All Forum Posts by: Lior Rozhansky

I like the idea of increasing the rents for the first year to cover the broker fee. I've heard that some people just don't do the security deposit at all, and thus tenants would require 3 months of rent upfront (and they avoid the trouble of setting up an individual account for the security deposit). As I am about to start funneling in tenants to my first rental in Everett (MA), what are people's thoughts on that? 

I would also voice the FHA option, thats the one im pursuing right now. In terms of budgeting for management, typically what I've seen on here is 8-10% of monthly rent. For vacancy, that very strictly depends on where you want to buy; different markets have different rates, although I guess 5-7% is a "typical" vacancy rate I've seen on many deal analyses on BP. And repairs is another controversial one; while it is definitely a function of the condition of your property, what I've learned is that at least in your initial deal analyses, you can budget anywhere from 6-10% (12-15% total for repairs and cap ex). Again, though, this is only a very rough analysis.

Hey Kevin, welcome to BP! I'm in a similar boat as you, as Im working my first job and want to build a stream of passive income. I'v been at this for nearly half a year now, studying/reading and saving, so I am nearly ready to pull the trigger on my first multi family. Funny enough I'm also from Umass Amherst. Anyway, looks like me, you and @Jason Li all have this Newton/Umass/Real Estate connection. Hopefully I'll catch you guys around the site and maybe in town. 

Hey Ade, I would say it depends on your circumstances. I'm also on the market to buy a MF in Quincy. Any specific areas within Quincy you are looking at? I'm going to be using FHA, which allows 3.5% down (and depending if property needs rehab, 203K). But this is only for owner occupant properties. If you are not going to occupy it, you have tons of strategies. If you have money for it, you can get a conventional loan for a multi which i believe requires 20-25% downpayment. If not, you need to get some creative juices flowing...

@Josh Robbins Makes sense. As long as you have some reserves in the bank in case something brakes the next day, and you think at as-is condition in that market you will be positive cash flowing, it seems sensible. 

Im definitely not thinking of investing in Newton. I've been studying the Quincy market for some time now. The city has numerous redevelopment construction projects going on, and it seems like they finally have a sensible execution plan. I think finding a deal in a "cheaper" area though is just as hard to find a good deal as in the more expensive areas (Boston). At the end of the day, some of these multi families Im looking at have good returns. Im just waiting to pull the trigger until I see a house that meets my exact criteria (3-4 family, under 650K,  4-5% cap, and some form of expandability, whether it be some minor cosmetic updates or management).

@Josh Robbins From a pure numbers perspective it looks good. Though I havent bought my first one (so take with grain of salt), one thing I am really focusing on, especially with an older house, is understanding how to account for lifespan of the capex. So if you know you will have to replace that roof in 5 years, during your due diligence process (AKA now, when its under contract) see if you can estimate the cost and amortize that into your monthly expenses. The worst thing that can happen to us newbies is one bad hit from an un-calculated/un-expected capex expense that destroys a year or more of cashflow. Just my two cents. 

Lior

@Andrew Schena You are right; I've definitely seen these rental rates being pushed significantly up, but I also stumbled across a number of properties that were well below. As I'm looking to pull the trigger on my first investment, I prefer to stay on the conservative side but definitely keeping this in mind when I evaluate property expandability. 

And thanks for offering a second opinion, anything that will make me feel more comfortable signing that first deal. I'll be sure to let you know!

@Jim Sestito Thats also a good point. Math is definitely important, but there are certainly other factors

@Jerry Agbon Thats an interesting point you bring up about the impact of development. On the one side, having these new luxury apartments definitely suggests an influx of life into the market 9along with all the other construction going on). But I have been thinking about this as well; can these new developments over-saturate the market? I think because of the very significant price differences between typical homes and these new apartments saturation will be spared (at least in the nearer term). 

I chose Quincy because of all these new developments, and now I'm worrying that they may have negative impacts on the rental markets. Funny how that works out....

Hi BP,

Over the last number of months, I have been aggregating data and analyzing the Quincy, MA (south of Boston) multi family market. Here are the big trends I have uncovered. 

Quincy Areas

-From driving around and studying the rents and prices, clearly Quincy Center seems to be the hottest area in town (especially with all the new construction coming down). Excluding areas such as Wollaston and Houghes Neck that are right on the water, I noticed that South Quincy and Quincy Point seem to be values at slightly lower rents/prices, followed by North Quincy. Clearly this depends on distance to T stop, major highways etc (so South Quincy area next to Adams T stop is more attractive than the rest).

General Rental Rates

-1 bed/1 bath seem to be in the range of 950-1100 a month (600-800 sq feet)

-2 bed/1 bath seem to range in the 1400-1800 price range (800-1100 sq feet). I've noticed that on sites such as realtor.com, many of rental listings are of relatively furbished units  (hard wood flooring, tiled kitchen). I've only really stumbled on minimal number of multis that had some clear wear and tear on them. 

-3 bed/1 bath seem to range in the 1800-2200, with some very "high-end" apartments taking prices of 2500+. 

I think an interesting trend that investors have to be on the lookout for is with the newly constructed  apartments set to open in Quincy Center, will there be an impact on rental rates in these furbished multi family units that would begin dropping rental rates (logic being if i could pay another 200-300 and get this fancy new apartment in the heart of Quincy rather than dealing with a multi unit). 

Besides that, I've been trying to look for any trends that make renters "click" for in this market. Any thoughts would be appreciated, but from what I've seen, increased rent is commanded by cosmetic updates such as hardwood flooring, ktichen cabinets, and of course, the number one rule of real estate, location (T stop, highway convenience, beach).

Multi Valuation

-With a focus on triplexes and fourplexes, I started to analyze the valuations of these multi family properties. One of the biggest trends I have discovered so far by studying sold property data has been a cap rate of 3.5-4.5% (now this has gross assumptions such as a 45-50% operating expense structure--and no, when I put down an offer I will not use this, I will actually do a valuation of capex using lifeyears although repairs I'm still working on....) . I've heard on the forums and some meetings that the Boston cap rate is around 4-5%, but I did not think Quincy was so low as well! To be fair to this valuation, it does seem like many of these sold properties have obvious room for at least cosmetic repairs which could boost your NOI, though that would need a thorough analysis of its own.

As mentioned before, the expense structure has definitely been trickier to fabricate in terms of this market. I havent seen or heard anything that would suggest there are drastic flags an investor needs to be aware of here (besides floor insurance if buying close to the ocean). If someone is interested in these updates, I am planing on calling roofing companies, contractors etc. to find out their views on the expenses associated with capex (and general repairs).

Long post, but I think is a nice overview of this market. I hope its helpful to anyone thinking of buying here (I'm looking for that ever-elusive first property), and for anyone who has experience in this market, I'd love to hear thoughts on these dynamics.

Cheers,

Lior

Hi Kathleen,

Welcome to BP! I have been on here for a few months, and if you are looking for a place to learn, you came to the right place. So many great resources here. I would also not put Boston out of mind just because of market value prices. Although I have yet to buy my first investment, I have analyzed lots of deals that make solid returns. Just need to look hard!

Lior