Investing In Massachusetts newbie
Member since 2019 · 19 posts · 6 votes
Investing In Massachusetts newbie
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New to Real Estate · Peabody, MA · Member since 2020 · 3 posts · 3 votes
6yI'm in the same spot!! MA can be tricky to get into but it just pushes us to think of more creative ways of financing. Good luck!!
25 Replies
- Real Estate Agent · Denver, CO · Member since 2020 · 103 posts · 65 votes6y
@Faith Gracia Since you just graduated college you should definitely House Hack. As long as you have good credit and have been in your job for enough time, you could potentially qualify for a 3% conventional loan. FHA is another option but PMI stays for the life of the loan (unless you refi) with an FHA loan. From there get some roommates! I wouldn't recommend getting a fixer upper for your first home and make sure that the numbers work for you. Where in Mass do you want to live? Boston Area?
If you're struggling to qualify for a loan, see if lenders have any other options for you. There are government programs that offer downpayment assistance or are more gracious with the qualifications. If possible, cosigners are another option.
Congrats on wanting to begin your REI journey!
Welcome @Faith Gracia, MA is definitely a challenging market for a number of reasons, price point being a big one. As @Maria Bakaj said above, house hacking is a great way to get the ball rolling, build your skill set, and get a feel for this. There are a bunch of MA investors on here and I am sure they will chime in as well.
Good luck!
- New to Real Estate · Peabody, MA · Member since 2020 · 3 posts · 3 votes6y
I'm in the same spot!! MA can be tricky to get into but it just pushes us to think of more creative ways of financing. Good luck!!
- 6yDerreck WellsPro MemberSpecialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
@Faith Gracia and @Joao Victor Souza,
Keep in mind the new lead paint laws in MA. They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it... and even after you delead it you would still be liable for previous issues because you didn't do it in the 90 day deadline. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. Since the law doesn't specify exactly how to maintain the standard (but does say you must) I recommend a Post Compliance Assessment Determination (PCAD) every 5 years or so to CYA. That's a simple walk through by a lead inspector that gives you a letter saying the property is still lead safe by the current laws. That way if you do ever get sued, you have proof that you were proactive in maintaining the standard and it's not your word against theirs.
Here's the law about the 90 days (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.This isn't a bad thing! You can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors it can get expensive. Like I said though, most come in about half that because the windows have usually already been updated, so use $5k per unit to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.
I can run any addresses through the database for you and see if they've been inspected or deleaded for you. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet but you would just negotiate as if it still needs to be inspected.
Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading (UD) and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.
Remember, deleading increases the amount you can get for rent, increases the value of the house, and decreases your insurance!! It's a win all the way around if you plan for it when you're buying a property. I helped a BP member save $20k off the purchase price, but the project only cost them $9k to complete, so they actually saved $11k by negotiating using the $5k estimate and then having the property deleaded!! They also got tax credits that year, so technically saved even more. There are usually grants and loans you can use also to save even more, I've seen loan programs that didn't have to be repaid until you sell the property, so if you hold the property for life, the government pays for your deleading. Do your research and get creative!!
If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.
Let me know if you need any help or have any questions.
Good luck on your investing!
Derreck
- Member since 2019 · 19 posts · 6 votes6y
@Maria Bakaj thank you so much for your input! I would preferably like to invest on the north shore of Boston or even southern New Hampshire.
- Member since 2019 · 19 posts · 6 votes6y
@Joao Victor Souza thanks! Good luck to you as well!
- Member since 2019 · 19 posts · 6 votes6y
@Derreck Wells good to know! Thank you!!
- Investor · Campton, NH · Member since 2010 · 287 posts · 144 votes6y
@Faith Garvia - happy to help you out up here in NH let's connect!
- 6yHoward HerringtonPro MemberRealtor · Boston, MA · Member since 2014 · 159 posts · 75 votes
Hello @Faith Gracia and welcome to BP. One additional thing I will recommend for you is to join a REIA and get a mentor if you plan on making this a business. Education and networking is key in Real Estate.
