All Forum Posts by: Dan K.

A couple of thoughts:

1. It's difficult to find properties close to Boston that meet the FHA limits. Below are the limits for Boston. You can of course buy further from the city.

2. You don't need to re-fi out of the FHA. You should just keep it in the FHA unless you create equity or gain it through appreciation.

3. Where in Boston are you renting for $1,000? Rents for a tiny studio in Boston and Cambridge are well above 1k a month.

4. If you're going to be losing money when you move out, how is that better than renting? There is a ton of info on appreciation versus cash flow. Everyone has an opinion.

My 2 cents. Think about your goals. I suspect that right now you want cashflow over things like appreciation and tax deductions. Think about adding roommates to maximize your house hack. You need to do a lot more reading on BP and other resources before jumping in.

Absolutely, I'll reach out to you.

@Mindy Perry

I have a multi-family in Cambridge. A couple of tips:

- Get mass saves to come out to do an assessment. If you are thinking about energy saving upgrades like new windows or upgrades to heating or cooling you can save a lot of money by working with their programs.

- Think about the wiring. I did a new bathroom and facelift to the kitchen. I ended up having to rewire the apartment and add connected fire alarms. Although it was painful and expensive, knowing we got rid of the old wiring helps me sleep at night.

- You may want to think about raising the rents anyway, before doing kitchens and bathrooms. If the previous owner owned the property for a considerable amount of time they probably didn't keep up with market rates.

- As other said, do it one-by-one. However, do not miss the June - Sept rental window. If you do, do a short-term lease that ends sometime in the sweet spot of Boston area rentals.

- Spend some time thinking about how much to spend. In this area the ROI isn't always great for major improvements on rentals unless they are truly needed.

Good luck and feel free to reach out with any questions.

@Ashley Pohlman

You may have to do a 70 or 75% LTV, especially if you want to avoid PMI; however, you should be able to get a cash out refinance. If you PM me I'm happy to put you in touch with a small regional bank that does work on the Cape as well as a local mortgage broker for another bank. I think either one would be able to help you with unlocking some of that equity.

Furthermore, I don't think you need to classify it as an "investment property." Instead, it is a vacation home that you rent out for part of the year. You should be able to have it qualify as a second home in the eyes of many banks.

@Ron Willbanks

I agree with everyone. No need to set up an LLC.

If your goal is to protect your SSN, you can get an EID (Fed Tax ID) from the IRS by applying for one as either a sole proprietorship or an LLC.

If you're not paying expenses, I don't see the need to set-up a separate business banking account unless you really want to. Of course you can do it to easily track income.

My 2 cents is save your money and don't do the LLC unless you need one. If you want to shield your SSN apply for an EID as a sole proprietorship. The EID is nice because in some ways it doesn't matter who sees it (within reason).

Emma,

Granted it was a few years ago, but I know of at least two Big 4 accountants who were able to buy very small city condos and hold onto them once they made more money and wanted to move. Like I said in the earlier messages, the numbers are great on the properties.

At your stage in life and your career you've got to be thinking where will you be in 5 years? If you don't think you'll still want to be in that 400k condo, and if you think you'll need to sell in order to finance your next purchase, you may want to think about continuing to rent. Just my opinion, but the transactional costs of buying and selling a property is roughly 10%. Therefore, you need that much appreciation just to "break even." Of course you're also not paying rent, building equity, etc.

I wouldn't make major decisions totally based on this, but the NYTimes has an interesting rent vs. buy tool -- https://www.nytimes.com/interactive/2014/upshot/bu...

I have several friends who have bought 1 and 2 bedroom condos, lived in them for under 5 years and then successfully rent them out and now live elsewhere. The first couple of years are rough from a numbers perspective, basically after HOA fees they break even. The tenant pool is terrific and tenants pay realtor fees, so that is very helpful.

As for owning versus index funds, that's a personal question -- you've got to think about marketing timing, stomach for risk, etc.

If you pay close attention, there are some fixer up condos in the Cambridge area that sell for over $100 under comps. That being said, they are mostly in the $700,000+ range.

You might be able to "house hack" if you put your rent into the equation. Living mortgage free in a 2-4 family within the Boston area is extremely challenging unless the property needs extensive work. Additionally, think about living in the dingiest unit. I lived in our basement studio for 2 years while it was gut renovated because I was only there a few days a week.

Our number on that property no longer look so great because my wife, son, dog and I are now living in "premier" unit.

@Steve Mitrano

Although Boston can be difficult for great returns, breaks all of the "rules" like the 2% rule, and as a high barrier of entry, there is tons of data available online. The city has been at the forefront of making public data accessible. Look up the address on the city's database: https://www.cityofboston.gov/assessing/search/

If you PM me I'm happy to help you do a little digging.

Some red flags are: (1) odd basement units, (2) units without proper egress, and (3) units that were broken up several years ago without permits to try to limit the number of unrelated people living in one dwelling after new rules were put into effect.

Hi Ryan,

This is not legal advise, but I am an attorney. As @Ashish Acharya said, make a distribution to yourself, that is fine.

If you are regularly just moving money back and forth that is different. But quarterly or even monthly distributions are fine. And if you need a new roof, a personal contribution to the LLC is also fine. You should leave enough in the LLC account to (a) not have bank fees, and (b) pay regular expenses.

If it were me, I'd make a separate Ally account and put the money in there so that you can track it.