All Forum Posts by: Michael Vazza

@Stormer Santana Happy to help. I'm not involved as its one of my Uncle's businesses so not sure if they have that lease option but doesn't hurt to check it out and see. They probably have much more relaxed options and more flexibility getting that done for you than a large corp. like WeWork. 

@Stormer Santana Hi, I agree with Lien. Paying for office space just to have the lease would be a pretty substantial waste of $ so I would look into shared office spaces. My extended family owns a space in Quincy that has shared working environments if you want to check it out (I personally have no interest in the property), just wanted to share if its beneficial for you. I think its around $500-$750 per month depending if you want to have a private office. 

Office Link Quincy

https://officelinkboston.com/q...

One of the first things you want to look at of course is the market. If units in your market that have recently renovated are renting for a few hundred dollars more than yours, then this should be an immediately simple and good indication you may be leaving money on the table and should consider renovations. You need to know what your market’s rents are and how you stack-up against them.

As far as the financials, the main process I look at is whether or not the ‘return on cost’ is greater than a property’s yield. For return on cost let’s say that I am looking at a remodel that has a cost of $20,000 overall to complete the project and add value for a unit. If in my market I can be confident that these renovated units will push my rent from $1,200/month to $1,500/month. Then the first part of my return on cost calculation is simply the $300 difference x 12 months which equals = $3,600. This is the added value (return) that I can expect. To finish the equation, we divide the $3,600 of added value by the $20,000 cost of the renovation - $3,600/$20,000. This gives an overall return on cost of 18%.

If my current yield on a property is 5% and the ‘return on cost’ of carrying through with a project is 18%, then it makes sense to complete renovations to pull up the properties returns. If the ‘return on cost’ is not as substantial - maybe 5.5% then it’s not going to drastically pull up my overall yield on the property and I most likely wouldn’t want to go through the headache and time of accomplishing the renovation. Any ROC below the yield would be dismissed as it wouldn't add value. 

Anytime the return on cost is substantially higher than your current yield on the property – then it will make sense to seriously consider renovations to add value to the property. 

What other calculations or metrics are other investors/managers using when considering renovations?

@Taylor L. I agree and will be interesting to see what the future holds relevant to rates. I am a little cautious in an area such as Boston with these factors pushing renters to remain renters. While I certainly agree, my concern is the high prices already experienced in the Greater Boston area for renters and questioning how much further rents will/can go before tenants start looking for lower cost areas of living. We do have many positives with great schools/universities, diverse economy, world class hospitals, and massive life science investment flowing in to the city to (hopefully) keep high income earners. 

I would hope most multi investors are using conservative underwriting in their rent increase assumptions moving forward, but the good news is if you already have qualified high-quality tenants then they should be staying put and renting for a while. 

The market potential for existing-home sales in June was estimated to be 5.47 million at a seasonally adjusted annualized rate (SAAR), down 2.5 percent compared to last month, and 13.1 percent lower than one year ago, which is near the same level as in early 2019.

Fundamentals Reducing Housing Market Potential-

• Declining House-Buying Power: House-buying power is how much home one can afford to buy given household income and the prevailing 30-year, fixed mortgage rate. Mortgage rates in June were 2.5 percentage points higher than they were a year ago. Holding household income constant at its June 2021 level, the increase in mortgage rates reduced house-buying power by $123,500. A 4.4 percent annual increase in household income helped to mitigate some of the impact of rising rates on affordability. Once accounting for the rise in household income, house-buying power fell by $108,000 since June 2021. The overall decline in house-buying power reduced housing market potential by 522,000 potential home sales.

• Tighter Credit Standards: When lending standards are tight, it becomes more difficult to qualify for a mortgage to buy a home. Likewise, when standards are loose, it’s easier to get a mortgage and buy a home. When home buyers are less likely to receive mortgages for a new home, they are also less likely to purchase a home. Credit standards tightened in recent months due to increasing economic uncertainty and monetary policy tightening. Compared with a year ago, credit tightening reduced housing market potential by 458,000 potential home sales.

• Increasing Tenure: According to the most recent data from June 2022, tenure length has increased from 10.4 years to 10.6 years compared with a year ago. The main reason? Low mortgage rates discourage existing homeowners from selling because there is no increased house-buying power other than that which comes from household income growth. Homeowners staying put reduced market potential by 80,000 potential home sales compared with one year ago.

Fundamentals Boosting Housing Market Potential-

• Rising House Prices: As a homeowner gains equity in their home, they are more likely to consider using the equity to purchase a larger or more attractive home. However, if equity is low, homeowners are likely to remain ‘equity locked-in’ to their home. Compared with one year ago, house price appreciation increased housing market potential by nearly 193,000 potential home sales. This may be particularly important in an environment where house price growth is beginning to moderate, as sellers may be tempted to jump into the market to capture the higher sale price, yet these potential sellers must also contend with a rising interest rate environment.

• Rising Household Formation: The more households formed, the higher the demand for homes. The growth in household formation contributed to 43,000 potential home sales in June compared with one year ago.

• More New-Home Supply: The lack of supply and the fear of not being able to find something to buy keeps many existing homeowners from selling. As homebuilders bring more new homes to the market, the risk of not being able to find something to buy lessens and homeowners’ confidence in the decision to sell their existing home grows. Compared with last year, more new-home supply is entering the market, increasing housing market potential by 1,400 potential home sales.

Data and information sourced from First American.

https://blog.firstam.com/econo...

Hi Andrew, I have a locksmith our team uses in Boston - he would probably service Quincy. Happy to send you his info privately if you want to reach out. 

Final product looks awesome! Congratulations and sounds like you got pretty creative with the approach on getting this done. 

Hi @Katie Bustos, that price point would not be feasible in the Greater Boston area as pointed out by others. You may want to look at locations such as Springfield, Holyoke, Fall River (but Fall River might also be a slightly higher price point). One of the challenges you'll face as well is the car aspect - going to view the property or running in to any maintenance issues so would ideally need a 1) a real estate agent who works primarily in these areas who knows what you are looking for and can do viewings for you and 2) property management company or a good reliable relationship with a handyman. This comes at a cost on your returns of course. 

Hi Tyler, I just shot you a message and of course - happy to share how I got started. I very much agree with Troy DeLong's comment. Very hard to expect high cash flow off the bat in an area such as Boston, especially on your first property. But you can still make strong returns, as well as learning the in's and out's of the property itself for future experience. 

Hi Katarina, I actually had a similar conversation with another BP member yesterday so would be happy to connect for a conversation if that helps. I grew up in the Boston area and can share how I got started in this market, especially with the challenge of finding cash flowing properties in the Greater Boston area. I am an agent/partner with Compass in downtown Boston, but I have a background specifically related to investment properties as I hold my CFA designation and spent nearly a decade in investment management while building a RE portfolio on the side before transitioning full-time to RE.