All Forum Posts by: Colin Kelly-Rand

Hi Ben,

I made the the switch from manufacturing engineer into real estate over time. Welcome!

One area I am going to spend more time evaluating is the new ADU law in Mass. Partially so I can buy some cool manufactured homes and place on site of a single family homes in single family zoning.

Cheers

IMHO You can go with ducted minisplit systems as this is a new build and subject to the newer energy code. These are electric only systems - dont work well in older buildings - but newer construction they should be great. This would also eliminate the need for gas at the property as you can go all electric in the building

I am not sure on the cost per se. Ductless minisplit systems were around $20K for $1000 Sf units, but they have more heads vs ducted, but also don't have the ducts. The benefit I see in ducted minisplits is they can use just one thermostat instead of a separate one in each duct. 

These will get energy rebates on top if you have an energy code consultant help with the process. 

Overall, make sure you are building an energy efficient building (sealed and insulated). 

Yes, I imagine that is the case. I remember back in 2011, I had wished to purchase in JP where I grew up and ended up investing in Dorchester where I could afford. 

No one likes being priced out, however it's people moving in and people moving out- people in both sides. As long as we procreate there will be more people. We will always have desirable locations that have more demand than supply and the excess supply will go somewhere. It would help if we could increase the supply of more desirable housing to match the demand for it. 

That would lessen the length of the drive for everyone to drive to where they could afford, BUT we will always only be able to purchase where we can afford...

Are you not using an architect? Extensive gut rehab seems like it has enough cost to justify. 

I find architects to be relatively in expensive when its basic as-is layouts with a slight design change. It also helpful to bounce questions off of them regarding permitting and building code as well. 

I don't use architects when I am lipsticking (same layouts but updating kitchen and bath or heating system). 

Regardless, I am not being too helpful on the actual request. I am curious to what others suggest. 

Sketchup seems plausible - playing around with it now - I know I tried in the past. Most software has a slight learning curve period - so frustrating when trying to accomplish something in a few minutes. Honestly, graph paper and a pencil is the dang easiest way. :)

Cheers

Colin

@Denis Boyda

Oh I love data! thank you. 

2020 Data i would throw out the window. Covid happened and schools closed so students were unlikely on campus. That was a tough year for Boston area. 

Overall my thoughts on Boston outside of Covid-I dont believe vacancy has increased and I think units were added. If there is a decrease in population I imagine its more because smaller wealthier households have replaced larger less wealthy households. Less people, same number of units occupied. Maybe that could be captured by GDP for an area such as average income x population for each city (total income for an area). There would be a large increase (need to adjust income for inflation I imagine to compare years?). 

I think when we see the 2025 census there will be a large increase in many areas. I think Providence RI absorbed a lot of MA transplants and Worcester, Framingham etc grew (Lowell perhaps). Boston I think will show a strong rebound (lots of new construction). Newton does not build a lot of new homes - mostly just knocking down smaller ones and building bigger ones. I imagine there are a lot of NIMBY towns that did not show a lot of growth. I think of Quincy as pro-growth and there is also great transportation there. Although - if you have ever been on 93S - I am not sure how much more growth that road can take. 

Anyways - thanks again. 

@Linna Li

Congrats. 

What work do you want to do? What needs to get done? How are you paying (cash vs loan)?

I have paid for a few renovations - and costs can vary a lot between contractors, so I would work on simplifying the scope (built in anything vs off the shelf is going to add cost). 

I spent around $125 psf on a decent 3000 SF renovation (interior mostly) including carrying costs for the year it took.  https://www.zillow.com/homedetails/44-High-St-Newton-MA-0246...

And - systems are important. Like roof, plumbing, heating, and electric. If the home is 1900 and plumbing has never been touched, and electrical is old, you might want to replace vs slapping new tile over old plumbing lines. Also, better to replace tubs vs refinishing. 

If your going exterior, interior etc that may be $150 psf+. True guts of 3 unit plus buildings may require sprinklers. 

We have done skin deep renovations for much less (updating kitchen cabinets, appliances, bathrooms) without truly touching systems (besides any required updates such as electric to each appliance).

And - if you are renovating - determine best rental layouts - might not be the same as condo layouts.

Happy to connect you with contractors and architects I have used.  

And permit processes can be a pain - but important to have. 

@Albert Ngo

@Kevin Sobilo

@Lien Vuong

After I wrote that I come to my senses - for a 1031x to work you must buy something worth more or equal to what you are selling. So...dang not really an option to sell for 1.1 and buy another place for 800k. 

You could sell without a 1031x, you would only pay taxes on the profit which is your sale price less your cost basis which includes the 800k original PP + closing costs (both on buying and selling) and the renovation costs) which sounds like it might be between $900k and $1M. So ~$100k-$200k in profit at whatever tax rate you have (long term capital gains rate not short term so likely 20%? Not as good as a 1031x, however ~$150k back in your pockets is likely like 10 years of cash flow if your only making 1K pre-tax and pre-operating expenses income - something like $500 a month in profit?

@Albert Ngo

What about selling it and doing a 1031x? 

At the moment your two options are pretty low cash flow with varying degrees of interest rate risk. If you can sell for $1.1M, and use the ~$200K to purchase another property for $800k, get a 600k mortgage closer to 6.5% (2% over FHLB). You would only need that property have a rent roll around 6,800. 

DSCR loans has some benefits, but they still are not cheaper than what I have seen banks offer for rates, hence, they can not get you to a great cash flow. They can potentially cash you out more, reduce variable risk but hatchet your cash flow (some DSCR loans ignore expenses when determining DSCR - they just take PITI into account - which I find...curious...very curious...)

Its hard to part with a new property you have puts some sweat into - but you seem to be in a rock and a hard place. 

Brokers like @Lien Vuong might be worth reaching out to regarding finding a new property. Worth a phone call in my humble opinion. 

@Arian Mustafa

Hi Arian, 

1) Research what similar comparables are selling for using redfin / zillow. You can check by square foot sales price, per unit etc. Good for a baseline.

2) Create a pro-forma analysis

Rents (less 5% vacancy)

Expenses (taxes, insurance, repair costs, 5% management fee, snow shoveling, pest expenses, anticipated annual legal fees (evictions etc))

For commercial loan rates you are between 5.5% and 7.5%. Wide range! I have clients hopefully closing around a 5.25% rate on the 30th on a 24 unit but I believe rates have moved up since then.

Based on the income less expenses you will get your cash flow and start determining how much you are willing to pay for that cash flow. (Simplification).

Happy to sit down and model with you.

3) As for raising the funds - if the deal happens to be very strong there are those who can supply preferred equity financing which is expensive but help cover the gap. ALSO - there is seller financing which can be great.  

@Faraz Mog

Hi Faraz,

I'd love to hear your math on on acquisition (are you 25% down?) and what are your market projections? I.e. why are you entering now, are you assuming near term appreciation? Or that prices are low? When you say house hacking, are you going to live in one unit and rent out the other bedrooms in that unit, and then rent the other apartments out? 

Generally speaking, prices in Boston are very stable, no huge discounts yet, which appears to be due to the lack of inventory. Homeowners are finding it really hard to sell and buy a new home due to the huge change in interest rates. Unless they have an excessive amount of equity to take out, buying up into a bigger home is quite costly. 

And as @Devon Turner noted, triple deckers are the most common asset in the boston area, so definitely include it in your search. Tripledeckers have pretty good income to cost (one roof) etc, and all your potential vendors, lenders etc know them inside and out.