All Forum Posts by: Brian J Allen

So true Andrew, There is so much money chasing Worcester right now, since rents have jumped so much over the last 3 years. This is depressing the CAP rates from 10% 3 years ago to about 6% now. But also keep in mind, Location and Quality are the big drivers of RENTS and QUALITY of TENANTS. If you are in poor access locations or you have lame/tired units, you will never get good tenants who will stay.

it is typical not to see the units prior to making an offer.  But your offer should be subject to seeing all the units.  Honestly there are buyers who are willing to buy without even seeing any units.  I am not one of them.  Most of the money is in the basement.  I have put in offers on buildings with only seeing the outside and the basement, and they usually work out.  In a Worcester 3 decker the units can be terrible and you can overcome that.  If the outside and the basement are terrible, it is hard to overcome that.  Take the pricing this way.  Figure you have a $400k 3 decker.  These are the things you can price from the outside and the basement.  Roof $15k, Siding $25k , Windows $15k, Doors $10k, steps/decks $30k now in the basement. Heating systems $30k, Electrical $30k, just the cast iron soil stack $10k. THAT is $165k of stuff that can be done or partly done.  you can redo a whole unit for $40k and make it wonderful.  Let me know if you want me to show you the difference in Worcester. Im out every weekend

You can get a 5-7 CAP Rate on decent places in Worcester, you can stretch to almost a 10 on Properties that need a lot of work

Thanks for the kind words guys. There is a lot of off market small multi in Worcester, honestly there is a lot more for sale OFF MARKET than on the MLS. Currently there are 27 Multis in Worcester on MLS. We work with property owners who individually own more properties than that. Keep in mind that OFF MARKET DOES NOT MEAN A DISCOUNT. Do not confuse these things. Simply put you can have a conversation on price instead of bidding against yourself. That is what off-market does for you.

saidah you should look for financing and a realtor in parallel.  both are easy to do, but take time to find the right fit of skills and personality.

there are always opportunities. I am working with a wholesaler/flipper to create enough equity in a property to gift the down payment to the buyer and still have the wholesaler/owner happy in the end.  We will also do a closing cost credit so this may be a no down payment scenario in Worcester, MA where inventory is tight.  We are saving 2% for the seller on commission and reducing his hold time by 45 days by purchasing before the flip is complete.  If there is a will there is a way.

There are always good properties to purchase in any market.  The key is being comfortable with your target type of property. In Worcester you can get good properties with upside that will do well in any market.  You can also buy properties that look good in this UP market, and do not fare well in times of higher vacancy.  The key is to find an agent that really knows multifamily as most do not have enough experience.  You need to have someone who can explain to you the economics of the city as well as the specific neighborhoods.  You need to know transportation patterns, topography, and school districts.  You also need to know the quality of the property, not just the rents.  If your analysis of properties is just based on current rental income I think you leave yourself open to lots of pain and suffering.  Make sure you work with people who are committed to just helping investors like yourself, not just agents who are now dabbling in multi family because the prices are up and buyers are there.  Make sure you know who your target tenant is and where they intend to work.  Best of luck in whatever city you pick.

These 0 lot line properties in Worcester with a garage rent at about $2k a month.  I don't think changing the bathroom makes a big deal in rent.  I have clients who have similar places. 3 BR 1.5B and 2 BR 2 BA and they rent about the same, just different people.  There are plenty of people looking for these.  you might be able to get $2200/month from the right tenant.

Worcester has a small community of agents who have been doing this for a long time, along with a small community of investors. They typically do everything off the MLS. It is great to bid up the price, but almost every offer is contingent on appraisal so even if someone offers $450k for a house that is worth $375k, it will still sell for $375k. Why go through all the trouble when everyone knows the final price. Also, most MLS offers have inspections and other contingencies. The good stuff sells for CASH with local lawyers on both sides of the transactions. If you watch the MLS you will see properties that go under agreement then back on a month later. This is typically related to either an inspection or an appraisal issue. Off market those are not issues for the most part.

As for delivering something vacant, that would be great, and I am seeing up to a 20% premium for vacant properties.  In the past people wanted tenants, now everyone wants the place vacant which drives the price.  There is a lot of money out there to help tenants pay back rent through various City,state and federal programs.  The bigger issue is not people who are late in payment, but people who have been paying super low rents for years.  There was a property this weekend, on the market for $400k with $2,350 a month in rent, $1200, $750,$550. Each unit should have been at $1500/month. How can you get someone paying $550/month to ever get to even $1300?  it is not going to happen.

Best thing to do is try to get properties at a discount due to low rents, and wait them out. That is what the seasoned investors do. Don't get caught up in CAP rates, but focus on the LOCATION and QUALITY of the property and you will win long term.

I hope this helps.

Andrew, The market for College Rentals in Worcester is Fierce and ultra competitive. Almost everything trades off market, but there are opportunities. Most deals are done sight unseen and there are few players. A lot has to do with 1031 action. If someone has something they can buy, they then become willing to let something go. The biggest problem with worcester is that there are SO FEW LARGE MULTIS in WORCESTER, so there is little to trade up to. Competition for the Small Multis is big, since there is SOO MUCH MONEY chasing real estate as to try to hedge against inflation. Anyone with $100k can buy a 3 decker and have the leveraged appreciation they want. The key in Worcester is to know exactly where and what you are buying. Most of this activity takes place off the MLS, and by agents. These are not pocket listings or something fishy, but sellers simply don't want their tenants to know they are selling. I have a seller who was able to sell(we close this week), and only showed 1 unit and the basement, and will not let the buyers meet the tenants until closing!!! The market is odd, but there are solutions. The college market is even more complicated as most sellers want CASH commitments, for over 3 months so they can go shopping for something better with YOUR CASH. You can't make this stuff up. So basically in order to buy something, you have to wait until the seller has SOMETHING BETTER THAN WHAT THEY ARE SELLING YOU!! Fun Stuff