I inherited a house from my late grandfather in Massachusetts. No mortgage and worth $1.5mil - $2mil. My parents live there. Our family has a SF rental in Florida, that rental covers the Florida and Massachusetts houses for taxes, HOI, and repairs. My primary home is in Massachusetts and I have very solid W2 income. I'm considering taking a HELOC in the $500-$600k range on the house I inherited and buying say 4 multi-unit properties, each with $125k down from the HELOC and financing the rest with traditional financing. I would start with 1 and see how that goes. My math on one of the units I'm considering has me cash-flowing $750 a month which includes 5% vacancy, repairs, taxes, HOI, and the mortgage (I used 4.5% rate for investment property). So I feel like even if there are other issues that come up there is still money left over each month for those repairs. Cash-flowing with no money down seems to be a smart option. On top of that I have well over $100k saved for repairs when they come up. Any tips/suggestions?
Sounds like you've put a lot of thought into this. I like the first parts of your strategy as I think it would be sound and reasonable to accomplish taking that fund out. Can you tell me what areas you're looking to invest in the Greater Boston area? I feel that your money could go further than the $750/month cash flow from the property. I just did a calculation on a property something of that deal size would yield closer to a $1200-1400/month. Again - this has a lot to do with the areas you're going to target.
Do you think you'd like to find a Property Manager for this or you'll manage it yourself? How many units does your first deal look like? What rental class would you be comfortable with?
Those are just some exploration questions that would be good to keep in mind during your search. There's no right or wrong, just things to consider. Good luck with everything and please reach out if you have other questions!
@Lien Vuong Lien, do you mind sharing some info on the property you're referring to? location and unit breakdown would be helpful to have as a reference for the area. Thank you!
@Alejandro B. It was in the metro western part of the state with 3 unit counts. You can also find these figures in southern cities that are about 30 minutes from Boston also.
@Michael Hayes congrats on getting started, sounds like you have a lot of the hard stuff figured out. Have you ever considered investing in Ct? Towns like, New Britain, Bristol, Middletown, East Hartford, Manchester- All the above can be great areas for cash flow.
I would suggest getting as many doors under one roof as possible (small apartment perhaps). I would suggest this for a few reasons.
1. Ease of management- if you are self managing this is a no brainier- 1 roof to fix, furnaces all in one place, 1 driveway/parking lot... the list goes on. If you plan to hire out- you would probably get a discount if all the units are under one roof.
2. One purchase and closing. If you start buying multiple property at different times it can add up quickly with closing costs attorney feed and points.
3. Boston market as I am sure you know is very pricey. I believe your dollar could go a lot further on a small apartment building in Ct, specifically in the towns I mentioned before. I know a couple off market small apartment buildings in those areas with a 10-12 cap which are in fine neighborhoods.
4. Consider value add apartment investing. If you would like a repeatable process to recycle and use your money again consider buying property at a discount- add value through either raising rents, decreasing vacancy or upgrad the building from a construction standpoint. By doing this to a building over 4 units your ARV is going to be based on the NOI and not subject comparable's as it would with a residential 1-4 unit building. This allows you to control the ARV far greater than relying on an appraiser.
Feel free to reach out with any questions.
@Michael Hayes -- You've received some great advise so far. You may want to have some initial talks with bank regarding your plan. I know some banks will be hesitant with the downpayment coming out of a HELOC. In addition, banks will want to see that you have reserves in place.
Updated about 1 year ago
Advice of course, not advise
@Michael Doherty has provided great details, I would second that. The areas he mentioned have decent cash flowing properties.
@Michael Doherty I'm based out of CT as well and looking to invest in small apartment buildings. I would love you to chat with you. Dropping a DM.
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