Tired out of country owner- hard lessons and perspectives

[Elena P.]

Hi wonderful BP community,

I need your help in decision’s making.

Ten years ago I purchased (without seeing it!) about 100yo MF in MA, hoping to get it paid off in ten years. In couple of two weeks visits, I rehabbed it with the craigslist “proffies” for like 15K, which was not bad at the time.

In retrospective, there were two things, which significantly reduced cash flow:

1. the location- as excited first time “investor” I did not pay attention to numerous sump pumps (the house actually sinks in the swamp- not unusual in New England)
2. the property manager- I had one great guy for the first four years (also found in craig). Unfortunately, after a while he decided that PM is not his thing. Then I hired a “big” PM firm- which was a pure disaster- the permanent turnover of the staff, skyrocketed repairs. Then I was fed, I’ve found another one-guy- management, he was building his PM business, but his repairs costs were building up as well.

My remarks along the 10years-way:

a) It might be a business circle for rental, but after ten years, they all inevitably come to the point when the major repairs are necessary to keep them alive.

b) Though appreciation has doubled or even tripled the sale prices in area, the rent raised only about 50%.

c) The cost of rehab and repairs tripled as well (well, for “craigs-profi” may be doubled). In general, it correlates quite well with the overall income level in the area.

I’d like to draw comparison to an investment apartment in one of capitals of east Europe. It’s B-class, was rehabbed long distance for 10% of purchased price, strict 0.5% rule regarding cash-flow (or 5% yearly, but the property taxes there are practically nonexistent), all the utilities on the tenant, super landlord friendly, great PM found through internet and absolutely hassle free. While at the last year, it was not a couple months passed before I encountered yet another $$$ problem with my MF.

The thing is all B...R process is getting old and I am getting 50+. I am buried out of US with family and other commitments and cannot fly transatlantic on every whim .I’m finally going to sell and looking to reinvest for another ten years by exchange 250K of profit. But in what??

I’d like it to be

• As much as possible new ( built not before 1950) and updated
• Sitting in B/C-neighborhood, and able to find “its” PM, not charging arm and leg.
• Here comes the hard part- it has to be in range of possibly short direct flight from Europe, namely, on the border of the major metropole, in case I do need to be present. Great Boston is still ideal from the distance point of view, but the inventory is almost nil, crazy-priced and mostly antic.
• Deliver at least 5% ROI yearly after all expenses (taxes, management, insurance etc.)

Sketching the math for ten years- I got 100K CG rolled in, 70K future depreciation (which I have no use of due to low rent income, but will be forced to claim on a future sale), 20K closing/settlement etc. So even going to exit after ten years with the same entry price, I will lose 50K. Which means, the property has to deliver in rent 5K net yearly, only to break even and do not lose the equity. If I want to call that “investment”, comparing to 2% bank CD, then it should deliver 10K net, which is min18K with all the expenses. What and where it might be?

• Condo in outskirts of Boston. It will hardly deliver 5% ROI and hardly will appreciate. Also I will have to find somebody just to collect the rent from individual condo unit- have no idea where to look for him?
• SFH in middle of nowhere in MA, may be an hour from Boston- here again not so much PM options and looming rehab issues.
• Turnkey or such out of state -I would go to Midwest if I was living in US- but it might take me one full day and couple flights to get there. I’ve checked some metropoles along East Coast- I get or bigger property taxes (MA is 1,4) or equally hot prices. Many locations appeared to have the tax homestead exemptions, which farther kill the cash flow.
• Land in Midwest- no rental income but no depreciation as well+ usually higher selling commissions +waste of property taxes. Appreciation is rather unpredictable. Also I got impression, the land selling is a long process without giving substantial discount.
• Did not look commercial, but I suppose, it’s not so much money to make the game worth?     

Would be great to have your opinion or help in sorting “this soup” out. As you see, I am quite broad-minded and open to the ideas.