All Forum Posts by: Axel Ragnarsson

Hey @Nate Wilson, I invest in the Manchester, NH market and I think your assessment of the market is mostly correct. As is the case in almost every market, you aren't going to find good "deals" (properties selling for 20%+ below market value) on the MLS, you'll have to start looking for properties off-market. If you're looking to buy an investment property at slightly below market value that provides a stable return, you can find those deals on the MLS. With that being said, you're going to have a hard time finding properties that offer a 10% cash on cash return on the MLS - the vast majority of the deals you see are going to provide a COC return similar to what you've mentioned, 5-7%. That is just your cash on cash return though.. to really understand your ROI you'll need to look at your IRR (which is a sum of your return from cash flow, loan paydown, and factoring in a reasonable number for yearly appreciation). That return will most definitely be higher than what you would earn in the stock market.

As for what a market "crash" will look like, that is a question for someone much smarter than me. I can say that even after the last market crash, rents did not drop nearly as much as property values. When the market turns, multifamily properties have significantly lower foreclosure rates compared to residential properties. So long as you have adequate reserves to handle a slightly longer vacancy period and rents that are 10% lower than what you are expecting to receive now, you should be fine. 

@Erik Pfundstein Erik, NH is a significantly more landlord friendly than MA.. evidenced by the less stringent lead-based paint laws and shorter eviction timelines. MA is also a little more strict regarding the handling of security deposits I believe - a google search should give you good specifics if you are looking for them.

The reality of the BRRRR strategy is that much of the deal's success comes on the final appraisal. What I've found in my personal experience and with people that I have worked with, is that the appraisal oftentimes comes in lower than what you anticipate. We always assume that the appraisal is going to come in at the number we need it to, but at the end of the day, an appraisal is just another person's opinion of value (which can easily be different than yours). This is especially dangerous for folks who use a PML or HML to fund the purchase with terms such as 90% LTV or 100% purchase price / 80% rehab costs... when the appraisal comes in low, you may need to bring money to the closing table to get the refinance done.. and if you planned on refinancing the deal and getting out with "no money down" this can put you in a bad spot.

Also important to mention that this strategy was popularized in the last few years, at least in terms of it being called the "BRRRR strategy" and being something that many newbies looked to utilize. This means that investors who have used it have benefited from increasing real estate values while they undergo the purchase, rehabs, renting, and seasoning periods - therefore helping them get to the appraisal they need to ultimately leave no money in the deal. This was at least true in my market, New Hampshire, as I'm obviously assuming it was in many others. As markets throughout the country soften and price growth begins to slow down (or head in the other direction..) it's important to have cash in the bank to ultimately refinance the property even if you need to bring cash to the table.

I, along with many others, have built their portfolios using this strategy - it is important to look at the downsides and potential risks involved, however. 

@Richard Lovering Is the tenant on a M2M lease? If they are, you can just serve a 30 day notice after you close and take possession of the unit that way. You can certainly ask the seller to deliver the property at closing with a vacant unit but if it wasn't part of the original contract, I doubt the seller agree considering it adds another variable to the deal. Even if the seller was open to the idea, he/she can only serve an eviction notice if there is cause.. and while NH is a pretty landlord friendly state, evicting for reasons aside from nonpayment of rent can be difficult (especially if there a family in there on section 8). 

@Joseph Bowers Hi Joseph, I'm an active investor in NH, both in the Manchester market and out in the seacoast. I'd love to talk about your real estate plans if you have time, as well as your contracting business - I never turn down an opportunity to connect with a good contractor!

@Forrest Owen Hi Forrest, welcome to BP. I'm an active investor/agent in NH, specifically the Manchester area and out in the seacoast. I work with and know many people who live in the Boston area and invest up in the NH market due to the lower price points, more attractive cash flow, and better landlord/tenant laws. I'd love to talk NH real estate if you have time this week, I'll send you a PM!

@Jared Carpenter My largest property is just 6 units - hoping to do a 10+ unit deal in 2019.

@Jeremy G. Jeremy, the insurance policies I have on my three unit properties in Manchester (non-owner occupied) all range from $1,750-$1,950/year. Given the fact that you are purchasing a property that is 4 units, $2,600 isn't too out of line, to be honest. You could go to your insurance company and request they lower the replacement cost or increase your deductible... if they don't want to write a policy under those conditions, you can look for another company. You aren't going to find quotes around $1,200/year, your mortgage broker was pretty off on that one. I would be surprised if you find any quotes for under $2,000/year, you might get one from Geico/Allstate/Progressive or one of the big companies, but its unlikely that coverage will stick after inspections or they look at it further. I can refer you to my insurance broker if you'd like, her and her company know the Manchester market really well. 

@Shawn Regnier Welcome to BP. If you are in the personal training business I'm sure you interact with a number of people on a daily/weekly/monthly basis and have some schedule flexibility... Perhaps you could leverage that into doing a few deals as an agent when you get started. I wish you the best of luck, living in NH right now has me wishing I was out there in LA!

@Joshua Lidberg Thank you! Congratulations on getting started so young, I'm sure you'll be much farther along by the time you reach my age. I actually flipped cars in high school and college which is how I made earned enough money to get into the business... looks like we have similar stories. As for the issues I've had with financing, it was typically due to the fact that the income I was showing on my tax returns wasn't high enough to be qualified for conventional financing. I'm still running into this issue now since my tax returns haven't caught up to the growth of my business yet and likely won't for 1-2 more years. I would talk to some lenders (and give them your returns and current income verification) and ask them if you think you'll have trouble refinancing a property when the time comes, then you'll have the peace of mind you'll need to continue buying with the plan of refinancing.