All Forum Posts by: Eric Rosiello

Hi Brian,

I used masshousing for my first property. 

What are you estimating for vacancy, maintenance, capital improvements, and property management?

Eric

Reading through that was very interesting. Would love to hear how the project ended up!

Can't make this one tonight, but would definitely be interested in future meetups!

Eric

Ok gotcha. I see a ~16% annual cash-on-cash return ($11k per year on $72k initial investment) using the following assumptions:

Purchase price = $160k (20% down)

Rehab cost = $40k 

Electric/Heat = tenant paid

Rent = $1,400/mo per unit

If you can get $1,600/mo in rent per unit then the return is 21% ($15k per year).

Hope this helps and happy to answer any questions!

Eric

Hi Chris,

I'm somewhat familiar with the area - my parents moved there about 3 years ago. It's certainly a small town, but has quick access to the Blackstone shopping center and it's not a terrible commute to Worcester (my dad does it every day). It's also only ~40 minutes to Boston.

On the surface, $160k does not seem like an outrageous asking price for a buy & hold strategy.  A few questions:

1) What is the square footage of the units?

2) What condition are the units in? Updated kitchens & bathrooms? Any selling features (master bath, walk-in closets, yard with deck, etc)?

3) What is the condition of the exterior and how is the neighborhood?

The range of rental prices appear to vary quite a bit based on these features. On the low end you might be looking at $1,200 per unit, and on the high end it could be $2k+ per unit.

Agree with @Dan K.

You should target the highest rent-to-purchase price ratio possible. However, just because a property doesn't meet a 1% or 2% threshold doesn't necessarily mean it won't perform. There are many other factors to consider including:

Quality of the tenant base ... how often are you going to have to turn over the apartment?

Potential appreciation ... can a case be made for the area to appreciate in the near future?

Tax rates, landlord-paid utilities, cost of repairs/maintenance

This year I acquired two multi family properties just north of Boston and neither meet the 1% threshold. The properties have averaged a combined cash flow of ~$3000 per month, leaving a nice buffer for vacancy, repairs, and property management costs. The properties are also located in areas likely to appreciate in the future.

A 1% rent-to-purchase price ratio is great, but not the end all be all.

@Marc V Palmeri

Hi Marc, 

I think what people are saying is that they are able to find investment properties in their market that cash flow immediately (in addition to long-term cash flow), so there is typically no need to consider ones that don't cash flow in the first year.

As far as your estimates go:

- I would expect your annual taxes to increase significantly (Boston's rates are ~1.06% of assessed value). 

- I would also budget 8% for property management, even if you plan to manage yourself. This way you will know whether the property still cash flows when you decide to step away from property management.

- I'd also consider other options rather than paying the $3k broker fee. In Boston, often times the entire broker fee can be passed along to the tenant, or split between the tenant and owner. Alternatively, it likely wouldn't be difficult for you to find tenants yourself and bypass the broker entirely. Boston has high rental demand - especially for September 1 leases.

Overall, I'd pass on this property at the given numbers unless you are expecting significant appreciation. I can find multifamily properties in this price range just outside of the city with monthly-rent-to-price ratios of to close to 1, whereas the ratio for this property is just 0.58. All dependent on your situation, strategy, and goals, which may be significantly different than mine!

@Becky Fischer

It's encouraging to hear that it is possible to attract vacation renters during the offseason. I think I'd be able to put in a hot tub bordering the enclosed outdoor shower, plus there is a working fireplace. Thanks for the tips!

Eric

@Kristopher K.

Very useful, thanks for the response! It sounds like you have a successful rental!

What is your vacancy rate for the shoulder seasons? By how my much do you lower your rates for the shoulder season?

Thanks,

Eric

@Becky Fischer

Great - thanks so much!