All Forum Posts by: Account Closed

Colleen F. - buy, renovate, and rent out. Students are interesting as many times parents are paying and may pay up(?) for something nice. Also wondering about rearranging the interior to maximize bedroom count. There are some huge three families (nearly 5000 sq feet) that only have 9 beds and 3 baths. If I were to renovate something like that in Somerville, they building would have at least 15 beds and 6 baths.

Additional pictures Of my renovation quality for those who are interested:

Hi all - I typically buy and renovate in Cambridge and Somerville where rents are sky high but so are purchase prices. As such, I try to create value by renovating the kitchens and baths as well as re working the interior to maximize bedroom count.  

That being said, Worcester is a different animal. Some of these old buildings are huge and rearranging interior layout to maximize bedroom count is doable. I typically put in nice(ish) cabinets, granite countertops and stainless steel applicances. Will I get paid for that in Worcester? What does a beautiful 4 bed within a quarter mile of Clark (south of Main Street) go for. To give you a sense of quality, below are some pics of kitchens and baths of recent remodels. Will I get paid for these? Thoughts?

Jeremy Paschedag I have around 80k of depreciation per year. Yes - rental income is taxed as ordinary income.

Jason V. Point taken. My market is pretty well insulated from a down rental market as compared to others. There are 50 universities within 25 miles. Biotech in Cambridge is best in country (if not the world). The hospitals and medical buildings here are best in the country (if not the world). There is a very strong finance and banking sector. Incomes are strong. We aren't tied to a single manufacturing company like may be the case in more rural areas. We have significant job diversity here. I am not worried about rents dropping 20-30% in my market, not really. 20% would be 80k and I'd still be able to service my debt. Take away another "70k" for "deferr d maintenance" and I'm still cash flow positive. I feel pretty good in a downside scenario. Can you apply everything I do to every market. Absolutely not. But the concept of buying pieces of garbage that are large and in good locations and renovating kitchens/bathrooms, as well as interior layout to maximize bedroom count has worked for me and I think can for others.

Natalie Vane Vacancy is 0% in my market (save for the time from renovation is complete to finding my first tenant). I only paint when the tenants complain. There is so much expensive garbage rentals out there that even if mine isn't pristine it is better than 90% of the stuff out there. 70k for annual maintenance just isn't right for four buildings. 17.5k per year in maintenance per building. Does that make sense to you? Do others pay that type of coin for repairs each year? Remember...the high rents relate largely to location (where maintenance is not apply). And yes the buildings are nice but the same buildings in Worcester would rent for 1/3 of the rent and maintenance costs would be the same.

Jd Martin , thanks for your note. Insurance is spot on and might be a bit lower this next year as I reshop rates and reassess coverage. They are all on a business owner policy (fire dwelling) and have an umbrella liability policy. This is generally cheaper than your residential policy as there are economies of scale. Assessments seriously lag market value here and that's why taxes seem low. Agree with your comments on maintenance being low the first 10 years. Could it increase? Absolutly! But tying maintenance to a percentage of rent is just flat out wrong and doesn't take into consideration rental costs across markets. For example a 4000 sq foot three family in Cambridge is going to cost (roughly) the same to maintain as the one in Worcester. Cambridge rents out at $3800 per unit and Worcester $1400. Will my mainrence costs be nearly triple? Nope! Regarding high rents - a drop in 20% would kill most people's returns on this site....

Peter T. PenFed was excruciatingly slow when I put the line in place a few years ago. I think it took them like 2-3 months with me badgering them multiple times per week. I just grinned and beared it as nowhere else would provide a HELOC up to 80% ltv. Is the property in your name or in an LLC? If in your name, you may try some Local banks.

Jerry W. thanks for your note. What are your thoughts on my comment above related to operating expenses and expense ratios? In Wyoming you can probably rent a 10,000 square foot palace for $3800 a month, whereas in the Boston area, a 4 bed 1550 square foot apartment rents for $3800. Which do you think has higher maintenance cost? The small apartment or the gigantic single family? If you want to bust my balls on the maintenance/capex numbers here, fine. They are estimated and are identified as such. If they are off, it's not off by more than a few grand over the year. Key projects in 2016 included: --2 new water heaters ($2300). --3 visits by the plumber for one off issues (750) --3 windows replaced and wood rot fixed ($1100). --Landscaping (100 per month for 7 mo) or $700 (only two units need landscaping. I gut rehab my buildings from the start so maintenance is minimal. Besides, maintenance expense, any other gripes? People talk about 40%-50% expense ratios Which I think are crazy! How do you make any money when rents are so low/expenses are so high. Anyone else in the Cambridge/Somerville market see expense ratios this high?

Joseph Baiera Good questions. Tenants pay utilities with the exception of two units in property #4 which are furnished rentals and I pay utilities. To simplify the numbers. $485k rent -$65k operating expenses -$243k principal and interest (debt service) ----------- $177k cash flow before taxes and one time capex