"Your Network is your Networth"
There are many many investors, agents, etc. on BP that are more than willing to help as well.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes6y
@Derreck Wells I don't see the part in what you posted about liability for the past...are you sure thats right? I think its strict liability for the future....in other words if you don't delead within 90 days then you could be held responsible for future occupants even if you sell. Happy to be corrected on this.
- Rental Property Investor · Brookline, MA · Member since 2013 · 1k+ posts · 777 votes6y
I'll echo the "house hack" as your first place. The goal for a house hack is to REDUCE your current monthly payment so you have more money to invest in other real estate ventures.
Given your geographic requests, I found a couple of possible house hacks for you:
https://www.realtor.com/reales... With this place full of renters and roommates you should be making a few hundred dollars per month to live there. The cash flow as a rental will be okay once you move out. Appreciation will most likely be your best value add here. There is also the possibility of condo conversion down the line a ways. For sale and Available as of 330pm on 11/14/20.
https://www.realtor.com/reales... Unfortunately "contingent" as of 330pm on 11/14/20. Watch this one if it comes back to the market.
https://www.realtor.com/reales... Salem MA. Cool place to live, at least one of the apartments is really nice. The 2/1 apartment should rent for $2000/month after some paint. Throw in a couple roommates at $1000 or $1100 per room in the nicer apartment and you have a successful house hack in a fun town. For sale and Available as of 330pm on 11/14/20.
If you want to chat about any specifics, hit me up. Good luck in your ventures!
- Real Estate Agent · Member since 2019 · 285 posts · 149 votes6y
@Faith Gracia have you considered moving to southern NH once you graduate? It should be easier to find a property within your budget, ideally a house hack to keep your living expenses low.
- 5yDerreck WellsPro MemberSpecialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
Originally posted by @Jonathan R McLaughlin:
@Derreck Wells I don't see the part in what you posted about liability for the past...are you sure thats right? I think its strict liability for the future....in other words if you don't delead within 90 days then you could be held responsible for future occupants even if you sell. Happy to be corrected on this.
I didn't post that part and you just didn't go deep enough into the rabbit hole that is the lead laws to follow it through. There are many sections and subsections and it's really as clear as... well... mud.
You are not liable for future tenants after you sell. If you don't delead in 90 days, you are liable for past tenants and the tenants that live there while you own it before you delead it even after you delead it, once you sell it, the liability ends since the property is already deleaded when the new owner buys it. You literally only have the 90 days after purchase to avoid liability; and if you didn't delead within the 90 the only way to get out from under it is to sell the property. You could probably sell it to an LLC you own to get out from under, but I'm not sure as that goes into a whole different set of laws that I haven't studied.
460.180 states in part:
- 460.180: Owners in Violation Subject to Damages
(A) Compensatory Damages. Pursuant to M.G.L. c. 111, § 199, the owner of any dwelling unit or
residential premises shall be liable for all damages to a child younger than six years old who is lead
poisoned as defined at 105 CMR 460.020 caused by his or her failure to comply with M.G.L. c. 111,
§§ 194, 196(a) or 197 provided that:
(1) an owner shall not be liable for a period of 90 days after acquiring legal title to a dwelling unit
or residential premises in which a child younger than six years old resides if the owner complies
with M.G.L. c. 111, § 197(b) or § 197(c) within 90 days after acquiring legal title to the dwelling
unit or residential premises;
Let's dissect it. We'll start right at the top of that with 111 subsection 199.
M.G.L. 111, subsection 199 is titled "Liability of owner of premises; punitive damages" and states in part:- "Section 199. (a) Except as provided in section one hundred and ninety-seven D, the owner of any premises shall be liable for all damages to a child under six years of age at the time of poisoning, upon proof that said child's blood lead level equals or exceeds the blood lead level at which the department defines lead poisoning, that are caused by his failure to comply with the provisions and requirements of section one hundred and ninety-four, subsection (a) of section one hundred and ninety-six or section one hundred and ninety-seven, and regulations pursuant to said provisions."
