Boston-based Newbie Looking to Invest with Friends

New Member Introductions
6yFollow

Boston-based Newbie Looking to Invest with Friends

Reggie S.
Member since 2020 · 8 posts · 1 vote

Hi! Thanks for taking the time to read my post. I am a recent college grad (blessed to not have any debt) working at a small-to-medium sized biotech company in Boston. I have a group of about 5 friends in a similar circumstance who are interested in pursuing real estate as an investment vehicle. 

We would like to invest in a city that we know. Members of the group primarily live in Boston, New York, and Atlanta, and we have ties to Chicago, Memphis, and Detroit.

 We are particularly interested in cashflowing multifamily properties where a member of the group could live so that we can take advantage of as many first time homeowner perks as possible.

My main question is: How should we get started? Do you have suggestions for tools to help with goal-setting and creating a group structure? 

A slightly significantly more involved question: How do I take the desired monthly income that the group would like to collect from the property and back-calculate the down payment we need to save up in order to purchase a property?

0Reply
24 views

Most Popular Reply

Raul R.
Rental Property Investor · New York City, NY · Member since 2017 · 493 posts · 386 votes
6y

Personally I think 5 people as Partners is too many Partners starting out. More partners is not necessarily better especially if all are inexperienced.. 

1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Jingru Sui
    Real Estate Agent · Atlanta, GA · Member since 2014 · 683 posts · 317 votes
    6y

    Maybe set a commitment goal for each person and back that into how big a property you can afford. If you are leverage loan , lender can only give you loan based on how much you can afford (DTI Ratio).

    0Reply
  • Lillie MAnon
    Rental Property Investor · Bristol, CT · Member since 2016 · 30 posts · 17 votes
    6y

    @Reggie S. Have you all considered investing passively? Investing in a syndication could be a great way to put your money to work without dealing with the headache of being a landlord.

    If you are more interested in investing actively, I would suggest you take some time to educate yourself.

    Maybe consider a home study course or pick up a few books. Definitely get linked in to your local real estate investor network. There are typically REIAs in every state, as well as local meetups. A quick search on Facebook, meetup.com, on here and perhaps even google should help you find what you need.

    Learn the market, what you’re looking for, educate yourself and come up with a plan.

    0Reply
  • Lien VuongBusiness Member
    Real Estate Agent · Boston, MA · Member since 2018 · 2k+ posts · 1k+ votes
    6y

    It might be the best if you're going to be involved in some REIT as your group of friends is so spread out it might not make sense to buy a single property together. Everyone has needs and wants and it's going to be challenging to satisfy everyone equally.

    [email protected]
    The Elle Group5153 Reviews
    WebsiteView Page
    0Reply
  • Raul R.
    Rental Property Investor · New York City, NY · Member since 2017 · 493 posts · 386 votes
    6y

    Personally I think 5 people as Partners is too many Partners starting out. More partners is not necessarily better especially if all are inexperienced.. 

    1Reply
  • Taylor L.
    Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
    6y
    Originally posted by @Raul R.:

    Personally I think 5 people as Partners is too many Partners starting out. More partners is not necessarily better especially if all are inexperienced.. 

    Agreed. It's one thing if you have 5 partners who are all experienced and adding value. 5 Inexperienced partners is a recipe for poor decision making. 

    OP, I'd recommend you either start by passively investing out of state or buying smaller properties out of state so you learn the process and build the experience.

    Regarding goal setting, the calculations are pretty straightforward. If you want to retire on cash flow, then you need to determine exactly how much money per year that means to you in cash flow. Then research your asset class to learn what typical returns are. Plan on being maybe 75% levered, and that'll tell you how much money you need to put down.

    As you get deeper in the process you'll learn more about value add strategies and ways we can increase the cash flow on our properties to improve our returns.

    1Reply
  • Avery Heilbron
    Realtor · Raleigh-Durham, NC · Member since 2018 · 324 posts · 218 votes
    6y

    @Reggie S. Welcome to BP. Congrats on starting your REI journey. I run a meetup in Everett if you're interested in connecting. The next event is at Bone Up Brewery on 3/16 from 7-9.

    0Reply
  • Scott KronePro Member
    Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
    6y

    @Reggie S.  Whenever we go into a new market, we study the demographics, and market conditions. Yesterday, I was on a podcast discussing our real estate strategies. The host was from New York and mentioned how crazy the MF market in NY currently is 3% and 4% CAP rates. Seller's market. In Chicago, it is important to understand the housing laws to protect tenants. Detroit is starting to rebound in certain areas. Each market has its own conditions any investor needs to know and more importantly understand.

    The way to calculate the required capital is: Cash flow/1.2 or 1.25 (DSCR Debt Service Coverage Ratio). This will give you your monthly payment on your loan. Make an assumption on interest rate and 25 year am, you get your mortgage amount. Take that amount/.7 (Debt to Equity percentage). That will be the price all in for acquisition and repairs if needed you can pay.

    So, if your desired cash flow is $5,000.  5,000/1.2 = $4,166.00 per month.  At price (3.92%) and 25 year am, your mortgage will be ~$800,000.  $800,000/.7 = ~1,142,000 and your equity (what you need to save is) $342,000.00

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Reggie S.:

    Hi! Thanks for taking the time to read my post. I am a recent college grad (blessed to not have any debt) working at a small-to-medium sized biotech company in Boston. I have a group of about 5 friends in a similar circumstance who are interested in pursuing real estate as an investment vehicle. 

    We would like to invest in a city that we know. Members of the group primarily live in Boston, New York, and Atlanta, and we have ties to Chicago, Memphis, and Detroit.

     We are particularly interested in cashflowing multifamily properties where a member of the group could live so that we can take advantage of as many first time homeowner perks as possible.

    My main question is: How should we get started? Do you have suggestions for tools to help with goal-setting and creating a group structure? 

    A slightly significantly more involved question: How do I take the desired monthly income that the group would like to collect from the property and back-calculate the down payment we need to save up in order to purchase a property?

    I recommend you get started by everyone in the group purchasing the book "Rich Dad Poor Dad" by Robert Kiyosaki. Then if you're in the same town start playing the CashFlow game. Playing the game is a safe environment where you can have fun, understand the personality of members of your group, (yes the game will reveal some things about your friends), and you can also discuss strategy. 

    Regarding pooling your money to take advantage of first time homeowner perks, I'm not saying it's a bad strategy but be careful. What you''re considering is an immigrant tradition- To pool family money to help a new immigrant purchase a home.  That new person is responsible for paying back the pool but also participating in the pool for the next person. It works well in families, but it can get stick with friends. Heck it can get sticky with families if one of the family members turns out to be a deadbeat.

    Regarding your last question about how to determine the desired cash flow- This is why I recommend you start playing the cashflow game. It will provide you with the financial acumen needed to answer your own question.

    312-681-7487
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free