All Forum Posts by: Matt Z.

Thanks for the tips.  I'm set for insurance on this property now for the next year, but have another I will need to requote soon.

I will check on Patriot Bank - honestly I'd never heard of them.  I'm using Liberty Bank for some Security Deposit accounts right now, and although I like Liberty for many other things, all 3 branches I've tried are LOST when it comes to security deposit accounts.

I have a unit that will be rented to a group of international Post-grad researchers later this year.  Have a deposit, but won't be able to get a physical W9 until August.  And even then, no SSNs...

Hi All,

Been a landlord for a few years in CT, but am curious as to what others are doing concerning 2 items:

1) Insurance for non-owner-occupied Multi-Family properties.

I recently switched a 2-family that I used to partly owner-occupy to a Landlord policy, since it is now fully rented.

It's in a great area, in awesome condition, updated plumbing/electrical/safety, etc.  Wonderful property with great tenants.  TOTAL nightmare to find landlord insurance - I spent 2 months of heartache and runaround to eventually find a good rate. 

What are you doing for insurance?  Is there a better type of policy to insure a small multi-family rental?  This is in New Haven (but an "A" area) and an older building so I understand there are costs associated with that.  The 300% swings in price from one carrier to another are what I don't understand.  

2) Security Deposits.

Are you simply holding these in a savings account, in your own name, separate from your other funds?  Or creating one of the "CT Security Deposit" accounts that no bank seems to understand a thing about?  I found one bank that would actually do them, but its a complete nightmare each time.  The staff has no idea what they're doing - yet another thing I've spent a month calling around about with no straight answers.  Other banks want the tenants to appear in-person, which is a burden and in some cases not even possible.  None of my friends who rent in the area, regardless of mom & pop landlord or major management company, have had to fill out W9 forms nor appear in person at a bank...

The interest rate on those escrow accounts is comically low, barely above the state minimum that you are required to give back to the tenant.  Seems a bit silly when there are 1%+ savings accounts available.  When you have a great tenant that's been with you for 4 years, it's almost embarrassing to hand them back their money + $3.17.

@Will Chamberlin I ended up not doing anything here, based on my own research and advice from my accountant.

Ended up acquiring another multi-family property and still personally manage all the units.  It's a fine setup for now.  Just going to keep an eye on a few factors: my portfolio (growth, possibility of moving beyond "A" neighborhoods with "A" tenants), whether or not I self manage any additional properties as I grow, tax legislation, etc.  

Hi NYC Forum,

I currently invest and self-manage some small multi-family in "A" areas of New Haven, CT.  Love investing and living there, but looking toward the future it wouldn't be a bad idea to diversify. 

A possible next step for me is to go with something that is far enough away that I will hire-out management, but close enough that I could drive there on occasion when.   

Prices in Belmont for Small Multifamily (2-4 units) is very similar to what I encounter in New Haven.  I'm apprehensive on tenant quality and dealing with NYC regulation/bureaucracy/costs.  NYC tends to be a whole different animal then...well...anywhere else including the rest of NY State. 

I'm accustomed to amazing tenants and a generally reasonable attitude & policy from the city towards landlords & rehab projects. 

Anyone familiar with the area that can offer insights on investing there?

@Edward Schenkel my experience is specific to the space I operate in, which is small mutlifamily in the top tier parts of New Haven:

- Property value for brick will be slightly higher (assuming average or better condition brick)

- Property tax for brick will be a bit higher, all other things equal. Proportionally, the amount of extra tax paid is slightly inflated versus how much extra money you'll make on a sale. 

- You won't get additional monthly rent from brick. But keep in mind...

- ...an attractive house is an attractive house, an ugly house is an ugly house. Rentability and achieving full market rent is easier with an attractive house, even if the interiors are equal. Old brick houses in my area are often very attractive.  Original wood clapboards are if they were maintained.  Siding encapsulations and beat-to-hell wood clapboards tend to be the biggest losers. 

- On old houses, yes, brick will require some maintenance.  Relatively expensive, but also not needed often. But painted clapboard I believe will likely need far more frequent maintenance, though at a lower cost each time. 

- Here's the wildcard: In the areas I operate, many small MF are being converted to Condos or owner-occupied SF.  This can be a quite lucrative exit strategy, or partial exit I suppose if you are going to manage the condo.  Good-condition Brick houses are a candidate for these valuable conversions, as are houses with original wood clapboards with nice detailed trim, also in good condition.  Wood w/ rot and covered in flaking lead paint?  Nah. Vinyl, Aluminum, or Asbestos?  Hell no. 

@Filipe Pereira Any quick suggestions for mortar for minor repointing of a brick + stone foundation?  Late-1800s soft brick.  Care more about not using a too-hard mortar and damaging the brick, more than finding a perfect visual match.  It's all been painted multiple times anyway. 

