All Forum Posts by: Ray Hurteau

Hey @Timothy Walsh, feel free to reach out/connect and I can share some info from what we've seen over the past years.  We've done gut renos and ground up 2-4 unit buildings - finished product was condos.  We also have some rentals.  Prices vary based on the end product.  

What hasn't changed over the years is that construction costs just keep going up, so you can very likely save money if you put in sweat equity.  My wife and I house hacked a 2 family about 5 years back and probably saved ~15k.  We moved out last year and now it cash flows nicely to help pay a part of the mortgage of our new home.

Welcome to the forum!

Hi @David Ward, this is a great question since so many people are looking at either SFRs in the burbs or larger 40+ unit rental buildings.  Boston is extremely unique because of the limited land, housing stock, and very high prices.  

Being a developer and investor in Boston, the only way a property is going to be a "good deal" is if there's a value-add play.  Otherwise, many view Boston's market as a safe haven for their money, hence the low cap rates as noted by @Jarrod Kohl.  That formula you mentioned just does not work or even come close.  Another reason 3 family buildings in particular will sell for a premium is because they are usually converted to condos and they are the easiest to acquire.  Even 2-3 years back, the prices of triple deckers in Eastie were 30-50% less.

In terms of what you should do.. it's a tough decision and completely up to you.  Personally, I don't like to put my money into something I can't control - yes the stock market has been great, even during COVID, but I would rather put my money into something I can manage (even if not 100% due to moratoriums and zoning risks) versus a stock that I have no control over and is basically a legalized form of gambling.  I still feel this way even if that means making less in hindsight.

In terms of buying something recently, we put a rental building under contract back in April and closed in July - it's a value add play where we get the existing building but it comes with a lot which we plan to subdivide and develop.  We did this strategy last year too and are just about to go through the ZBA process on that one.

So in terms of what 100k can get you right now in Boston -- yes, you're limited on your own.  IMO your options are: (1) look in less expensive markets where your dollar goes further, (2) invest in a different asset type, (3) invest with someone else / partner on a deal, (4) wait for prices to adjust, if it happens... personally, I would expect to see some distressed sellers who are going to be taken out by the eviction moratoriums due to abusive tenants - MA is brutal when it comes to the super-progressive lawmakers who think free rent w/o aid to landlords is perfectly acceptable... but I digress.

Wow! In Boston, a full gut on a triple decker will run $150/SF minimum.  And that's for a rental building.

Right now, we have an 8 unit property we're "refreshing" (somewhere between 2 and 3) and it's probably going to cost us $60-65/SF.

I've often wondered if anyone has seen this kind of cost delta and flown in crews to try to arbitrage their labor costs.

Depends on where it is - if it's in Boston, the Boston Drain:

https://www.bostondraincompany...

If it's south shore, we've used this company:

https://www.budgeitdrains.com/

I've also seen these trucks around but do not have personal experience with them:

https://www.bostonbudgetplumbi...

Good luck!  

Hi @Paul Bird, just took a quick look and I don't think 0% annualized expense growth is realistic - not sure if that's what Brandon was referring to. Also, the general rule of thumb is 5% for things like vacancy, repairs, etc. but since it's based on low gross revenue, you'd want to be aware that one repair could add up quickly into multiple months or even a year.

If you're doing a lot of capex then it could be a safe number - something to consider.  Good to see the PM fee and future capex!

Hi @Zachary Gilula, getting into the first house might be the most difficult thing to do as you balance wanting to do that first deal against analysis paralysis.  If you do this deal and you're breaking even - are you using all your funds to get this property?  How long would it take or how much would the property have to appreciate in order to get the next property?  I never like to use appreciation.  In my opinion, the appreciation of the property is only useful if it can be leveraged to purchase another property without impacting the economics of that property (or you do a 1031, which I haven't done but know the basics).

It sounds like you've already run some numbers and you asked if there was anything you missed, so I'll just list all the potential costs we have here in Boston. They should be similar to Denver, which I understand is very hot with inventory dropping fast since COVID started.

Cleaning
Dumpster/Trash
Electric
Fees & Interest
Gas/Oil
Insurance
Mortgage Principle
Mortgage Interest
Property Mgmt
RE Taxes
Water/Sewer

Variable Costs
Advertising
Book Keeping
Broker Fee
Capital Expenses
Condo/HOA Fees
Depreciation
Fire Alarm
Internet/Software
Landscaping
LLC Fees
Locksmith
Maint. & Repairs
Miscellaneous
Pest Control
Professional Fees
Security
Snow Removal
Supplies

Hi @Chris Martinez, we use Excel for all our rentals (as well as property management software, which varies by PM or if we do it ourselves).  We have one spreadsheet template for deal evaluation (research) and a second one for managing each property we own (track tenants, rent, security deposits, LMRs, the loan, and a few different summaries of financial performance).  Best thing to do is look for a solution that best fits your needs! 

Hi @Timothy Magill, congrats on your first purchase!  For what you're looking for, there are web-based services and excel-based solutions.  There are many free and paid options.  If you're looking for a quick spreadsheet to just create a basic budget, I'd google it and check out a few options to use the one you like.

If you need something more robust that can track the budget, variances, construction loans and draws, lender info, finish materials/spec sheet, etc., you could look at some of the more developed options.

@Cheng Bin Zhang what is the size of the two lots? what are your plans for the two lots? would you consider combining lots to maximize space and build something larger?  I've heard JP is a tough neighborhood to get plans approved, but if you know your abutters and can work out a deal, it could be possible.

our company has done new construction is south boston so we're familiar with the zoning appeals process.  PM me if you'd like any unbiased advice as you consider your options. @Neil Gulden gave some good referrals, we've used George and Arthur before to get projects approved.

@Jim Sestito - you got the best answer from @Nick Montville - if you bought your first house using FHA, you cannot have two FHA loans at one time, which is why they are saying you need to refi the first loan or sell the house. making the assumption that the 2 fam is an FHA loan product...

the value of your 2-fam has certainly gone up in the last 2 year, enough so, i would argue, to get a conventional loan without any additional money in (i would question if it was enough to pull any significant amount of money out tho).

so either buy the 3 family using a conventional loan product or refi the existing 2-fam into a conventional loan.  sorry to say, but most underwriters aren't in the business of thinking creatively, they just work to get to a yes/no decision.  your loan officer needs to do the thinking, and if they can't, it's up to you to present another option.

see if they will refinance your 2 family to a conventional product and give you the FHA for that 3 family. smaller regional banks might do a portfolio loan, but that would assume all products in the loan are investments. you should still try to get a new FHA for the 3 fam rather than go the portfolio route since they will likely make you put 25% down on the new property. good luck.