* That leads us to look at 197D to see if we're excluded: "Section 197D. (a) No secured lender shall be considered an owner for purposes of sections one hundred and eighty-nine A to one hundred and ninety-nine B, inclusive, unless and until such secured lender has acquired legal title pursuant to applicable law, and takes actual physical possession, at which point he shall be considered an owner; provided, however, that a secured lender who has acquired legal title pursuant to applicable law shall be liable in any action brought pursuant to section one hundred and ninety-nine only to the following extent:—- Within ninety days after acquiring legal title to a premises in which a child under the age of six resides, such secured lender shall either (i) obtain a letter of interim control pursuant to subsection (b) of section one hundred and ninety-seven, (ii) obtain a letter of full compliance pursuant to subsection (c) of said section one hundred and ninety-seven, or (iii) transfer the property following the procedures required by section one hundred and ninety-seven A. A secured lender who does not take one of such actions within the specified time period shall be fully liable for all damages, including punitive damages, under section one hundred and ninety-nine."
Nope, we're not excluded, 197D is for banks and actually tells us why they let houses sit in past owners names for as long as possible when they foreclose, they want to avoid the liability of section 199. They want to list and sell within 90 days.
So in plain English, an owner is still liable for all damages to a child if they don't comply with MGL 111 subsection 194, 196a, or 197, except during the first 90 days after taking title. So now you need to find Mass General Law 111 subsection 194, which is titled "Detection of sources of lead poisoning; inspection; search warrant; notice; examination of children; reports; records".
- Section 194 states, in part: "The director shall, subject to appropriation, establish a comprehensive program for detection of sources of lead poisoning. Such program shall attempt, to the extent permitted by appropriations, to locate all premises in which the paint, plaster or other accessible structural material contains dangerous levels of lead. ...
- Upon the request of any occupant and subject to appropriation, the director shall cause to have the occupant's premises inspected, within a reasonable time, not to exceed ten days, ...
- When the director is informed of a case of lead poisoning, he shall cause to have inspected the premises in which the victim resides, or has resided within the past twelve months, if the occupants of said premises consent, after reasonable notice, to such inspection. If the occupant refuses admittance, an agent of the director or of any local board of health or code enforcement agency may apply for a search warrant to permit entry. ...
- A dangerous level of lead found in premises inspected pursuant to this section or otherwise, shall be reported immediately to the owner of the building, all mortgagees and lien holders of record, the director, and all affected tenants as outlined below. The owner of such building shall comply with any order to correct violations issued by the director, any local board of health or any code enforcement agency within the time established by regulations promulgated by the director."
Okay, now we're getting somewhere, 194 says the State can force an inspection. If we don't allow the inspection, we're instantly held liable.
So now let's look at the next law mentioned, 196(a) which is titled "Prohibited acts relating to lead-based paint, glaze or other substance; punishment; embargo of personal property" (sounds exciting, doesn't it?) it says in part;- "No person shall apply or cause to be applied any lead-based paint, glaze or other substance to any toy, furniture, cooking, drinking, or eating utensil, or interior or exterior surface or fixture of any dwelling; and no person shall sell, expose for sale, deliver, give away or possess with intent to sell, deliver or give away any toy, furniture, cooking, drinking or eating utensil to which any lead-based paint, glaze or other substance has been applied."
Ahh, not so exciting, it just says we can't paint stuff with lead paint, if we do we're liable.
