All Forum Posts by: Aksel A.

Greetings everyone,

In parallel to my house search (settled on focusing on 3 family house thanks to gentlemen recommendations here), I am also starting my general purpose LLC.

It will have a foot on housing rentals and mortgages notes. Goal is to immediately invst in mortgage notes for the time being, before including additional features (mainly rental).
For the purposes of this post, I want to point out that I am doing this for the 1st time and all by myself, mainly for the invaluable learning experience.

My main interrogations:
- Is it common to start a 1-member/owner/manager LLC for real estate investment purposes?
- Any concern with using current temporary rental address as LLC's address (before changing to home residence after I find it and move in)?
- Any caveat to be aware of in order to be able to file as S Corp later for tax purposes?
- Any 3rd parties to keep in the loop (attorneys, insurance companies, etc)?
- Anything specific specific to Massachusetts worth knowing?

I understand this may not be the best forum to ask specific questions on organization structure, tax benefits, and other legal requirements.
I am just looking for friendly gotchas, from Real Estate Investors perspective. There my be useful articles, forum posts and additional resources already available on the current forum, so if you get a chance, plz send over in case I miss them as I'm searching. Much appreciated.

Thanks

Good input @Justin Repp, appreciated. I happen to like Beverly, nice town you got there.

As far as staying the 20min to Boston, I think Everett may also have interesting profile.

Delayed answer to @Charlie MacPherson : Yes I attend the BREIA.

Thanks all you friendly posters here, I've been tweaking my search criteria based on what's been said so far, and that sure makes a difference. Great.

Thanks guys for the 3-unit family house suggestion. I initially assumed it to be a bit off-range for a starter, but we seem to be in agreement that this is the way to go about MFH. Will hence orient my research accordingly.

In parallel, what do you think of this? Is it considered too speculative for the intrinsic value of RE geared towards limiting risk?

1. buying a discounted simple family house within 20min of Boston", up to 300K, no more. Just for me to live in and build equity

2. focus on multi-family rental houses far from Boston for the time being, ex: Worcester/Brockton.

3. wait for the house market downturn so we have a chance to make the big bucks by investing closer to Boston.

@Victor Eng thanks for the clairvoyant advice, and yes appreciation is another huge long term factor I didn't initially mention. Albeit it is not as much of value to me as a buyer living within 20min (judicious time interval), it is a huge advantage as an investor. The Boston area is never short of larges ongoing development projects such as in the ones Malden, Jamaica Plains or South Boston. They suggest that, even if the prices are already high, they can only raise even higher due to the strategic location and the high demand, and the cosmopolitan student Boston will likely never be short of demand.

After all, one may suggest that all of this applies to Boston just like to any big city: high entry bar, tougher ball game, and more rewarding profits (or is that so)

Voila, the direction of this post is summarized in the title. This post is not asking a specific question. Rather, it aims at exposing my current situation which may be familiar to many newcomers.

I wasn't too sure whether to post this here, or in another more appropriate section (such as strategies, diaries, etc), but of course, comments, corrections and and advices are encouraged. Let's get into spicy details.

Note: this post tackles multiple topics at the same time and goes in various directions. The goal is to be describe what it means to be a newcomer in the RE area, in Massachusetts, in 2017, with relatively limited capital but massive ambition.

I have initially started my interaction with the BP forum here, where the goal was to start with a home purchase, typical single family home, renovate it and live there for a few years. The deal didn't last because of a few reasons, mostly related to the ARV given the pretty intensive repairs. Simply said, we make the deal at buy time, and the property was about 25K off. So... back to home search.

My issue is the following: I am torn between

A. investing right away into a 2-family B&H house, to get to live in 1 unit and rent the other for profit

B. getting my first single family home to move away from renting, start building some equity, and keep my mind clear to focus on investing.

Advantages of A: getting right away immersed into the joy of landlording, receiving cashflow income, investing in a liquid multi-family property that may appreciate more than single family...

Advantages of B: cheaper, easier process, less overhead, build equity, more cash available for investing, more choice...

Initially, I wanted to go for the 2-family house, plan A, for all the reasons above. Plus everyone (including here) suggests that this is a better investment long term.

