All Forum Posts by: Jason Turgeon

City of Boston ISD is a horror show. They are completely underwater at 1010 Mass Ave (the ISD location) and you can expect long delays for everything. They'll need every one of their allowable 30 days to review your plans. You may need to visit them a dozen times to get your fire suppression system signed off. You pull one inspection for electrical, another for building, a 3rd for plumbing, you go to City Hall to get a dumpster permit ($20 per parking space per day, it adds up in a hurry), you'll need police details for anything that blocks traffic, if you cross a sidewalk with anything bigger than a shovel  you'll need a bond that can only be obtained by crossing the street, taking an elevator up 5 flights of stairs, and giving someone $100 cash. And absolutely no one you deal with is ever happy. The permitting staff in the city are some of the most miserable human beings on the planet. And that's just the City. You haven't yet dealt with the NIMBYs at the Back Bay Neighborhood Association, the contractors who charge double their normal rate to put up with traffic and daily parking tickets on their trucks and the higher costs of everything, the neighbors making demands that you compensate them, etc.

And I'll come right out and say it. Our building inspector was shaking us down for bribes, although he was careful to do it in a way that he wouldn't get caught. We didn't pay, and it cost us several months of down time while we waited for inspections and permit approval mid-project - and this was on a simple 2-family house. A friend of mine ended up making a $500 payment to a man in a bar in JP just to get the interior renovations he was doing himself on his private residence out of permitting hell. My physical therapist with a fancy downtown location had their certificate of occupancy held up for 4 months after construction finished, and I'm 100% certain it's because his boss wouldn't pay the right person. That division of Boston is still very old school.

Not sure how this compares to Central Mass. Maybe you've dealt with all this before and it doesn't phase you. But having done 2 renovations in Boston, I will never do a 3rd in the city itself.

@Taylor L., I wasn't looking much at SFHs until I saw the post from Sam about his 7 SFH's in Texas that he did in 6-9 months. I'm still curious about that. He's clearly developed an amazing system, which I don't have.

Definitely want to bring in OPM, but it's easier now that I have a chunk of my own capital to start with. Just means I can do bigger deals. 

I don't have any unsecured debt in the credit card sense. Everything is also pretty low interest. Depending on how much we get when we sell it and how much needs to go to the 1031 fund, I would like to pay off the van as well as the HELOC and loan from my retirement account. That would leave me with only the student loan.

Definitely interested to hear your podcast! Drop a link when it's ready. Buying land could be interesting, I'll check out Mark.

Thanks!

@Amanda G., thanks for the reply.

No matter what, I want to pay off the HELOC. It will free up $600/month of cash flow and then I'll have the $125k available to me any time I want to jump on an investment property.

I'd also like to pay off the loan from my retirement account, since that puts me one step closer to my goal of quitting eventually. If I quit without having paid it off, I either have to come up with the money or pay a huge tax penalty. And since it is my retirement account, I get that money back eventually with interest.

Eliminating those two payments will roughly offset the loss of income from the rental property, and I'll have a chunk to reinvest in a 1031 plus access to the HELOC as needed.

I am fine with putting in more effort for a few years if it gets me to my goals. I'm already working a ton (day job, realtor, landlord, commissioned artist), so I can just reallocate how much time I devote to each of my side hustles. 

If Boston weren't such an insane market, I would try to find another undervalued SFH or small multi and either BRRRR or fix and flip. But it's impossible to do anything here. In a perfect world, I'd find some large commercial space and hack it by putting in art studios to rent to all my creative friends, but that kind of space is also unavailable at prices that make sense.

I want more equity gain and income than I'm likely to get from syndication deals or notes, so I think this likely puts me back into more active roles like BRRRR or fix and flip, but in faraway markets. Those make me nervous because finding and managing great people is hard enough when you're local, but it seems it can be done if I can figure out a better system and I pick the right metro. I'd also be open to storage units, boat or RV storage, etc., pretty much anywhere.

My wife is starting to get impatient about the condition of the exterior of our personal residence, so I may tend towards doing some quick flips and pulling some of the profits out for that (it's a 2-family, so I can at least write off part of the work).

