All Forum Posts by: Doug Shapiro

Hi Patrick,

Boston's real estate market is definitely very expensive compared to other cities around the US.  Don't get distracted with sales prices outside of your market.  

It is unwise to put all your eggs in one basket because it is risky.  Let's assume that you end up buying an investment property in Boston that is at the top of your budget.  Would you be okay financially if your tenant stopped paying rent for 3 months?  Or what if you had to spend $15,000 for an unforeseen repair?  

If you buy outside of Boston in a less expensive real estate market, you have to start thinking about how you will manage the property (will you drive 1+ hours to do repairs yourself?, will you hire someone else to do maintenance work? will you hire a management company to find/manage tenants?, etc.)  If you plan on living in the property, such as a multifamily unit, then those questions won't matter as much.  

If you are completely stuck on investing in Boston, then that is fine, but just make sure that your investment makes you money (or covers your mortgage/expenses).  There are many different property investment calculators on this site that you can plug numbers into to see what your monthly cash flow will be.  I'm sure there are opportunities in Boston, but you should spend a significant amount of time doing calculations to see what is a good investment.  Change the down payment percentage to see how this effects your monthly payments.  Speak with several different realtors to see what you can charge for rent in particular neighborhoods for different types of properties.  

Hope this helps.

Jay

I read the book "Rich Dad, Poor Dad" - that's what motivated me initially.  

Welcome Edwin!

I just recently took a trip to Toronto for the first time and really like the area.  

You are definitely on a good career path for real estate investing.  

Jay

Agree with Kyle J.  

I personally believe that if anyone has a history of doing something, then their chances of doing it again rise dramatically when compared to someone who doesn't have a history doing that same something.  

If a prospective tenant is honest about a previous eviction, then it is commendable.  However, as a landlord, you want to do everything you can to ensure you receive rent each month.  If you have to evict a tenant, then you are in a terrible situation.  It means they are not paying you but are still living in your property.  This costs you money.  

In summary - just have a policy to not accept tenants with a prior eviction history.  I believe in second chances and that people can change, but in this case playing it safe is best.  

Jay 

Originally posted by @Marco Carrillo:

Brian - The current lender I use (aimloan) will lend you up to 10 mortgages provided that you qualify for them.  It would be good for you to talk to them or other banks to understand whether is more important to have reserves (the $30K) or the lower debt to income ratio in your specific situation.

Steve makes a great point that I can't emphasize enough.  If you know you won't be able to sleep at night if you take a specific action (paying it off, or not to pay it off), then don't take that decision even if the math tells you it is the right decision.  First of all, take care of your well being and then take care of everything else.

If it was me, I would think about this as another investment decision.  You are investing $30K to get $400 more per month.  Your return on that investment is 16% (=400*12/30,000 = 4,800/30,000) without including the higher tax cost.  If you will pay 20% of taxes on that 4,800 that means your 400 net per month (or $4,800 per year) will be reduced by $960.  Still your return on investment is 12.8% = (4,800 - $960)/30,000.

Unless you have another investment that will give you more than 12.8%, or if you have a personal requirement for your capital that is higher than 12.8%, then the payoff seems the way to go.

I agree with Marco Carrillo.  Think about it this way:  if you have $30K sitting around then you can either do nothing with it, or invest it.  Paying off your mortgage is one way you can invest it.  By paying off your mortgage, you would essentially be making an investment of your $30K that will yield a 12.8% return each year.  It will also greatly improve your lending ability and credit.  

If you desperately need the $30K for another investment - one that will yield more than 12.8% return, then by all means use it for the new investment. 

I agree with everyone who recommended to live within a short drive if you will be self managing the property. Also agree with buying a duplex/triplex/quadplex as a smart investment. In terms of location, any area can potentially work. Some areas are easier to invest in than others and some areas have much better returns. Regardless of location, buy in a good neighborhood - one that is safe and desirable to live in. There are three important questions you should answer: 1) how much money do you have for a down payment? 2) how much money can you borrow from a lender? 3) how much money are you comfortable investing in a property for repairs/remodeling after you buy? The answers to these questions will help you identify neighborhoods and properties that you can afford. Hope this helps. Jay

Hi Derek, Sounds to me that you are in a great position to develop a real estate class that your family or friends can sign up for. Not only will this give you the opportunity to make some extra cash (it is okay to offer this to friends/family in your situation), but it will also save you time by allowing you to teach all your pupils at the same time and around your schedule. Jay

What is your role in selling?  Are you the listing agent, mortgage broker, title company, etc?

