All Forum Posts by: Todd Wheatley

Hi @Yuzi Stha

There is already some great advice in this thread. Unless you are purchasing this property with an investment partner I see little advantage to purchasing the property in an LLC. In fact there will be significant downside as folks have already mentioned like using a commercial loan with higher down payment and likely an adjustable and higher interest rate. You will also need to purchase commercial insurance on the property, again likely more expensive than a personal home owner's or landlord policy.

Speak with your real estate attorney to get their professional expertise. I wouldn't be surprised if they recommend purchasing the property in your own name and then ensuring you carry high quality home owner's insurance supplemented by a personal umbrella policy.

Good luck and if you ever want to connect about the Waltham market let me know! It's my backyard :)

-Todd

Hi @Elena C. - it sounds like you have a few things at play here if I'm understanding your post correctly.

1) It sounds like you are benefiting from reduced fuel prices through the MassSave fuel assistance program but you are not willing to agree to their terms about raising rents at the property? I think that's a decision only you can make. How does the fuel savings compare to the gap between current / market rents - that's your actual opportunity cost IMHO.

2) You mention you've been trying to raise your tenants rent for the last few months. I would strongly encourage you to connect with a local real estate attorney as well as educate yourself about the ongoing state and federal eviction moratoriums which include presenting new leases and/or rent hikes to tenants include those on month-to-month / TAW leases.

3) You mentioned wanting to improve the insulation in the house to make it more energy efficient. Have you checked with MassSave to see if they will do an energy assessment which would include a prioritized list of things you can do? This might be a good starting point for you. Otherwise I would start making a list of what you think is contributing to lack of efficiency (e.g. windows, holes/cracks in foundation or framing, lack of attic insulation, etc) and then starting bidding those out to local contractors you can find on Angie's List or HomeAdvisor. Winter is coming so you may want to move quickly.

Overall, it sounds like many of these items (low rent, high utility costs, etc) caught you by surprise. At the risk of sounding too critical I would encourage you to think about what you could have determined prior to purchasing the property and use it as a learning opportunity for the next one!

All the best,

-Todd

@Kristen G. - Happy to share my opinion on the matter but please keep in mind an opinion is all that it is as I am not an appraiser.

Your lot square footage would certainly be considered during an appraisal and thus factor into the estimated value. Taking the time to run high quality comps would include filtering out much smaller and/or much bigger lots. The property type (e.g. cape, colonial, etc) would also come into play. The distance to various comp properties as well. 

In a vacuum though your thinking is right. Adding additional living space can be a cost-effective way to increasing a property's value.

Hi @Kristen G.

I agree with Aaron's assessment that the majority of the value would come from the increase in square footage and not necessarily the addition of a 5th bedroom. Some back of the envelope math below...

Looking at Waltham comps for 4 and 5 bedrooms SFR's. Last 9 months for 4 beds and last 12 months for 5 beds (to ensure large enough sample size). Average $/ft shown below (NOTE: no consideration given to quality of comp vs subject). If you are strictly looking for maximum appraisal value then perhaps consider it if you can develop/finish the attic space well below the $314 $/ft average for a 5 bedroom.

However, other factors you may want to consider are increased operational costs (e.g. heating, cooling, etc) that will stay with you well past the cash out refi. Furthermore, would this eliminate all of, or most of, the available storage at the property? This could have a negative impact on resale value when that time comes.

Good luck with whatever you decide to do!

I would get in touch with @Adam Curry’s team and see if they can help. It’s an excellent team. Best of luck!

@Nate Hubley welcome and a kudos to you for thinking about this stuff at the age of 17, incredible! Some great recommendations in this thread already and BP is a great community to begin your REI journey. I would encourage you to read as much as you can on all sorts of real estate investment strategies and network with folks in the community as much as possible through virtual and in-person meetups as well as 1:1 on conversations. You never know what door(s) these conversations will open for you. Hope to see on a meetup soon and congrats again on the impressive start!

Hi @Michal Kasza and welcome to BP!

As other folks have mentioned there's a great community of folks from all over Massachusetts here on the BP forums. Make sure to check out the location specific sub-forums and you can target folks in various regions of Massachusetts depending on what you are looking for!

This scenario is covered well in Brian Burke's recent book The Hands Off Investor (a great read on syndications!). An LP in a real estate syndication owns an "interest" in real estate not "real property". A 1031 exchange requires a like kind exchange of "real property" and thus private syndications are not good vehicles for 1031's. At least this is how I understand it perhaps Ellie and other's can keep me honest. 

Hi @Sam Schildkraut - good to see you on here!

Perhaps take a look at Framingham / Natick. A little south of your ideal line between Marlborough and Cambridge but might be worth taking a look. There have been atleast 9 3-unit properties sold in those towns/cities the last 12 months.

Give me a shout if you want to bounce around ideas! Best of luck.

Hi @Michael Guay. Unfortunately I am not aware of any local banks/credit unions doing anything near 5% down for a 3+ for owner occupied. I make calls to existing and new lending connections a couple times a week, especially during this constantly evolving and changing lending environment. I'd love to hear if anybody does have access to this type of lending right now though!