All Forum Posts by: Julie Williams

@Stephanie P. your new post is incredibly helpful. 

@Tika Eaton maybe you should work with @Brian J Allen on this thread. The agent I was working with further West owns three multi-families. He will buy places with low rents and raise the rent over a two to three year period and has never had an issue with that. The people who are unwilling or unable to pay the higher rent leave sooner or later. There is of course more risk during the pandemic because of eviction moratoriums, but it makes sense to me. 

This is what @Nicholas Bolcon is referring to, from Vermont House Bill H 200. It got an "Oh My GOD" out of me. 

12 § 4469. RESIDENCY REQUIREMENT

13 A person may not offer all or part of a dwelling unit as a short-term rental
14 unless the person has occupied the dwelling unit as his or her primary
15 residence for:
16 (1) 270 days of the preceding year; or
17 (2) if the person has owned or leased the dwelling unit for less than a
18 year, more than 70 percent of the days that the person has owned or leased the
19 dwelling unit.
20 Sec. 3. EFFECTIVE DATE
21 This act shall take effect on July 1, 2021.

Are existing rentals going to be grandfathered in? Nicholas, has this bill passed? I am looking in to buying a one family or a multi-family in Massachusetts, Vermont or Maine as an investment property. I actually prefer long term tenants, as short term rentals have such high overhead and cause such constant management headaches, but I am considering short term rentals. The market is so inflated right now, many properties have weak numbers for long term rental and great numbers for short term rental. If this bill has passed, it all but crosses Vermont off of my list.  

Nicholas, the work around is to get a two family, use one side for yourself, and rent the other side out for the entire ski season, which does not qualify as a short term rental. Then rent both sides out for the whole summer. Some areas have summer long events that people who participate in them need housing for, for instance Middlebury College's summer writing program, Bread Loaf. (By the way, Bread Loaf is not happening in Summer 2021 because of COVID-19.) You would have to see if there are summer events in Stowe. Or rent both sides out May-October to snowbirds. Again, this is a longer rental and does not fall under short term rental rules. Fully booked that would yield you at least five-six months of rentals a year, depending on whether you get someone for the entire ski season and the length of the summer event. Stowe has a 57% occupancy rate for short term rentals according to Airdna, so the total days occupied would be similar. 

Not sure how this effects investment properties owned by an LLC and financed on the commercial side...doesn't sound like new ones will be permitted.

People get married for green cards. Maybe people will start getting married to have a spouse to stick in one of the units of their Vermont property for 270 days a year. Doubles the capital gains tax exclusion too. 

@Tika Eaton I think you should reconsider Worcester. There are good neighborhoods. You just have to learn where they are. I am looking much further West, but the most desirable towns are very expensive to buy in to. In some of the towns the rents are very high too, but in others the prices to buy are high and the rents are surprisingly low. I saw a 5 plex in a popular town with quite a bit of crime, great cash flow, but the building was very poorly maintained. It was section 8 tenants (whom I have nothing against) and it made me sad and angry that the owner wouldn't trade some of that guaranteed income for tightly mounted railings and fresh paint. The deferred maintenance scared me off, because if they aren't fixing loose handrails, which are a safety hazard, God know what else they aren't maintaining. I didn't need a building inspection to tell me the place needed $50,000-$100,000K thrown at it ASAP. I saw a three family that had a ton of work already done on it, that I really liked, in a safer, working class town, and consider buying, but as I dug in to it found out it had a red flag for lead paint, it is just off the flood plain so I wanted flood insurance and all in (million dollar liability policy, umbrella policy and flood insurance) it was going to be over $3000 to insure. There was an empty church for sale three doors down and abandoned warehouses two blocks behind it, none of which will be developed into office condos or residential space anytime soon because of the pandemic. AND it had a sex offender living a couple of blocks away. There is a two family in that town in a better area (no abandoned buildings) that I am considering but it is overpriced by a good $40,000 and they will probably be shocked by what I would offer. I drove by a couple of place in Pittsfield, the only two of eight I was interested in that were not too close to registered sex offenders. I saw a two family with an excellent tenant upstairs that wants to stay but the numbers were weak all around. I saw a cute two family house in a great town but it was so expensive to buy the numbers were terrible, but put in a call to the town planner to ask if I could put a third apartment in the walkout basement. He called back and said yes, and had my agent call on it but it had just gone under contract. I saw another nice two family that was beautiful but I just had a gut reaction against it. In all I only saw six places and drove by three. Using the 1% rule, avoiding sex offenders, the flood plain, and places that need more than 100K of work, there isn't much left to see. 