I guess that leaves me narrowing down to BRRRR, flips, or storage units somewhere far enough away from Boston as to still be profitable. Which then means I need to figure out what metro to invest in and start building a team there so I can be ready to jump in a couple of months when the house is sold.

As to what I enjoy, I really like identifying properties and doing deal analysis and making creative offers to get deals done. I don't mind the rehab process although it can get a bit stressful. I don't love being a landlord, but I do like the cashflow. I don't really have a preference for SFH vs multis. I am intrigued by commercial/warehouse, storage, and similar deals but I am still very much on the learning curve about how to structure those deals to make a decent profit.

Loving this thread and your other one on self-storage. Thinking about what direction to go in with my ~$300k that I am taking when I sell my rental house in a month or two and maybe I want to dip my toe into this market.

My day job is in energy efficiency and I have to agree with @David Sisson. You absolutely want to get the most efficient lighting systems you can, especially if you are paying for the electricity. Modern LEDs and occupancy sensors will save you a ton of money in the long run, and you may be able to get some sort of subsidy for the up-front cost.

Check out these programs here (assuming this shopping center is in Chattanooga): http://programs.dsireusa.org/system/program?fromSi...

This is probably the one you want to start with: https://www.tva.gov/Energy/EnergyRightSolutions/EnergyRight-Solutions-for-Business-%2B-Industry/Incentives   I would just call them and ask what you qualify for. You might be able to get incentives for spray foam insulation to keep your HVAC costs down, in addition to lighting.

Run more numbers.

Scenario 1: if you get a HELOC and use that for a down payment, what will your new net cash flow on the CO house be? With that down payment, what can you reasonably expect to get in Dallas, and what will the cash flow on the new property be? The sum of these 2 numbers is your scenario 1 number.

Scenario 2: you sell CO and invest all your equity in Dallas. What cash flow could this generate for you?

If the amount of cash flow from scenario 1 is significantly higher than scenario 2, you know what to do. If Scenario 2 is significantly higher, you know what to do. If they are roughly the same, I'd say sell CO and invest in Dallas just for ease of management and the ability to take some profit without paying capital gains.

And I don't know if it's common to use a HELOC for a down payment, but we refinanced our principal residence with cash out, then used that cash as a down payment on our second residence and turned the first into a rental.

Go talk to some lenders (you can probably find some good ones here on BP) who are familiar with your market and see how much they will lend to you based on your current income and available down payment. Make sure they know you are planning on getting a duplex and that they will account for a percentage of the income (usually 75%) in your mortgage qualification calculations.

Armed with that info, you can look at the market if there are duplexes that you can afford to buy now that make financial sense and are in a neighborhood you want to live in. Since you are working and going to school, don't make life hard by looking super far away, keep it within a reasonable 15-30 minute commute from both. If you find stuff that makes sense, go shopping! If you find that you need a bigger down payment to live in your target neighborhood, keep saving. 

It is fine to buy a place that is run-down but liveable. Rent out one side and live in and fix up the other, then swap. It's a great way to get started. But try to stick to cosmetic rehabs for your first one, especially with a limited budget and very limited time. 

I've always thought the multi-page riders to P&S were BS. Just have a standardized P&S that covers everything, with maybe 1 or 2 paragraphs in a rider if there are special circumstances. But it seems the attorneys need to justify their fees and the extra steps it takes to close a transaction here in the Commonwealth, so we have arrived at a point where there is a "standard" P&S followed by an even longer rider. I can understand the frustration.

But I agree, your example is obnoxious. I'd report them to the various boards and associations. And I fully expect it to sit and rot. The market isn't *that* strong. No buyers agent worth her/his salt will submit an offer with that clause in place.

Brokers and agents work on commission. If you work with multiple people but only intend to buy one property, you're asking the people who don't close the deal to work for free. 

I have a very clear rule when I start working with a client. You can fire me for any reason. I don't mind. But you can't cheat on me. If I find that you're working with another broker, I immediately drop you as a client, forever. 

tl;dr - I'm looking for specific investment ideas on how to get the rest of the way to quitting my day job. NOT looking for advice like "spend less money" or "move to a cheaper town" or anything like that. 

