All Forum Posts by: Dan K.

Hi Dennis,

Sounds like you've found a very nice niche.

With raising interest rates you might feel a little bit of a squeeze -- Citizens bank is offering 3.15% for 5 year CDs -- obviously little to no risk. So if you're going to offer return on cash of 8%, we are looking at a 4.85% spread. Of course interest rates are only going up. That being said, that is still a decent spread.

You need to understand your investor's motivation. If they want to jump into real estate to see massive returns with somewhat high risk, you're not the right person for them. Making 100K on a 6-month flip is exciting, but you need investors who want a nice, steady and reliable return. Basically you need investors who have a lot of cash parked in a money market and aren't sure what to do with it --- the stock market is volatile but they know their savings are losing value every month because of inflation. That 5 year CD I mentioned would hopefully beat out inflation by about 1%.

As to how to structure the deal, why not do a cash out refinance after 3-5 year period and pay off the investor(s)? You could also look to sell the property if you have a long term lease in place with a group that does sober living -- do you have long term leases or are you just renting out by the room to newly sober people? 8-12% returns are not bad for a safe place to park money for a few years.

There are a variety of ways to structure the deal. A joint venture could be a good option. Keep in mind that getting a loan just on an LLC would be challenging.

By the way, I'm an attorney by the way in Massachusetts.

What I have found with exterminators is that they are great at killing / poisoning pests. You really need to make sure to identify where the critters are entering the property and use spray foam to close all gaps.

Also, I'd be hesitant to use poison inside. Besides potential danger to people and pets, you don't want any critters dying in the walls.

Where is it located and what are the issues?

You are going to have a difficult time in my opinion. Your business model is not unique and given the fact that you are a recent graduate I doubt you have much capital.

The arbitrage between yearly rentals and weekly/daily rentals provides some upside, but the profits margin is slim and you are going to need to find buildings that allow short term rentals.

My opinion is whenever somebody is willing to give you free money go for it. $250 isn’t much. I have totally required a unit because of knob and tube — make sure it isn’t more extensive than you initially think. Also, confirm that you actually have knob and tube. I had a Mass Saves inspector flag a property as having knob and tube because an old phone line was in a tube....

My two cents on vacancy — In my experience, if the timing is right you’ll avoid a vacant unit, but turnover costs can be expensive. New tenants expect skuffs on the walls to be addressed and for the apartment to be generally clean. It behooves you to do this so that the new tenants leave the unit is good shape. Because Boston has a high cost of labor, turnovers need to be considered with your numbers. I would generally disregard the “rules” locally except for very quick and crude calculations.

The dishwasher is going to be a water savings. You could encourage tenants to not use the heated dry. I remind tenants that I want to keep rents stable... costs are always increasing and small things like closing storm windows and not using the heated dry help to keep rent increases down. As for the washer dryer — you could try a monthly fee for a w/d hookup. Like a flat $20 a month. I might also require that your handyman does the hookup and that the water lines are new. You’re going to be holding the bag if there is a flood.

I agree with @Kate Ziegler, in Boston a $1k per a unit is an extremely easy out. Glad it worked for you @Kelsey G.

In the Boston suburbs, I've seen $15,000-$25,000 waivers for single families fairly regularly. Also, as Kate mentioned, pre-inspections are also common.

Any good inspector should be able to find a few thousand dollars of work. Loose doorknobs and faucets add up.

For Multi-families in Boston and Cambridge, I view an inspection contingency as a red flag. If you are an investor in these areas you should be educated enough and have enough capital to handle a new roof or heating system. Of course informational inspections can be helpful.

Hi @Dimitri Savidis

It sounds cliche, but there is are never "no-go zones" for real estate investors. It just depends on goals, what your comfortable with, risk tolerance, etc. I certainly have personal no-go zones.

If you want to househack your way through your early 20s in the Boston area, I have a few questions. Do you want to live in Boston or are you willing to live in Boston or are you willing to live further from the city. There are deals to be had south of the city -- @Charlie MacPherson would probably be a good resource.

If you're like a lot of younger people in the Boston area, you could househack on a much more personal level. You can purchase a 2 or 3 bedroom condo in Boston and rent the other rooms out to friends or other young professionals working in Boston.

You might want to also do some research into Turn Key properties in the mid-west.

Spend some time in the forums and you will see lots of talk about the Boston area. Additionally, there are a few podcasts featuring local investors.

Everyone has given great advise.

I think a huge part of it comes down to the cliché of location, location, location.

If your area has an active rental marked for single families, by all means go for it. Where I invest, economies of scale make multi families work well (a new roof on a 4-family or a single zone steam boiler replacement for a 4-family costs close to a single family. Also, in my state I can't offload snow removal -- I'm liable for it.

At the price point your talking about, the BRRR method can work very well and quite quickly.