price, I think cap rates are somewhere around 7-8% assuming 5-6% of rent for each for vacancy, capex, and management fee. But those numbers can vary greatly. On management my PM charges me a flat per unit fee (rather than % of rent). In realty vacancy is low because of high demand, but if you have turnover of tenants, tenant finding or placement fee is generally about one month of rent. And sometimes you may purchase a property with below market rents—this happens often with owner-occupies—and it takes a bit to get it to market. Actually maintenance and capex can be all over the place—many of these multi-families are old homes that may not had been maintained well or it could be something that has been renovated with many of the major items (roof, furnace/HVAC, water heaters) replaced recently. Locations within Worcester matters greatly. Generally homes on the good areas, like around UMASS/Lake Ave area have lower cap rates but good appreciation potentials. But tougher areas like closer to i290 and main street in the middle of Worcester have higher cap rates.

@Diandra Duncan My first property I purchased was a condo in Kew Garden Hills, Queens. Although that transaction does make sense to me today after I learned to invest long distance. It was a great way for me to get started while living in NYC. I house hacked it by renting out the extra bedroom. It helped me in many ways—building equity instead of paying rent, getting experience as a landlord, years later was able to cash out refi the equity, and even 1031 exchanged it two replacement properties.

But in my opinion, with this being your first purchase and the fact that you said it is old, I don’t think you should waive inspection and possibly not go the route of doing an informational inspection, unless you walked through the place with an expert like a contractor. The times I done informational inspection was when I had more experience in spotting things and did some research to give me confidence there weren’t major issues (e.g. an apartment being converted to condo in the last couple years so it had meet some requirements recently; all the major items like plumbing, electrical, HVAC were replaced recently).

It sounds like the seller is allowing an informational inspection and not willing to fix or provide credits for anything found to be wrong, but make sure you get clarification. Waiving inspection is completely different.

I never waived mortgage contingency completely. But I have agreed to cover up to $20k of difference if appraisal was below purchase price. It did help me win the deal. I was lucky that appraisal actually came in above and I had the extra cash just in case if I needed it. But since you only have enough to do 5% down, it doesn’t seem like this is an option for you.