Next up is 197, I have a good feeling about this one. Section 197 is titled "Duty of residential premises owners; interim control measures; abatement or containment of paint, plaster or other accessible structural material containing lead" and states in part:
"Section 197. (a) Whenever a child under six years of age resides in any premises in which any paint, plaster or other accessible structural material contains dangerous levels of lead, the owner shall abate or contain said paint, plaster or other accessible structural materials in accordance with the requirements of subsection (b) or (c). Except as provided in section one hundred and ninety-seven D, whenever any such premises containing said dangerous levels of lead undergoes a change of ownership and as a result a child under six years of age will become or will continue to be a resident therein, the new owner shall have ninety days to contain or abate said paint, plaster or other accessible structural material as required by this section, so as to make the premises in compliance with the provisions of sections one hundred and eighty-nine A to one hundred and ninety-nine B, inclusive...."
And it seems we've come full circle. The owner of the property has the liability of any child that was lead poisoned there unless they delead during the first 90 day exclusion. If you miss the 90 days, the only way to avoid the liability of any tenants that lived there before you deleaded is to sell the property. You're welcome to read all the sections and jump around them to try to follow the logic. They're 189a through 199. https://malegislature.gov/Laws... or you can just take the word of the guy who deleads apartments for a living and has to know and understand all the laws. It's your choice, but unless you plan to become an expert in a field, I'd recommend taking the word of someone who is an expert in the field.
Moral of the story... delead your properties within 90 days of buying them.
- 460.180: Owners in Violation Subject to Damages
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes5y
@Derreck Wells ok thanks for the info. I was reading your post as meaning you are liable for past tenants who vacated before you owned it, which is not true and may not be what you meant. Yes, liable for anyone who lives there before you owned it and is still there when you own it if you don't delead. One of MA real estate lawyer is one of the lead plaintiff attorney's in MA for lead poisoning and I heartily agree with you. Delead within 90 days of buying.
- Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes5y
@Derreck Wells I had my own imprecise use of language by the way! I meant liable for anyone who resided in your unit if you didn't delead, but that isn't what I wrote :)
- 5yDerreck WellsPro MemberSpecialist · Pelham, NH · Member since 2013 · 547 posts · 269 votes
Originally posted by @Jonathan R McLaughlin:
@Derreck Wells I had my own imprecise use of language by the way! I meant liable for anyone who resided in your unit if you didn't delead, but that isn't what I wrote :)
Jonathan... you ARE liable for any tenants that lived there before you owned the property unless you delead within 90 days. The new laws attached the liability to the property.
"Pursuant to M.G.L. c. 111, § 199, the owner of any dwelling unit or
residential premises shall be liable for all damages to a child younger than six years old who is lead poisoned as defined at 105 CMR 460.020 caused by his or her failure to comply with M.G.L. c. 111,§§ 194, 196(a) or 197 provided that:
(1) an owner shall not be liable for a period of 90 days after acquiring legal title to a dwelling unit or residential premises in which a child younger than six years old resides if the owner complies with M.G.L. c. 111, § 197(b) or § 197(c) within 90 days after acquiring legal title to the dwelling unit or residential premises;
Note it says "the owner of any premises shall be liable for all damages to a child under six years of age at the time of poisoning". That doesn't say the owner at the time of poisoning is liable, it says the owner is liable if a child was under six years of age at the time of poisoning. You can go down the rabbit hole of the lead laws that I linked to above if you wish and find everything I posted above. Section 194 says the state can get a warrant to inspect the places the victim has lived in the last 12 months. If they moved out of a property 6 months ago, and you bought it 4 months ago and didn't delead, you are the owner of the property where the child was poisoned and are liable because you didn't comply with the law that says you have 90 days to delead. - Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes5y
@Derreck Wells continuing this cause I think its valuable to highlight this underappreciated liability, especially in New England where so many houses have this exposure. I think you are misreading the relevant statute as a key phrase is "caused by": in other words, the child residing there could have been lead poisoned before you bought it but if you don't delead within 90 days you will also be responsible. And if a child who moves in was poisoned elsewhere (no way to know) but you didn't delead, you are still responsible, YES TO BOTH. All I'm trying to say is this liability doesn't extend to all past tenants no longer associated with the property. If this hypothetical child has moved out before your ownership, that liability stays with the previous owner, not you (I added the bold).