Hi Nate,

I live and operate in New Haven but in 2 different "A" Areas, so I will try to help as much as I can.

1) Yes, to some degree.  The majority of ground-up new construction are larger apartment buildings in expensive areas.  In a "C" area, it is more often a gut-to-frame of an existing structure, maybe with an addition.  (This is being done in A/B areas too, sometimes for condo conversions).

2) Would need more information on the exact location and size.  Honestly, if it's truly a C area, the answer is "not much."  Unless it's very close to a better area that one could speculate may improve in the near future, but even then the empty lots sell slow.  Beat-up existing structures actually sell quite quickly in C areas because they cash flow well after renovation, but I think that people look at empty lots as "too much effort, could just fix up an existing house" in those neighborhoods.  If it is a narrow lot, you are also probably dealing with zoning variances - approval for yard setbacks, etc - even if the area itself is zoned for 3-family. 

New Haven is very block-by-block, especially on the outskirts of the A/B areas and in transitioning areas.  Regardless of your goals, I would invest significant time in learning the ins-and-outs.  I love living and investing here and hope to continue, but it took me years to learn this place.   

Hi Rich,

I think the old saying "all real estate is local" is true here, and applies to CT in a massive way.

There are both positive & negative factors that should be kept in mind when investing here (that agent is not completely incorrect, but is speaking too broadly), and you need to truly understand your local area and your goals to make the best decision.  Don't rely on any agent.

I find CT is interesting because the Real Estate picture can differ completely in the same city, block-by-block.  Or even Single Family vs. Multi Family on the same street!  Nevermind massive swings on a town-by-town basis.  Someone above mentioned ruling out a particular NC County - in CT, each (tiny!) county has hundreds or thousands of different micro-situations when it comes to real estate.

I know my little niche very well.  There are other markets in the state that I also think would fit my strategy, and others that I absolutely will not touch.  However, there are successful investors even in the state's most-struggling areas.  Strategy & experience.

Hi Albert,

Thanks for the insight.

Both my current duplex, and the one I'm interested in, are actually great primary residences for me.   Love the area, its convenient to work and everything I want/need. 

From an investment perspective on this area, the vacancy rate is very low, rents are healthy (reasonably high, but not NYC/Boston/Bay Area crazy), and the tenant quality is about as good as it gets.  Prices of multi-family homes are a bit high (as well as taxes), but can be justified due to the positive factors. These factors also did not seem to be affected much, if at all, during the last recession.  

Seems to be a blessing and a curse that my personal preferences happen to line up with my investment strategy :)

Hi All,

Posting this in light of the BP article sent out today "An FHA-Financed Duplex is an Ideal First Investment Property: Here's Why"

So I already have one duplex. Purchased January 2016, didn't want FHA financing because of the potential restrictions. But now I'm looking for my second. Will have a year and a half of landlording experience by the time that happens, and 2 signed leases through Summer 2018.

I did a significant value-add and renovation to my first property, and am planning on 1) Doing a cash-out refi with minimum 20% equity remaining (this is in progress right now), and 2) Renting out both units, including the one that I currently owner occupy, and purchasing a second multi-family home.

I live in a hard area to appraise, because sales of decent, or great (mine is great) duplexes are so rare.  They cash flow like crazy, so people hold the houses unless they're falling apart. Thus, the comps are crap-boxes in need of massive investment.  Tough to comp against my turn-key house, so I'm preparing myself for a pessimistic appraisal.  Less cash-out = less down payment on another multi-family.

Notes:

- I would owner-occupy the new duplex, at least for a year. Possibly many more years, but it's tough to say for certain.  For the sake of conversation, lets say I can only guarantee 1 year of owner occupancy.

- A particular "duplex" Im looking at is actually a legal triplex, but missing a kitchen thus is being sold as a duplex. Would immediately be pulling building permits to return to a triplex. Meticulously maintained and updated home that I don't see having an issue passing FHA requirements.

How does FHA financing fit into this, if at all?

Update:

That went much better than expected.

Went to the Building Dept. Most recent record on the house is a permit for a minor repair job performed in the 1950's...on that document, the stated use is 3-family.

Because there is no document on file newer than that, the legal use is still 3-family.

So for functional purposes, the 2nd floor is a rentable apartment once a (code compliant) kitchen is installed where there was a kitchen up until 25-30 years ago.  That, and change the locks, would do it.

To do it "right" (or at least not be forced into paying the 2fl tenant's utilities), I may need another meter or two, another electrical panel, and possibly a boiler - I don't recall the current utility configuration.

But in summary, this house is now definitely on my radar for purchase.