All Forum Posts by: Michael Morton

Wow - thanks everyone!  Awesome feedback.

@Nick B. - I think I'm calculating correctly since its straight from the BP tool.  However I may not have labeled everything quite right - like where the P&I is.  Still learning - thanks!

@Logan Hassinger - This is my first commercial loan, so thanks for the feedback on the terms - I'll adjust my analysis.  Also for the link - awesome.

@Ben Leybovich - my feeling too on the "cutting it too close".  So I look again, but maybe offer something that gives me a much larger margin-of-error.

@Kenneth LaVoie - Thanks for really digging into the numbers and double-checking.  Sounds like you got similar results, which is encouraging to me (that I did the analysis fairly correctly).  Also love the feedback on vacancy - got it ;)  Yeah - the utilities look high so I'm sure there are things to do - would love to get that into the hands of tenants ultimately.

Thanks for giving me a great sanity-check on this and confirming my suspicions.  This has been an awesome learning opportunity!  Time to get out there and keep doing more.

I'm looking at my first rental property.  This is in an working-class town 60 minutes west of Boston.  It's in good shape, doesn't need much work at all - maybe some minor stuff.  Long-term tenants occupy most units (10+ years!) so rents are on the low side by $100 / unit or so - but not much hassle from tenants

Price: $375,000 

5 Units.  Gross Monthly Income of $4100

2 Garages.  Gross Monthly Income of $1200

Expenses (Yearly):

Utilities: Gas ($800), Insurance ($3k), Elec ($3k), Water ($5k), Oil ($6k), Taxes ($5k)

Other: Vacancy ($1200 / 2%), CapEx ($3k), Snow/Lawn ($1800), Repairs ($2400), Garbage ($600), Management ($3500), P&I: $18k (30% Downpayment)

Yearly Income vs Expenses: $64k - 54k = $10k

Cash on Cash = 7.5% (10k on 120k)

My questions/comments are:

* Do those numbers look "reasonable" and am I missing anything big?  I've gone through the BP Analysis Tool.

* This seems OK, not great.  The big "killer" seems to be the utilities are very high.

* I'm interested in exploring splitting the utilities out to the tenants somehow.  It's an older multi-family so it's pretty complicated (I would think) to do that.  

* The ROI goes up quite a bit if I can raise the rents to be more inline with the area. $100 / unit x 5 units changes that to about 12% return.

* For what it's worth, the 50% rule shows $1500 / month cashflow, but actuals (above) show $800.  I think it's the expensive utilities.  Or maybe I'm overestimating the other costs.

Any feedback REALLY appreciated!

Thanks, Mike

Ben - I'm just getting in to - but have been listening / learning for quite awhile. I'm between you and Boston, in Harvard, MA. So far I've been looking at the local surrounding towns (Ayer, Hudson, Boxborough, etc). Depends on what you're looking for - but prices vary dramatically from one town to the next - so the numbers work out entirely differently. My best advice is to find some properties (doesn't matter how - just look on the MLS) and start "running the numbers" on them. Make guesses, just get going. Every day, I evaluate at least one property. Over time I'm building local knowledge and seeing which areas seem to have the types of properties that appeal to me.

Not an exact answer - but it just takes some leg work to start building local knowledge and see if Springfield (or an area therein) will appeal to you.

@Chris Anderson -Welcome!  I've been reading BP and listening to the podcasts for awhile now and they are indeed great.  I'm just getting into my local area networking as I've just returned to the Boston area from Australia.  I'm going to the Black Diamond event in Waltham next week - check that out (do a search here or the internet).  I went to the NEREIA this past week in Chelmsford and that was pretty informative.  I used meetup.com to find some local groups - there are a few.

Ann -- too funny that I've been thinking about this exact topic over the last few days!  Glad I've got it on the calendar - looking forward to the content.

I'm going to look at a potential rehab (fix+flip) property in Belmont that needs some significant work.  Looking for a recommendation of someone who can walk through with me and help estimate costs for the work.

Any tips appreciated.

Thanks,

Mike Morton

@Jeff B.

Thanks for the help.  Definitely requiring more information and detective work.  Appreciate the feedback.

Welcome @Lydia S. !  I'm new too - so in the same shoes as you - and also nearby (Harvard, MA).

@Robbie Reutzel - I'm heading to a few REIA meetings in my area over the next month (for the first time). What do you feel people should really get out of these? What should I be looking for an spending my time on there (and as followup)? Obviously I get that "making contacts" is the aim - but anything specific you could mention beyond that would be very helpful. Thanks!

Thanks for the tips @Russell Brazil and @Derreck Wells  Yeah - I realize now that of course lead paint is going to be an "issue" for every house up here.  Duh.  

Good point about resale value.  

Thanks for the positive responses.

I'm just starting out and am analyzing a property that is a 2 unit place in Harvard, Massachusetts.  I'd be looking to buy+hold, update and rent out both units.  My question is would you go anywhere near this place given that:

1) There's a pond on the property (really gorgeous, but do you want to rent with that "problem")?

2) There's a registered dam (and MA inspects them and can demand upkeep done by the owner)?

3) there's bound to be lead paint in the property

I'm thinking as an early investor I should just steer clear of these problems - but I'm interested in any perspectives.

Thanks!

Morton++