(b) or (c). Except as provided in section one hundred and ninety-seven D, whenever any such premises containing said dangerous levels of lead undergoes a change of ownership and as a result a child under six years of age will become or will continue to be a resident therein, the new owner shall have ninety days to contain or abate said paint, plaster or other accessible structural material as required by this section, so as to make the premises in compliance with the provisions of sections one hundred and eighty-nine A to one hundred and ninety-nine B, inclusive.
- Member since 2019 · 19 posts · 6 votes5y
@Cody Barna hi! I was thinking about it but I was also thinking of just purchasing a rental property there for now. Luckily, I live in my parents house as they live in Florida now.
- Member since 2019 · 19 posts · 6 votes5y
@Howard Herrington that’s a great idea thank you!
- Rental Property Investor · Boston, MA · Member since 2017 · 46 posts · 11 votes5y
@Faith Gracia. We can all give you advice but ultimately it comes down to What You Want. You’re the only one that knows what your budget is, what particular city/town you prefer to live in, etc.... With that being said, I think you should decide how involved you want to be involved in real estate investing (Rehabbing a old distressed property is definitely more time consuming than purchasing new construction property, especially if you have no experience rehabbing houses)
I think the 3 biggest factors for you should be.1. Your budget
2. The location you prefer
3. How involved do you want to be in your investment.
For instance, Lynn is a city on the North Shore with very affordable priced houses however there is also alot of crime in Lynn compared to some other cities/towns on the North Shore.
I’m from Boston and my company buys & sells properties all over New England so if you need someone to come up with a strategy with you feel free to DM me. If I was you I would also reach out to a few licensed realtors on this site, I’m sure they would be more than willing to help you. Best of luck with everything. - 5yJonathan BombaciBusiness MemberReal Estate Agent · Lowell, MA · Member since 2019 · 1k+ posts · 1k+ votes
Hi @Faith Gracia I guess what is your goal for real estate investing? Are you thinking of it as a career, in which case I’d recommend getting your real estate license abd joining a strong real estate team to get the training, experience, and leads to hit the ground running. If you’re graduating college into a W2 job then I’d say househacking could be a great option.
That's what I did, graduated into a financial consultant job and accidentally househacked a 3 family. I think you're previous comment is spot on, looking at northern MA markets into southern NH might work out well. We have an office in Haverhill and Lowell and you can find decent 3-4 units in this general area where you can househack and live for free or at least at a significant discount. It takes time to find the right property but they do exist, even on MLS. The cool thing about househacking with a W2 job is all you need is 3.5% for the downpayment + 3-6 months of reserves. A lot of times you can get the seller to pay closing costs or negotiate credits from the home inspection. So in theory you can buy a $500,000 property with as little as $35k. Even if you go invest in a low price area 2+ hours away from Boston your going to need $30-$45k to take down a $100k house with a traditional investment loan (20-30% down + closing costs + reserves).
Best of luck and we are hosting a virtual meetup this Thursday from 630-830pm if that’s something that you’re interested in just PM me and I’ll send you the link. Most of the attendees found us here on BP and the event is posted under the Events tab under “Pints & Properties” but it’s not the easiest part of the site to navigate.
Best of luck!
Jon
- Real Estate Agent · Melrose, MA · Member since 2016 · 99 posts · 41 votes5y
@Faith Gracia @Joao Victor Souza As others are suggesting, house hacking is the way to go. I started back in 2015 with a duplex in Malden, MA and was able to refi into a conventional loan and buy another with FHA as well.
I would suggest to build your team (lender and agent), get pre-approved for a 3-4 unit home. With COVID these days, a lot of agents are requiring pre-approvals before showing the house.
Let me know if I can answer any questions about homes North of Boston.
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