All Forum Posts by: Ray Hurteau

@Clinton Holmes,

There are many possibilities, but leaving everything in your name or one entity is likely the most risky. You can use a trust (for privacy) and have your LLC be the beneficiary (for protection of assets). Be sure to check with your insurance company about having the right coverage under the right entity.

The MA landlord-tenant law is really about dealing with tenants and how some can game the system/be impossible to evict; it does not really impact how you should structure your businesses.  Screening your tenants properly is the best way to hedge your risk of having troublesome tenants (see the BP blog post, which is gospel) and carrying ample insurance in case someone gets hurt on your property is equally important.

We currently use LLCs (no trusts) for our rentals and each rehab/new construction project. The LLC comes, it goes, and everything is separate. You will want to follow strict accounting and banking habits - do not transfer between LLCs directly (use a personal account).

Of course, please consult the appropriately licensed professionals and do not rely on my sole advice as I am not an attorney, accountant, or insurance agent.

Cheers!

Ray

@Jabari P. - Oh, great!  Have you been to any of our projects?  Hope to see you around soon!  Between the site work (water, sewer, electric, gas, foundation, surveys, curb cut, temp fencing, police detail, water line for sprinkler - if required vs pump and tank system, etc), you're probably looking at 100-135k.  it might be more if the soil is no good, you will want to get a core soil sample before you get to a firm contract price, since that can be another 30k to truck out bad soil and bring in good soil.

Then to build it will be anywhere between $125-150 a sq foot, maybe more maybe less - all depends on contractor relationships you have and the finishes.

With everything being very busy in Boston, affordable skilled labor is hard to come by.  I think every project is different, so it really depends on the complexity of the building proposed.

If you're doing a 3 family in a good part of Dot, you will get more than 550k, especially if you get tenants in there and sell it as turnkey.  Could be 750k+ in some parts.  I think the worse areas you will probably see 500-550k in the current market.

So rough numbers:

100k - Purchase with plans

135k - site work

437k - frame and finish (assumed at $125/sq ft)

672k - all in cost of land and construction

??k - legal, taxes, ins, broker fee, utilities, misc

sell for...?

I would look for condo potentials instead. Some areas in Dorchester you can sell for 350k+, so your ARV would be more like 1.05M and then it would be worth it.

Hi @Jabari P. - to develop a parcel of land, you will want to give yourself a solid 24 months.  I know someone who just took down a property and it took him 30+ months to fully complete from acquisition to resale.

You need a lot of things and we are doing our first tear down/new construction project.  You are more than welcome to follow along by following us on facebook.  We are also part of a group called Boston Wealth Builders, found on meetup, where we give property tours and insight/presentations.

For Dorchester, you should not consider any land that would be suitable for 3 units for more than 100k with approved plans (this is just an example).  Some land is sold with approved plans, some is not.  When we acquire raw land that needs ZBA approval, we cannot pay more than 50k based on our numbers.  But Dorchester is huge, so the specific area will better define what is the right price.

Feel free to connect with me - I'm by no means an expert, but am going through all this right now in Southie, so I do have the relevant info.

Maybe consider partnering or a rehab project first?

How are you looking to find your deals? If it's just MLS, you are not going to find much there. Let's talk about your marketing plan/budget for direct mail and/or online.

@Shaun Reilly makes a really good point about getting the estoppel cert. Definitely have them sign what they claim.

"I would say that I would only get a security deposit if you are going to collect the maximum 3 months rent up front allowed by law."

Shaun, when you said collect the 3 month's rent up front, do you mean first, last and security? Or something separate?

http://www.masslegalhelp.org/chapter-3-security-de...

Hi @Michael Cutting, great questions and it sounds like you have a potentially exciting opportunity.

I am going to have a slightly different opinion compared to @Rob Beland.

I agree about being able to require them to sign leases.  I am not sure if you can ask for a security deposit if they are already a tenant, you should ask an attorney.  My guess is yes, but you cannot hold more than 1 month's rent as security deposit and the amount collected must go into an interest bearing account (which is .05% today) - 1 account per tenant OR you have to keep track of individual interest allocated if you co-mingle money.  I do not find this to be a big deal (neither do my qualified tenants) and always prefer to collect a security deposit.  