My advice is to just be honest and to explain everything clearly to the seller.  Make sure they understand what you will do for them and make sure you give them your business card and/or contact information.  Honesty is the best way to build trust.  

The questions to ask would be:

What is the lowest offer you would accept for your property?

How much do you want to sell for?

When do you want to sell by?

Is there anything you think I should know about your situation and/or property that will help you sell for the most amount of money/close by a particular date?  

The questions above are just the basics, but I'm sure you can just have a casual conversation with the seller to find out about why they want to sell, what their plans are moving forward, where they plan to live, etc.  

I definitely would NOT try to ask questions that would make the seller more motivated to sell.  You should try your best to do what is best for the customer.  The real estate industry is built around trust, references, word of mouth, repeat business, and reputation.  I personally have bought many properties with the same realtor because they were trustworthy from the beginning and looked out for my interests time and time again.  

Hope that helps.

Jay

If you have a Chase Bank account, then use Chase QuickPay.  As long as you have the Chase account, then the tenant can still set up online payments.  I know there are various other sites/banks that allow online payments, but in my experience Chase is just the easiest and quickest.  Actually, the only reason why I have a Chase account is for QuickPay to receive rent payments.  

Originally posted by @Greg Baker:

@Doug Shapiro  @Simon Campbell @Mark Updegraff 

Thank you for the additional points of view.  The house would be very easy to rent as 2 individual units, there is a "common entrance" side door, after which you can enter the basement to the right which provides access to the electric panel, go through a door to the first unit on the left, or walk up the stairs and through another door for the second unit. The good news is the mortgage is also only in my wife's name.  

Here's my only concern which I would love advice on a work around.  The home is not metered for two units.  Gas/Electric for my wife and I is $209 a month but would expect more for multiple families, garbage is $30 a month, water is $17 a month, so say $260 at least more per month in utilities if I cannot pass them on. If I was able to collect $1300 a month rather than $1100, I'm -$60 unless I can somehow pass those costs onto the tenants.

Additionally, I know I can tell a single family home renter to mow the lawn and shovel snow, but can you tell tenants who share a property this?  If not, that's me on the weekends for mowing, and $250 a winter for plowing.

Last, but not least, does it require any additional inspections or certifications from the town/village before it is approved as a multi rental as compared to a single family rental?

Thank you for your time and expertise!

Hey Greg,

Another option you may consider would be to charge $1,500+ per month for rent to include utilities, garbage, snow removal, yard maintenance, etc. Or increase rent to be whatever all those additional expenses would add up to.  I think this is a good selling point.  Tenants may appreciate this all inclusive rent and some may be willing to pay more so they don't have to worry about utilities every month.  

As long as you can break even every month with rent received being equal to or greater than all your monthly costs, then I think you should keep the property.  However, if you are losing several hundred each month, then perhaps sell.  Looks like you have 27.5 years left on your mortgage, so take a look at your amortization schedule to see how much interest and principal you are paying each month.  

Again, this is a tough call, but if I were you I would try my best to hold on to the property if you can manage to break even each month.  Selling properties is costly because you will pay 6% of the sale price to the listing agent and buyers agent, and you have closing costs.  Definitely talk with a real estate agent in your area because it may turn out that you will lose several thousand dollars if you sell right now.  Also check with a real estate agent to find out what your place can realistically rent for.  Tell them you are thinking about renting out your place or selling it, and if they can help take a look to see what the place can rent for.  Remember, renting in the middle of winter typically has the lowest monthly rent because fewer people are looking for a place now.  The best months are May-October, since this is best for school year schedules and is when most people are signing lease agreements.  In other words, ask what your place can rent for now, as well as what it can rent for during the best months to rent.  

Jay