All Forum Posts by: Tyler Munroe

Investment Info:

Small multi-family (2-4 units) fix & flip investment in East Boston.

Purchase price: $565,000
Cash invested: $30,000
Sale price: $665,000

Buy and hold turned fix and flip investment in E. Boston about a 6 minute walk to the Airport Blue Line T stop. Heavy cosmetic upgrades needed in the first floor unit, upstairs was rent ready. Idea when bought was to buy and hold but changing market conditions prompted me to sell to use money to invest elsewhere. Net gain AFTER tax came out to $87,306 for a 77% total project ROI. Property also cash flowed when owning it.

What made you interested in investing in this type of deal?

This initially was a buy and hold for me in an area of Boston with some serious upside. East Boston has a fantastic location to the city relative to the prices of properties. This is fast changing which I'm sure helped with the final sale price.

How did you find this deal and how did you negotiate it?

Found on MLS and definitely OVER paid for this. Was able to make it work by spending more hours than I'd like to admit fixing the downstairs unit but was able to keep my costs down doing so. Didn't even get an inspection before purchasing, which would have definitely helped my cause and allowed me to negotiate down a bit. Property was sitting on market for months. Mistakes were definitely made here!

How did you finance this deal?

Traditional 30 year fixed with 20% down.

How did you add value to the deal?

Was able to get away with mostly cosmetic upgrades to the bottom unit, which was in need of dire repair. Basically a LOT of cleaning, painting, and light repair work. I also re-did the finished basement so it could be used as accessory space for a play area or home office. I was able to AirBNB the top floor, which netted great returns until covid hit.

What was the outcome?

I decided to sell to pull my money out and invest elsewhere due to changing market conditions. The AirBNB was heavily dependent on travel to the city, which has all but disappeared due to covid, so there was a real risk of vacancy if my long term renters left in the bottom unit. I could have certainly rode it out, but as my investing knowledge grows I'm looking forward to putting that money into action elsewhere.

Lessons learned? Challenges?

Major lesson here is pick your markets carefully and manage costs. Had no intention to sell the property this soon, but when I did the numbers I realized I could free up some great capital for other projects. That was only possible because it was a strong market and rehab costs were low. All costs considered (buyer's agent commission, cap. gains tax, closing costs) netted a profit of $87,306 on top of getting my down payment back. Came out to a total ROI of 77%, not bad!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I'm a real estate broker so I represent myself in transactions. If anyone would like to chat about investments in the area feel free to reach out!

Anyone received refunds yet? Never received any correspondence in "early April" as the policy stated.

The metro vs. rural comparison can go both ways, in my opinion. If this was an economic crisis instead of a health pandemic, I think we'd see more cancellations in leisure/rural areas as discretionary spending would be the first to be cut. Urban areas with diverse economies would have stable demand since travellers would prioritize holidays, events (weddings, graduations, etc), and family visits. I have four STRs in Boston and there's so much draw to the area due to education, medical, work travel, tourism, conventions, etc. that I consistently had 90%+ occupancy rates for most months. Of course, most of the draw to the city has now been cancelled and we're getting absolutely hammered with guest cancellations and not much, if any, replenishment of bookings. I recently read a short article (link below) about Airbnb petitioning the government that the company and its hosts should be treated as the hotel industry and included in any disaster relief - couldn't agree more given Airbnb's awful cancellation strategy overriding hosts default settings.

https://www.phocuswire.com/Airbnb-asks-for-government-support?utm_source=eNL&utm_medium=email&utm_campaign=Daily&oly_enc_id=3569D8023634I7X

Thanks for sharing that @Mike Dymski! Interesting and well researched read from a reliable source. I have four STRs in an urban area (Boston) and and definitely feeling the effects of cancellations. I do think the urban vs. leisure STR comparison is totally situational, though. If this were more of an economic vs. health crisis (think 2008 vs. now) then I think we'd see the inverse effect where less leisure bookings take place and urban STRs remain stable. Discretionary spending for exotic locations would be the first to be cut by consumers but travel for holidays, work, and family visits would likely be prioritized, making STRs in more accessible locations more likely to be booked. Definitely not the case with COVID, but I don't think an across-the-board assumption can be made, just my opinion.

What can't be ignored are the immense numbers of cancellations and lost revenue (those graphs are scary). I'm hoping the federal government treats all Airbnb hosts as essentially part of the hotel industry and allots bailout funds accordingly. Airbnb is already lobbying for this so hopefully some headway is made and hosts losing ten of thousands of dollars a month due to unfair cancellation policies (whole other argument) can recoup some losses and at least be able to pay their mortgages.

I usually find a good constable in the area for guidance on this. They deal with these situations a lot and can offer great advice on the eviction process (if it comes to that) and notifications needed building up to it. To answer your question about deliveries above, constables are usually the most reliable source to do this, from what I've found.

Hi Tyler - I don't think it's EVER a bad time to house hack as long as the numbers make sense. Find a place where the rents from the other units cover your mortgage and rent rooms in your own place. As an owner occupant, you have way more leeway to add value to the purchase with low-down payment and interest options as well as the ability to rent units short-term (Airbnb) in most areas. The market is always slow in the winter, but I came my best deal during the week of Christmas, so keep looking. Take inventory of properties sitting and make aggressive offers as people selling in the winter are usually only doing it because they have to.

Yes, the market may be at a peak right now, but house hacking your way to at least living for free would put you in a much better position if things take a turn! Good luck!

 That's the idea! I'm hoping the uniqueness of the space has some draw.

Thanks for the input, Dan, I'll make a note of that in the listing. So far (and this is only since November) my net income has been about what I would have had for long term rents, which is not ideal since there's so much more work that goes into the STR operation. My hope is that income will be at least 2x long term rental rates from April - October, so we shall see. If it's not worth the effort, I'll revert to long term rentals and due to the flexibility of the STR model, I can time the listings perfectly to become available at peak market times.

In terms of insurance, I'm exclusively listing through Airbnb due to the insurance coverage they provide on STRs. They've actually been great about paying me out for damages, extra cleanings, etc. as well.

Hi Ben - as of now there are no restrictions in Revere which is why I chose to make this investment. I'm hoping it stays that way, but there's been A LOT of changes with STRs in the Boston area so it is a bit of a risk. However, the long term rents would still make this property a viable investment so I was OK with regulatory risk. As of now, I'm not looking to expand the STR model but I am looking to buy another multi for a BRRRR investment. I'd prefer to not have a STR heavy portfolio as you're essentially in the hotel business which is more dependent on a good economy to prosper. This property was a unique opportunity for STRs so hoping it will pan out!

Good looking project - where'd you find the deal initially?