Massachusetts makes it very easy to find the security deposit laws and tenant-landlord laws online.  But again, a good landlord attorney will keep you most protected and the cost of legal advice far outweighs doing something wrong and it favoring the tenant's bank account.

I personally always like to have a 1 year lease (nothing longer for residential) and security deposit for the following reasons:

1) I am theoretically guaranteed to not have a vacancy during that time and I know what my income will be.

2) My tenants know they are legally responsible for paying the rent during that time.  Yes, they could move out overnight and I may never get paid, but legally they are responsible.

3) A security deposit shows 2 things: 1) they have the money to afford security deposit and rent (credit and income verification will prove this anyway) and 2) they are responsible for any damage they create and there is an incentive (as small as it may be) to not leave the unit damaged.

You may also have the opportunity to increase rents when asking them to sign a lease, of course given 30 days notice.  They don't have to accept it, but it's a way you can add value and correct an under-valued rent situation.

Get something in writing, regardless of TAW or 1 yr lease.

Some people may not like or want to sign a lease and for those you will need to either begin the eviction process or have them sign a TAW agreement.  I would caution that whatever route you take, be consistent to each and every tenant because if you say one thing but do 2 or 3 things, courts will not look positively at you for inconsistent practices.

If/when you need to find new tenants, be sure to have your own application, use the GBREB forms, and I've used the smartmove background/credit check online system multiple times with much success.

BTW, you will find multiple opinions of what to do or not do... neither is right or wrong, everyone has their own system that works for them, so you will need to make that choice on your own.  But you will need to be sure you follow all the applicable laws - everyone should be consistent in that regard.

@Patrick Kelly - I agree that the 2% rule would be a huge jackpot, mainly because your cash flow would be so high you could probably use 1 or 2 of those properties to quit your day job LOL

We like to use cash flow after all expenses - it has to be at least $200 a door - more importantly, we try to figure out how quickly our investment will be repaid.  Minimize the investment and maximize the returns.  Start evaluating properties using those metrics and you may find it easier to make a purchasing decision.

Agreeing with all the posters here.  Sorry for the tough lesson, which guru class did you take?

We took the flipping boston class and it was not very helpful.

I agree with the other posters that you might be SOL on this one with your EMD, but you defintiely don't want to close and lose even more money on a sour deal.

If an agent gives you comps to justify ARV, always be sure you validate them. How much $/sq ft was the estimate of 125k? How did you find your contractors?

Given the very short timeframe, it seems nearly impossible to make this work (but again, why try to make it work if you're going to lose money)?

I'd see if there is some way to get some of the EMD back, rather than lose it all and the justification could be that the seller's attorney claims it's such a hot market, so putting the property back on and getting another offer should be simple, right? But given the response you posted, the attorney doesn't seem like one who will want to allow anything back. Never hurts to ask.

Sorry for the tough lesson, feel free to connect or shoot any deal questions to me in the future - I'd be happy to act as a mentor in the future.  Don't give up!

hey @Kevin Kovalsky

how did it go? i could refer you to an attorney i know to help with the P&S. reasonable pricing (flat rate) and i've used her twice.

How much do they want?  Is someone going to invest 100,000 to get $300 a month?  That's a 3.6% return and they can do better than that in real estate.  A property manager in Boston typically charges anywhere from 6-10% of the gross rents (and you can also charge flat per unit fees each month if vacant).  I do not believe you can charge a fee to rent the unit unless you are licensed.

Find out their specific criteria before buying something on their behalf.  Feel free to PM me with any questions - it sounds like you have some good people in your network!  I can also help with terms, etc if you want to use the money to flip a property.  Just need to ensure the numbers work and their money is protected.

Hey @Chris Roche, welcome!  Generally, speaking, if you have all units rents and it is not owner occupied, $250 a door would be a good start (after all expenses).  I wouldn't go below it.

What do your investors want as a return?  Do they want their investment back after X years?  How long do they want to invest in a specific property?  What do you want to earn from the property?  What could you do with the money if you didn't put it into a rental?

Personally, I look to ensure we have a maximum 5 year return on money invested.  Can we do better, absolutely.  Is it my only factor in the whole equation?  No.

Where are you looking?  Some areas are not going to work for cash flow because multi's are being converted to condos by developers like me (sorry).