All Forum Posts by: Michael Cutting

Hello all!

I'm curious to know if there are any rules of thumb or rough estimates for costs involved with submetering a building for utilities. The apartment building I'm conducting diligence on is an 8 unit in which utilities are currently included in the rents. I do need to do more review of the market to confirm if prospective tenants would accept the responsibility of paying for utilities, or if the market expectation is that utilities are included in the rent for the area.

However, this may be a moot point if it will be prohibitively expensive or cause massive headaches to even try to meter for gas and electric for each unit. While my uneducated opinion is that the building is in great shape, I'm also very cognizant of the fact that it's well over 150 years old, so who knows what happens when that work begins.

The current owner paid an average of $7100 per year in each of the past two years for gas and electric. Am I better off just trying to maximize the building's energy efficiency as much as possible, or is it worth trying to convert these expenses over to the tenants? This is one of the key points I'm focusing on as I would look to improve operations and increase the value of the property significantly if I am able to acquire it through slowly raising rents to market and putting the building under more professional management.

Thanks!

Mike

Thanks, @Mike Hurney. It would be interesting to see what kind of luck I have with tenants in this specific property. As I said above, the seller has managed this property for many years and has apparently not treated it like a business, i.e. having long stretches of vacant units while he took his time in making any needed repairs or maintenance. The selling agent has definitely tried to sell the high list price by saying this is a great opportunity to raise the below market rents, but the answer there will be (1) I'll pay an appropriate value based on the current rents, or (2) feel free to raise the rents and come back to me if they're all rented at higher rates!

@Shaun Reilly and @Ray Hurteau, this is extremely helpful and valuable information - thanks very much for discussing!

From all my reading/listening to the BP podcast/your guidance above/my own common sense, the biggest item boils down to making sure something is in writing, and I fully intend to make sure all ducks are in a row and written down as a landlord! I had some landlords myself that just did things off the cuff which worked out to varying degrees.

Great points to note on the 30 days/1 months notice and the estoppel certificate (which I've heard of before but never actually known what is was for!). I also plan to make the last months rent/security deposit conversation part of future tenant turnover in the event I make this deal happen - the existing landlord is a bit of a "lifestyle" landlord, for lack of a better term, and so my plan would be to slowly increase rents, establish formal lease agreements, security deposits, etc. as tenant turnover opportunities come up.

@Paul Brockmann Thanks for the input. Definitely agreed that asking for a security deposit from an existing rental tenant might be a tall task. I also think you're spot on with the idea of wanting to screen them myself. Most of the tenants have been in the place for at least 2-3 years, but a couple are much more recent, so have less track record with the selling landlord.

@Rob Beland Really appreciate your thoughts here, and I agree on all your points. I haven't really thought much about the lease vs. TAW idea, mainly because all of my own renting experience was for annual leases. My high level thoughts on the rental market in New Bedford (where the property is I'm reviewing) would be that most tenants are probably more suited to a monthly agreement, as you say - better for the flexibility for both parties. At a minimum I think it'd be worth getting a written agreement, perhaps just memorializing the TAW agreement rather than a full lease with specified tenure.

You also make a valid point on the security deposits - just reading that section of the mass.gov webpage on Landlord rights and responsibilities was quite a chore to understand the various steps and requirements involved!

Hello, BP!

I've been doing some diligence on an 8 unit apartment building by obtaining details from the seller's agent and running some analysis. Outside of the numbers, I've got a few details around this potential opportunity that I'm hoping to run by the BP community to see if anyone has any guidance/experience with my specific queries.

The building in question is fully rented. However, the agent says that there are no leases in place - only tenancy at will agreements. Additionally, the seller has no security deposits, and he only has the last months rent for two of the units.

I've reviewed the landlording info on the mass.gov website, but wanted to check with any more experienced Massachusetts investors here on BP:

- Is a new owner allowed to step in and require signed lease agreements if no lease was previously in place in Massachusetts?

- Has anyone had any experience with taking such a step, and any guidance on that front? Are tenants put off by this? Do you advise allowing the tenants to remain on a month-to-month arrangement in order to make sure they are good tenants and the relationship will work?

- Can a new owner ask for a security deposit from existing residents if they didn't have to provide one to a previous landlord?

I'm not particularly enamored with the idea of not having a lease agreement in place, even if its a month-to-month lease, so am wondering how this would play out.

Thanks in advance!

Mike

@Justin J. and @Joshua Dow , thanks for the warm welcome!

Wow - quite the welcome party!

@Shaun Reilly Really appreciate you reaching out, Shaun - I very clearly remember listening to the podcast when you were a guest and being distinctly impressed by your success, especially since I've lived and worked in this area for many years now! Thanks to you,  @Justin Silverio and @Paul Timmins for the REIA recommendations - that's exactly why I decided to start being active, and one of the first messages I got was from @William Vaquerano regarding Justin's event in Chelmsford tonight (and I'm going to try to get out of work early enough to make it!). Also had heard about the Black Diamond Real Estate Investors meetup from listening to the podcast so was planning on making it to the Waltham and/or Worcester meetings later this month, so great to hear so many recommendations about that.

Welcome, @Mark Perry ! I'm a new face around here myself, though just getting started out in the real estate investing game. From what I've heard in all the podcasts, the site has worked wonders for people who are active. Very awesome to hear that you're able to live on the beach and invest a half world away. Do you mind me asking what your businesses are, aside from the rental properties? My main motivation to invest is to generate passive-income and be able to live someplace like Turks & Caicos!

Side note, have you read the 4 Hour Work Week? Sounds like you've got a great system going!

@Johnny Aloha Fitting that you should be the first to welcome me - thanks! Glad to see the keyword alerts that are discussed so frequently on the podcast work so well.

@Mehran K. Thanks for the welcome! Always was curious how people knew how to tag their fellow BP members in the posts so easily.

Hi BP!

Been devouring the podcast over most of the past year as I've tried to absorb as much as possible about real estate investing, and figure its time I stop lurking and start being active on the forums! I reside in Watertown, MA, but spend a lot of time down in the New Bedford/South Dartmouth, MA areas (where the fiance grew up) and that's where I intend to keep my primary focus as I try to get that first deal under my belt and become a real investor.

I've always been intensely interested in personal finance and have come to realize in the past couple years that what I really desire is financial independence. Found my way to BP late last year as I researched location agnostic/passive income, and set about educating myself through the BP podcast and blog as well as all the real estate investing books I could get my hands on.

Goals on BP: I'm hoping to further my real estate investing education by (finally!) becoming engaged on the forums, and I hope to do some networking with more experienced folks in MA and specifically the Boston/Metro-West/South Coast areas. Also hoping this leads to connections to real estate professionals that I can work with such as property managers, agents, attorneys and tax advisors, and GCs/rehab professionals.

Long term REI goals: I hope to acquire a large enough buy & hold portfolio to replace my current W-2 income, freeing myself and my future family of geographical constraints so we can live and travel around the world as we please. I really enjoy being outdoors and on the water, and hope to live in Hawaii someday, so my investing will be with that end goal in mind! I'm also interested in the idea of community improvement/revitalization through real-estate investing, and hope to generate some value in this manner for places like downtown New Bedford.

What I can offer BP: from the networking/investing perspective, I could bring access to capital/funding to a partnership. Otherwise, until I''ve got more experience, I bring a friendly smile!

Thanks, BP! Excited to be here!

- Mike