All Forum Posts by: Thomas Guertin

My opinion is know the Mass laws and cover your butt if this is your first or second property.  I have a few properties in Mass and you can run up big losses if your not careful.  Otherwise, welcome to Mass.

Tom

I am not talking from experience but I would probably give the tenants a 3 month notice of a rent increase and raise it to $575.  They won’t be able to move because you are still under the other rents in the area. Then after a year and renting the other side you can determine if you want to increase the rent again.  Sometimes long term tenants are better than making an extra $50/month.

I would make sure you get a letter from the other tenant that is planning to move their intention and the date their moving. You may want to give them the rent notice too Incase they decide to stay.

I agree with the above comments.  If their not complaining, don't bother.

Tom

I'm from Western Mass and the area you are looking at is no where near Western Mass.  To answer your questions to evaluate a deal, this is what I use ...

Vacancy - 8% (this is about how much the bank will use in their numbers)

Repairs and Maintenance - 6-8%

Capex - 10%

The other items I would agree with Brandon, they are going to be marginal increase which the increased rent should take care of it.

I find that turnover is going to be your most expensive time as a landlord.  That is when you need to replace carpeting, paint walls, replace lights or plumbing fixtures, replace doors and repair windows, etc.  And your doing this all while you don't have income.  You also have to carry the cost of utilities, outside maintenance, etc. for that month as well.

I would sock away at least 15% for turnover costs and if something major comes up (ie. replacing a furnace).  For the maintenance, depending on the size of the building, you will probably pay for the expenses on an as needed basis so you wouldn't "save" the money in a special account.  You do however have to account for it when your analyzing properties.

Hope this helped.

Tom

Your going to need an attorney who does real estate closings.  You won't be able to do it yourself in Massachusetts.

Tom

You should talk to a very good tax advisor about this. I wonder if you are better to take the 10% penalty and pay the tax before you invest the money. The reason is, an investment in real estate is a tax shelter because of depreciation and you don't get that benefit inside your IRA. By taking it out, you don't have to worry about the rules and the income it generates will be offset by the depreciation.

It doesn't seem that you even need the IRA at this point and you would make more that the 10% back on your money. If you have a Roth IRA, you can withdraw the principle without any penalty but you didn't mention a Roth so I am assuming it is a traditional IRA.

The other reason you may want to take the penalty is because you want the income.  Unfortunately inside the retirement account all the income has to stay in there.  There will be no immediate financial benefit to you.

Tom

I wanted to know what the expectation is for a real estate agent by a landlord. I understand that they post it on the MLS for other agents to access. My questions are -

Do they do a criminal background check?

Do they call past landlords?

Do they verify income?

Do they make sure that the information on the application is accurate and correct?

Do they get the lease filled out and signed?

Just wondering what to expect.

Yes.  It's informal.

Tom

I would not borrow from your fiancé unless she is all in emotionally.  Work 2 or 3 jobs to make enough for a down payment, get a rehab loan, etc.  I've borrowed from family and it puts a silent wedge in your relationship.

I would also not do a deal unless you anticipate a $15,000-20,000 profit.  The reason is that will give you the buffer you need when things start costing you more than you planned and hidden fees, etc. erode your potential profit.  If you do that, then you may end up with the $5,000 profit you anticipated.

In terms of what percentage is reasonable to give to your fiancé - she's going to be your wife so you give her half of the profits.  She'll be a little more eager to support you on the next deal.

Tom

Hi Sef,

You need to network and build relationships with these buyers, not post this way. There is a Western Mass REI group you can network with, get in touch with Bob Couture on here. Be humble. I believe you are new to the business so they don't need to give you their resume.

Tom