Unfortunately, this is quickly turning to be an extremely challenging goal:

As many of you know, the Boston area is a horribly expensive area for newcomers into the RE area with limited capital (say 100K). Sellers market, inflated prices, housing bubble, unbalanced competition, etc you name it. As a consequence, plan 2 is impossible to implement without a great deal (foreclosure).

Let me give you an example: a relatively decenty 2 family house in Malden MA, valued at 450K, actually takes offers reaching 600K and higher. With a 10% down-payment (FHA loan), the numbers don't work at all for investing enthusiasts.

As a consequence, I developed the following strategy

1. buying a discounted simple family house "kind of close to Boston", up to 300K, no more. Just for me to live in and build equity

2. focus on multi-family rental houses far from Boston for the time being, ex: Worcester.

3. wait for the house crisis to crash the market so we have a chance to make the big bucks by investing closer to Boston.

Did I say house crisis? Hum... The crisis is likely to hit at some point according to the economic numbers. You know that we may already be in recession, and a bull market can only last so long. The market moves in waves, so if it's not a blow-up, it will be at least a downturn, and prices will drop. It just doesn't seem wise for a first time home buyer to risk too much on his/her first purchase (ex: 600K with only 10% down) these days, and the deal is made a buy time, not much sell time.

Ultimately, whether I go with plan A or plan B, I feel that owning "something" to stop paying rent is the required first step, only then we can be 100% onboard investing. As long as one pays rent, the anchor will slowing or prevent the boat from moving far, either physically, psychologically, or both... I'm suspecting this was already discussed in great details in this forum. Feel free to link it.

Despite of my pragmatic resolution toward the single family strategy I outlined above, I am still looking for 2-family deals in the Boston area for up to 500K, despite of not having an established Real Estate business (LLC), limited networking, financing options and overall experience. Gotta start somewhere!

No longer pursuing this one, plz ignore

Hi/Ahlan Carol

Absolutely. As I mentioned earlier, I wanted to make my first home purchase profitable by switching from single family to multi-family house.

Given my max budget of about 600K, I am focusing on 2 family house. 3 or 4 would be awesome, but that's probably not a possibiliy.

Ideally, I'd rather stay away from rehabbed houses and rather take advantage of pre-foreclosure, to buy at discount, make any required repairs myself, and gain experience.

Of course, I'll take suggestions or advice anytime, still going through tons of documentation, books, tutorials, forum posts, etc.

Just to close here, this potential purchase was aborted. No variance allowed, no deal.

Currently in the search of a multi-family house in the Middlesex county MA.

Thanks Steve,

Good input here as well, I am going to set-up a meeting with city planner Michelle A. Romero next week to take this discussion further and evaluate my options. (http://www.cityofmalden.org/content/city-planner)

The impression I am having is that a topic such as variance/zoning doesn't quite have the highlight it deserves for newcomers. By any chance, can you suggest useful BP book, topics, forum posts or any other resources to get more familiar with it? I'd like to see reputable sources in parallel with my one-offs random internet searches.

Regards,

Aksel

Excellent eye opener Patti, appreciated. This is the 1st time that I even get close to the concept of zoning and variance, and this just shows how extensive of business knowledge the REI this

This part is interesting:

The second living area is defined by having a stove.

By any chance, do you know if that is applicable to Massachusetts? Or generally speaking, is it at the federal level (probably not), state level, or city/communal level?

I was not planning on installing a stove, at least not a gas powered one. Electric stove was optional, but at the tenant's charge. That said, electricity and water are musts.

Will definitely ask for more clarification on the variance conditions. If we already have a forum post, article, or podcast on this specific topic, that would be great.

All that said, even if doesn't turn out positively, I still wonder whether I should take the opportunity to turn this "First Home Buyer Purchase" into a Flip.

• On the one hand, I think this is an excellent opportunity to immerse myself into REI. I would just jump in with the bulk of the work done already. I don't even mind if the ROI is minimal (as long it's not negative), because I think the experience itself is huge and will be a life turning point to get engaged in further flips. From there, we'll tackle more REI opportunities and you know the story.
• On the other hand, well, I was not super prepared to go all in right at this time. I have lot of domain knowledge to catch up on, and still need to investigate whether it is best one under an LLC, whether the lender would agree to lend it with this model, etc. Overall, sounds risky. I am a risk taker, but need to make sure to avoid classical mistakes with blurred unknowns at this time.

Kind regards

Aksel