All Forum Posts by: Greg K.

@Paul McDonald

It goes without saying but I’d be very selective on your tenant screening process. A 1-bed, 600 SF condo in the South End will have a $2500 security deposit protecting the landlord. And that’s just for the walls-in of the apartment. A Massachusetts landlord cannot collect more than one month’s rent for a security deposit. $6000 to protect damage for a 6,000 SF home seems real skinny to me. I’d focus on income verification - lots of people have funny money these days from asset appreciation (micro cap stocks, crypto, etc.) but may not have as much verifiable income (you’d want $250k+ combined income at the minimum). Your ideal tenant is who you identified - someone building a bigger, more expensive home than yours with prominent jobs and something to lose.

@Colleen F. Nice call with the automatic delivery to protect against frozen pipes 

@Courtney M. Look at Invitation Homes and American Homes 4 Rent. Single family rentals with no effort on your part. Park your cash there until you’re ready to pull the trigger. You have to be able to divorce yourself from bad areas and good areas. If the numbers are attractive it reflects a risk premium for the area. Real estate is an institutional asset class that is pretty efficient in pricing. Just figure out what risk level you are comfortable with and go with it. I shoot for 15-20% cash on cash return and buy condos so I don’t have to worry about maintenance which allows me to buy from a distance.

@Kyle Curtin I dealt with this a year ago. I was budgeting $50 per month for oil for a 2-bed 1000 square foot condo. When I had the tank filled I talked to the oil man and he said that most landlords put the cost on the tenant. I followed that advice and created a separate oil agreement to the lease that started the starting level of oil in the tank. If more oil was left in the tank at the end of the lease, I’d pay them back $1 per gallon. If they didn’t leave enough then it would cost them the average price per gallon of three vendors in the area. This worked out well for me.

@Murtatha Ali I just ran your criteria in MLS for Suffolk County - Boston, Revere, Chelsea, and Winthrop. There are 47 matches - 11 studio or 1-bed apartments and 36 park spots. Realistically your budget would have to double to meet your purchase criteria but you can rent a 1-bed within a 10 minute walk of Pru for $2500 no problem. Connect with me if your interested in the rental route. I highly suggested you get on @Brian J Allen e-mail list to get a pulse on the Worcester rental market - that's where the numbers work for investing.

Investment Info:

Single-family residence buy & hold investment in Fitchburg.

Purchase price: $98,000
Cash invested: $1,500
Sale price: $155,000

2 bed, 1.5 bath condo built in 2004. Purchase price: $98k, closing costs: $2k, renovation costs: $7.5k. Total cost: $107.5k. Appraised at $141k (my pro forma was $130k so this was a nice surprise). One local bank offered 80% ARV while 9 others were at 75%. $110k mortgage, 5.25%, 30-year fixed. After closing costs, I walked away with a check for $106k leaving a $1.5k cash investment and $31k in equity. Purchased December 2018, sold May 2020 for $155k to my tenants.

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

I was looking for a low cost BRRRR for my first deal. This condo made it easy since it really just needed a cosmetic update. Plus the rental numbers worked really well. Cosmetic rehab (paint, carpet, appliances) which I did myself over Christmas vacation. Listed for rent 7 days after purchase. Rented for $1300 after 4 DOM.

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

HUDHomeStore.com. Purchases at 90% of list price.

How did you finance this deal?

HELOC on primary residence and credit cards for rehab.

How did you add value to the deal?

De-winterized, new paint, new appliances, new carpet.

What was the outcome?

Found great tenants who moved in February 2019 and purchase the home from me in May 2020.

@Doug Ford If you have the cash, and you're confident in your numbers, I'd say do it with your own money. You're instinct is right to avoid paying double digits with hard money. They'll make you set up and LLC to buy it and then the bank on the refi will make you get a commercial loan at higher rates and shorter amortization. I use HELOCs for my cash purchases and they're wonderful as they fit within the "delayed financing exception" and you'll be able to get cash out in less than 6 months.

@Doug Ford Apply for the refi as soon as you get a signed lease. I rehabbed my first BRRRR (a condo) in 10 days, had a lease signed a week later and then applied for a cash out refi. By the time the bank came to do the appraisal the tenants were already in and I cashed out in 3 months from purchase date. I used a small community bank that's a portfolio lender and they did 80% LTV with no seasoning. Get on the phone and call every small bank around - I called over a dozen - and tell them what your up to and what your looking to do. Community banks have to lend in their back yard by charter so then need new customers who are growing like you! Congrats and good luck! BRRRR is an addiction.

@Scott Anderson That's the way to go to avoid taxable income.  Also, it's worth checking your liability insurance to make sure you are covered in a transaction representing yourself.  Usually, purchases are covered but sales are not.

@Tom Gimer

Thanks for the insight. This certainly wasn't a case where the mortgage exceeded the property value. As we know, HUD conducts their "as is" appraisal and lists for that amount. In this case it was listed for $225k.

And obviously that was the bank’s concern that the previous owner put themselves in a worse financial situation where bankruptcy might now be closer.

The DIL has language where the previous owner asserts that they are solvent, etc. but I know a bankruptcy trustee would look to this transaction first as a way to clawback funds.

As you pointed out, in the end the title policy does cover it.