All Forum Posts by: Ross Williams

Colby,

A few things to consider:

1)  What are the terms/interest rate on your student loan debt?  You may be able to arbitrage the differential if your investment property has a cash-on-cash return that is appreciably higher than your student loan debt service.  

2)  Make sure you are comfortable being a landlord.  Its not for everyone, especially if you are new to the business, and never forget that even with a smaller purchase, it IS a business.

3)  Consider buying a four+family building, which is considered a commercial property; lenders will look at the cash flow of the building rather than your personal balance sheet when evaluating the loan.  Then you can continue to live at home until you've had some experience in rental real estate.  

Best of luck and don't get too attached to that day job, even though you you're happy with it.  It doesn't take many properties to replicate your current income and be your own boss!

Investing in properties that produce negative cash flow is not real estate investing; it is real estate speculation.   

As a professional Boston area investor, I continually hear of Chinese and other international investors from decelerating/unstable economies, many with weakening currencies, driving up the prices of new-build, Class A residential assets.  Many of these investors are not looking for return on their capital (as evidenced by low single-digit implied cap rates in these properties and record prices/square foot) but rather return OF their capital, as Boston is internationally viewed as one of the most stable real estate markets in world.  The potential of increasing U.S. interest rates will only accelerate this phenomenon.  Until it doesn't.  When this happens is anyone's guess, and while I'm probably a year or two early,  I would be a net seller of downtown luxury residential properties in this market.  I've seen this movie...

Welcome to BP Fiona.  

I own multifamily units in Dorchester (Section 8), South Boston, East Boston and Lynn.  My experience with Section 8 is that an investor needs to own multiple units (25+) to leverage operating expenses as the city of Boston has tightened its inspection standards and imposed new annual $500 fees per building for owners.  Tenant selection and an experienced, trustworthy management company are the make-or-break variables in the P&L with Section 8, as well as having a very good (read "pit bull") eviction attorney.  A well run Section 8 building should have an approximate 35% operating expense ratio over time, so while I like the 50% rule for new investors, its extremely difficult to find properties that pass it.  I target 12-15% cash-on-cash returns for these properties, given the management-intensive nature of Section 8.  I have been selling in Dorchester as the market is at or above the last peak and owner-occupant buyers (rather than investors) are coming into the market which is typically a good "sell" indicator.  Section 8 is an early cycle asset class, in my experience, and the market is well past that.  Lynn is a more diverse market comprised of Section 8 and market tenant buildings, especially near the ocean and the Swampscott line, but again, I'm selling the former for the same reason as Dorchester.  South and East Boston are two of the hottest markets in the city but would be better long-term holds in my opinion but very tough to find good deals.  I'm starting to look selectively in Chelsea which still has some value so you might start there.  Just my two cents...

Ask yourself two simple questions before spending a DIME on a Yancey or Mike Warren-like guru (who now markets under a different last name, btw.) event, seminar, home study system etc.:

1.  If their system is so effective and profitable, why are they wasting time better spent investing in their "secret" strategies by flying around the country giving seminars and "coaching"? And why would they CREATE competition for themselves buy sharing their "systems"?  

Answer:  They make a KILLING doing seminars, selling their courses and coaching.  And while they're at it, why not bring in another huckster to pitch his "system" at the seminar and split the profits?  The world is full of gullible people who want real estate "ruby slippers" and never want to do any hard work, which is what real estate investing is.  But its the highest return hard work you can do.

2.  If they mention the words "secret system", "only a few seats left" , "last chance", "my good friend "X" agreed to host this webinar" and they bombard you with emails from other "gurus" they are frauds.  Real estate is blocking and tackling.  Plain and simple.  There are no "secret marketing campaigns they don't want you to know about" etc.  "Regular price $1597, but today only $97.00! (we'll charge your credit card an additional $97.00 a month until you capitulate)

The majority of these guys are charlatans and hucksters and several have been prosecuted or changed the names of their companies several times to avoid scrutiny (you know who you are).  Check the web before opening your check book.  These guys are VERY good at what they do.

Emerse yourself in BiggerPockets and the volumes of FREE information, mentoring and advice found here.  Network, read, and most importantly, GET OVER YOUR FEAR.

Sorry, off my soap box now...

Jovan,

Welcome to BP. I'm a Boston area multi-family investor and its very tough to find good deals at this point in the cycle (my metrics are 8+ cap rate, 10%+ cash-on-cash return and 1.3+ DCR).

Your best bet is to find out who the top broker is in your area in your asset class, take him or her to lunch and develop a relationship. Always follow up even on the first couple not so great deals they will likely show you. One good broker who can show you off-market deals is gold. Also, check out your local REIA meeting and network. This business is basically blocking and tackling and doing what other people are not willing to do. And that's a good thing.

I got the same email from Ian Flannigan.  Your post is a great warning to newbies.  Nothing is free, especially from these parasites.  0.99c is dirt cheap for people like him to get your contact information.  It's always instructive to Google the mailing address of the these "gurus".  In this case, Ian runs his "business" out of a single family home in the middle of nowhere in Alabama.  Great post and hope more BP'ers stick to this website where experienced advice can really be had for free.

Ralph,

I am a Boston area private investor/private money lender.  I own ~40 units currently.  Always looking for opportunities of any kind; usually pay cash with quick close.  Please keep me in  mind going forward.  Thanks very much.  -Ross Williams

I've used Bob Madden several times; has been on time and on budget; (781) 953-1673, [email protected].

Michael, I am a Boston area investor and returns superior to those you mentioned can still be had here. My concern is that at this late stage in the cycle (my opinion), smaller, peripheral markets like yours tend to be the first to decline. More importantly, your first deal is your most crucial deal of your career. A successful first deal will give the the confidence to do your next one and so on. This cannot be overstated. So make it a great, not good, one. I recommend you target minimum 10%+ cash-on-cash returns, 8+ cap rate and 1.3+ DCR to be safe. These metrics are getting harder and harder to achieve but they are out there if you dig. I would also recommend a property with below market rents as the simplest value-play to start, as in your example. @Kenneth LaVoie makes a great point using a very conservative 8% vacancy number; this leaves you room for evictions and turn-over which can kill a properties return metrics very quickly. As you get more experienced as a landlord you will be able to reduce this number towards ~5%, but I still model 8% even in my Section 8 properties which re-rent immediately. Best of luck!