All Forum Posts by: Alex T.

@Wendell De Guzman I'm still a newbie but isn't the cap rate calculation in that spreadsheet wrong? From what I understand, cap rate is based on the property value, not your initial investment, so it should not vary when taking out the mortgage. What the spread sheet is computing as "cap rate" seems to be Cash-on-Cash return without factoring in the mortgage costs (and then CCR seems to correctly factor those in). Am I missing something?

@Ali Boone sorry, the notification in previous message doesn't seem to be working (even with editing).

@Sheri Ulm I'd be interested in learning more about long distance investing. Managing the property seems to be the scariest part. I'm assuming you got that part handled if you're investing out of state. Any advice you could provide? Did you visit the area first? Did you use the turnkey approach? Did you hire property management or just got an extremely good tenant? Did you buy condos and leverage the association for the management of common area and repairs?

@Ali Boone Thanks for the advice, I've actually been reading your blog posts, since your turnkey strategy appeals to me - as long as it still generates a profit (that was me sending you that email about choosing markets). I definitely would not consider myself an ideal candidate for a landlord. I haven't even thought of Philly, but it may actually be a good idea. I've lived in South Jersey for a year, so I'm familiar with the Philly area - have a few friends living there too. It is trickier than Boston in that the neighborhood quality changes very fast, especially for areas bordering North Philly.

As far as turnkey investments, you mentioned in your posts that property management isn't necessarily tied to the same company that you buy the property from, and that you often like to shop around for them. Do you decide on management company before you start looking for property in a given city? Do you have that management company help you find it, do you use some "turnkey" service and bring your own management after? Are there extra fees for not using the same company to do both?

@Paul Timmins I apologize about the name thing, set it up to my initials and then noticed I can't change it now.

@Shaun Reilly Would you recommend looking for property in areas like Worcester or even north of Boston? It seems like areas around Newton have very low returns, Brighton is a little better but properties sell very fast there and have appreciated a bit too much over the last couple years. It's also impossible to find a multi-family anywhere in this area. I was considering Everett or Chelsea, they seem like improving areas with some multi-families available and somewhat saner prices.

If 2% rule doesn't work in Boston, what other alternatives do you use to figure out if the property makes sense to buy? Do you assume you'll be taking a hit for the first few years and hope that appreciation will take care of the problem? Brandon also suggested not to count on appreciation in one of his blogs, which makes sense. Even in an area like Boston, property prices can't keep rising faster than salaries forever.

I'm hearing of people investing in NH due to better tenant laws and returns. Would you guys recommend looking in that area? I'm worried about being drained by maintenance, but if the margins allow for it, maybe I could look into property management. I'd also probably end up with a commercial loan rather than residential, might be hard convincing the bank that I intend to relocate to NH.

Hi,

I've been lurking the forums for a while, but haven't considered investing until now. I have no background in real estate (I've only been investing in stocks before), but I am familiar enough with how the typical process works from reading. I have a full-time job, so I'd prefer income-producing property rather than flipping, which would be a full-time job in itself. I don't mind putting some sweat equity in, however. I was thinking of starting with a multi-family, since I don't currently own a house either (but my rent is also ridiculously low, so if there are better alternatives, I'm open to them).

One thing I'm discouraged by is that I can't seem to apply the advice from the forums to the properties I've seen here in Boston. Neither the 50% nor the 2% rule seem to hold anywhere near Boston area, and the kind of crazy appreciation we've been seeing in this area can't go on forever. I was considering looking at areas further out but I'm afraid of having to commute there several times per week. I'm also worried of buying a place in an area I know nothing about. I understand that a lot of my fears come from inexperience and hopefully the more experienced members living in Boston area can dispel them and provide some guidance.

Thanks

Thanks for the reply. If I live in the property I buy, I can apply the tax credit: http://www.trulia.com/blog/gwenn_tanvas/2009/02/burning_question_answere

As far as property tax rate, it's about 4% in NJ Moorestown area. Also, not sure where you got the data of Wisconsin being the highest: http://www.highbeam.com/doc/1G1-186981243.html

I'm trying to take advantage of the tax credit to buy my first house, I was hoping to buy a duplex-type property so I can use it to leverage later investments. The area I'm in doesn't have many duplexes, but I managed to find a few. I'm worried, however, whether I'd end up saving more by living in an apartment for a few years than a house with property taxes and utilities, even after I get tenant's rent. The property taxes here are 4%, which is another thing that scares me.

But basically my main question is this: I found a duplex in this neighborhood that appreciates well and has high value (costs $225,000 and has 2-bedroom and 3-bedroom units). I also found a quad-plex about 10 miles from here in an area that has significantly lower value and appreciation rate ($250,000 and has 4 1-bedroom units). The duplex units seems to have been rented for $1100 -which seems low to me for this area, I have no data on the quadplex but was told that 1-bedroom units are harder to rent. Can you guys provide some advice, thanks.