@Tika Eaton That is what I am trying to figure out. I am looking hard at crime statistics, because some of the cities with the best prices in Massachusetts are low priced for a good reason. Fall River is on that list. I am playing my cards close to my chest (looking in none of the towns you mentioned) because I am on what I hope is a buying trip. Once I either have something under contract on the one hand or decide none of these properties are for me on the other, I would be happy for you to pick my brains. Feel free to remind me. Worcester is hot right now- it was the fastest appreciating city in the country, according to Zillow, a few months ago. It would have been nice to buy there a year ago! There is a lot of crime in Worcester and I would be careful as to neighborhood. You also really have to check out what is happening in parks. Overlooking a park used to be a huge plus, but in many Massachusetts cities, particularly with the economic suffering of the pandemic, homeless are camping in them and there is a lot of drug activity and sometimes some violent crime too. Realtor.com has a feature where if a property is listed on the MLS and you click on the map, you can overlay crime maps, the flood plain, and see where schools and grocery stores are. (Since I sometimes look at rural properties I look how far it is to the supermarket- you won't need that. :-)

Thank you for weighing  in with a fresh and useful perspective, @Joe Splitrock. 

@Steve Morris If I had $10M I would write novels, not buy property. 

@Aaron W. I was thinking along these lines myself, and it is nice to see it articulated clearly by someone more experienced. I don't know if how the eviction moratorium is implemented varies from state to state. In Massachusetts, the existing law (before the moratorium, and it is still in play) is that if a tenant does not renew the lease and does not move out, they convert to a month-to-month tenant and you would have to evict them. Massachusetts has some of the most robust tenant law in the nation and evictions are difficult and lengthy. So in an eviction moratorium, they don't have to leave. You could ask them to do so professionally and politely. If you are pushy it could be construed as harassment. You could buy them out. Offer them $1000 or $2000 to leave. (Rents are high here so you would recoup that quickly.) The great thing with the empty units is you can select applicants with jobs in industries that aren't going to disappear, or retirees. The other issue I am finding is access to view interiors of occupied multi-families. My agent says that the reason multi-families are selling far more slowly than single families is that it is often hard to arrange with tenants to show them because of COVID-19. In fact, of the nine properties I came to see, my sales agent has so far been unable to arrange showings at four of them because of tenants not cooperating with listing agents with showings. 

@Steve Morris Sounds like I would do better with a local or regional bank. 

If I form an LLC to hold a multi-family (I have not bought it yet) can't the LLC rent a residential unit to me? The LLC has its own tax number and is a separate legal entity. Let's use a $1000 rent as an example. I pay the $1000 rent to the LLC. If the cost of all overhead is 50%, $500 goes to overhead, is deductible and is not taxed. The remaining $500 is pass through income and I get it back, less income tax, say 22%, and self employment tax, 15.3%. So I get the $500 back less 37.3%. 37.3% = 153.65. I get $336.35 back in income from my own rent. It's also creates a unit with a stable tenant who is definitely going to pay the rent! If I had a tenant in there I would still pay income tax and self employment tax on the income and have to pay full price for a place to live as well. Long term, with mortgage rates so low, I am better off buying a place to live, but in the near term, it would work well. (One commercial lender I talked to does not allow owner occupancy. I have to find a lender who would allow it.) I do want to put property in an LLC to protect my assets.