My goal is to turn $300k of equity in my current rental property and whatever I can tap into from my primary residence into $4500 net cash flow/month and $460k total cash out for debt paydown and other projects. Would like to do this in less than 5 years.

We live in Boston, willing to invest anywhere.

With minimal fluff, here's our situation:

• Wife has a day job she likes. It covers benefits, etc. and gives us a comfortable base income.
• I have a day job I don't like, I want to quit but don't want to take a lifestyle hit. I like money! I take home about $65k per year. This is the income I'm trying to replace. This can come from passive income boosts or by paying down debt, or some combination of both.
• I have about $210k in debt with about $1725 of monthly paments. I would like to pay it all off.
• Stretch goal: I would like another $250k in cash to improve my current residence (I bought a money pit, and Boston contractors are 5x what they cost in the midwest).

Assets and liabilities:

• We have 2 x 2-family houses. House 1 we lived in until 2 years ago. 
  • It nets us about $10k a year but has over $300k in equity tied up in it (value is about $650k, owe about $350k)
  • We can sell it now and pull out about $160k from our equity without capital gains taxes, and use the remaining $140k in a 1031 exchange.
  • I'm sentimentally attached to the house, it's walking distance for easy management, and we have great tenants. If I don't have to sell I would consider keeping it. But I'm resigned to selling.
• House 2 we live in one unit and rent the other. 
  • Tenants pay $3000 a month, which covers most of our PITI (about $4k).
  • Value at last bank appraisal was $1.2M, mortgage is $630k, HELOC is $125k for a total of $755k (about 63% LTV).
• About $20k in available cash, but I try not to touch that (emergency funds, etc.)
• No credit card debt.
• We are credit card churners. I have about $200k of available credit if I want to get myself in trouble (aka "see a great opportunity")
• I pay $400 a month on about $36k of student loan debt. 
• HELOC is for $125k
  • Currently owe about $115k, about $10k available
  • HELOC payment currently $300/month but will go up to about $600 a month (interest only) after promo period ends in a year.
• I pay $400 a month for my car payment. Don't judge me, it's a long story and I like my new sprinter van after decades of driving sh*&boxes. Owe about $19k to pay it off.
• I borrowed from my retirement account and pay $325 on that debt. I owe about $40k. 
• I have a real estate license and occasionally make a commission, but it's not reliable. That money goes to the money pit or debt paydown.

I was probably 2 years away from being able to quit my day job after we bought property #2. But the rehab on our current residence went wildly over budget (1840s house coupled with insane Boston-specific issues getting contractors) and then we had a little accident (my beautiful 1-year-old son) and between the HELOC payment to cover the overage on the rehab and the extra $1500+ we're spending on the kid's childcare, college savings, and plastic kid crap I am now much farther away.

And no, we're not moving. I live in an amazing 1840s Greek Revival with a barn AND a carriage house and parking but I can still walk to the subway and I'm a $10 Uber from world class entertainment, and we're 1.5 miles from my wife's dream job.

So here we are:

I bring in ~$5400/month in wages + ~$800/month in rental income from the pure rental property. I send out ~$1725 in debt service payments (after the HELOC increase) on ~$210k of debt. I have ~$300k in equity I can access if I sell the rental (losing $800/mo in income), but I can only use about $160k on debt paydown. I want to pay off the whole $210k, get enough extra to pay for $250k in improvements to my residence/rental property, and still net about $4500 a month in income. And I want to do this in 5 years or less.

How would you manage to take my $300k nest egg and do what I want with it? I have some ideas, but I am looking for stuff I haven't thought of. Where in the country would you invest? Would you go with multis or SFHs, and why? Would you pay down debt first, or invest first and pay down debt later? 

I've lived in Roxbury for 11 years. I think we're close to the peak of the market in general but there are still opportunities to make money.  Boston is a hard place to do flips because contractors hate coming in to the city and the city's permitting and inspections process is nightmarish, but if you're experienced and can handle unexpected delays it can be profitable. 

I'm also a realtor, hit me up if you want to discuss more.