New to Real Estate and In Massachusetts
Member since 2020 · 1 post · 2 votes
Hey everyone!
I am new to real estate and live in the Middlesex area in Massachusetts. I do not know much about the Massachusetts real estate landscape other than it can certainly be expensive and based off other people's posts, leans tenant friendly. I am about to graduate college and was thinking about looking for a duplex/triplex to start, but do not know which towns to start looking at as I am flexible with whichever area that may be. I wanted to ask to Massachusetts real estate investors in general, what towns seem interesting for this type of property? What sort of tips do people have for a younger prospect to get involved in a more expensive area when I don't have as high a level of cash? Thanks for any guidance in general and hope all is well for everyone reading!
Hi Victor, as a first step I would consider reaching out to some local banks to get pre-approved for an Owner Occupied Investment Property. As you mentioned you are fresh out of school with limited savings but as an owner occupied rental property owner you can qualify for lower down payment requirements (somewhere between 3.50% - 5%) and the Bank will take into account the anticipated rental income as part of your income so you will most likely be able to afford more than you think.
If you purchase a 2 or 3 unit, you could rent out the additional bedrooms in your unit to friends/tenants and then of course rent the entire 2nd & 3rd unit out as well. You may not cash flow very much, if at all but you are living for close to nothing while at the same time having tenants pay down your mortgage, increasing your net worth, accessing additional tax benefits and hopefully gain some appreciation.
Starting at such a young age would be amazing for your long-term financial future and will set you up very well. Eventually you could consider borrowing against the equity in this property to acquire more properties down the road.
I live in the Metrowest area (Natick) so down the road (after speaking with a bank) if you need help looking for properties let me know.
Hi @Victor Ramirez. Congratulations on your recent transition to real estate and also on your upcoming graduation.
Hi Victor, as a first step I would consider reaching out to some local banks to get pre-approved for an Owner Occupied Investment Property. As you mentioned you are fresh out of school with limited savings but as an owner occupied rental property owner you can qualify for lower down payment requirements (somewhere between 3.50% - 5%) and the Bank will take into account the anticipated rental income as part of your income so you will most likely be able to afford more than you think.
If you purchase a 2 or 3 unit, you could rent out the additional bedrooms in your unit to friends/tenants and then of course rent the entire 2nd & 3rd unit out as well. You may not cash flow very much, if at all but you are living for close to nothing while at the same time having tenants pay down your mortgage, increasing your net worth, accessing additional tax benefits and hopefully gain some appreciation.
Starting at such a young age would be amazing for your long-term financial future and will set you up very well. Eventually you could consider borrowing against the equity in this property to acquire more properties down the road.
I live in the Metrowest area (Natick) so down the road (after speaking with a bank) if you need help looking for properties let me know.
Hello Victor and welcome to BP. There can be many ways to jump into the investment world with little to no capital but you must be willing to put the work in that it takes to see results. You have options such as, traditional financing as Nick mentioned but there are other options such as learning how to wholesale, networking with private and hard money lenders, doing a joint venture with someone who does have the capital or connections, etc. If you ever want to chat, please message me and we can discuss further.
Hi Victor,
I just wanted to drop you a note on 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. 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.
Here's the law (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, so use $5k 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. 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 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.
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
Hi @Victor Ramirez Welcome to BP! All the best!
@Victor Ramirez welcome and congrats on making the decision--it really is a big step! In terms of finances, I'm assuming you'd use an FHA loan to get into your deal, meaning you would need only 3.5-5%. That part if pretty straightforward, especially if you speak with a good lender, but I'd say most important is to make sure you dont drain your cash at closing--you want a good chunk of cash left over to protect yourself from unexpected costs (I bought my first multi when I was 23 and within a month had a furnace go out).
As for cities, Middlesex county can be quite large, so it depends on number of factors including what you can get pre-approved for, where you would be ok living, your commute etc. I would first tackle getting pre approved, because that will help define your scope. From there you can start analyzing deals in specific markets and see how the cash flow numbers differ. Let me know if you have any questions! -L
@Victor Ramirez congrats on getting started! I'd second what @Lior Rozhansky said. You'll certainly want to try to conserve your capital so a low down payment, owner-occupied loan is often a great way to start.
There are many great areas in MA but I think you'd want to figure out your price range, proximity to work if that's important, and then figure out the neighborhood that works!
Welcome @Victor Ramirez, Northern Middlesex here. Good luck in your venture into RE. Take the time to learn as much as you can. Feel free to reach out.