All Forum Posts by: Colin Kelly-Rand

@Brandon Durant

I think finding cash flowing duplexes with rates where they are is difficult in most of the north east - owners not having taken the hit yet on prices. On top of that, taxes in RI seem to be very high % of the income. I went down and looked at a bunch of properties in Providence and could not get the numbers to work at $80K per unit. The renovations needed to get to a comfortable level for me ($50K per unit) pushed it into pretty poor yield territory. 

Hypothetical I think New Bedford, lower taxes, similar rents to providence, may appear to cash flow better. Although I know a property manager who decided to leave that market as managing the properties and residents was not ideal (way to much work for the return).  

In some sense - figure out what price works for a 2 or 3 family in the market you want, and just be ready to jump when something does appear. Or proactively ask local brokers if they have off market 2 families for X dollars. 

@Lien Vuong

That sounds good. Are the majority of your purchases on MLS or off market? And what type of financing products are you using (30 yr residential, 5 yr commercial, swap rates)?

Cheers

Colin

@Viktor S.

Given what you can afford - the gateway cities would likely be correct. And are you planning to house hack? (Live there for a bit?) That changes how you search (near to where you live). Although, regardless, I imagine you should live within 45 minutes or less to the property so you don't need a property manager initially. 

So...where do you live :) so I can further think about this. 

Cheers, 
Colin

@Nik Lavoie

Hi Nik

What is the cost of your prospective property?

Worcester tripledeckers appear to range from 500k to 800k. Typically banks lend 80% of acquisition, and you would want to have a few months of mortgage reserve left over, ($25k?), the most you could put down is 100k, so a max purchase price of $500k. 

Part if your analysis has to be how you payback the line of credit (and what its costing you). Is it 8%+ interest rate ? 

Also a buying a single and having a baby is adding a lot more carrying cost. Why not another house hack? Is living in a two or three family so hard. 

I moved from a triple in Dorchester to a triple in Newton. Still hacking (with a better school system.)

@Karen Margrave

I have similar thoughts about Fed's approach - not sure if its fair to place the burden on them - this is more than a fed issue. 

How do we improve efficiency (more with less)? How do we incentivize that? I think the zoning regulation (upzoning) would help with reducing housing costs (increase supply to offset demand). 

As far as building more efficiently - I think there is some modular home methods on the rise - just most general contractors / architects / home owners are not familiar with the method. How do we make the general contractor comfortable (or certified) with that type of construction? Make some modular construction part of CE? 

Government should incentive for more people to head to the trades...electrician, plumbers, HVAC are doing just fine in the Boston area, as well as finish carpenters.  

@Casey Dimascio

I imagine I can walk you through some scenarios for commercial construction loans from local banks. Commercial loans can offer both acq/refi with construction loan. Rates are between 6 and 7.5 for most banks for this type of construction to perm loan.

I am in the Boston area - happy to jump on a call and depending on where you are - meet for a drink (coffee/beer).

Cheers

Colin

@Alecia Loveless

@Karen Margrave

I am in in the Boston area (Newton) as well and I did notice using my Sherlock zillow api that there were 17% more listings than last year. I havent checked to see how long they are sitting on the market.

@Marcus Auerbach

I'd love to see a breakdown of a $50psf full interior / exterior!  That's a $140k gut reno on a 2,800 sf home? 

@Griffin Coyne

@Griffin Coyne 

I agree with Sean, I think your safe to use Boston reno costs ($25k-$35k per unit for light reno). Material costs are the same as Boston and are likely half of the total project cost, so even if labor is 30% less, your still paying 85% overall of Boston costs. 

@Shane Burlingame

I was laughing pretty hard at 
"It seems to me that each time I run my analysis, the maximum allowable offer is often about half of the list price."

Sounds about right. Patience? Real estate cycles are a documented thing. At some point having cash at the right time is going to feel really, really good. When money is cheap, your money is worthless, but when money is expensive ...just ask Buffet - I think he's been hoarding...

I am hoping to buy operating properties at 100x monthly market rent (not even considering in place rent) - but I see most property in Boston asking for around 140x to 160x. And that's not taking into account renovating these places. I could pay more than 100x monthly rent when rates were around 3%, but at 6.5% I need a at least a 1%-2% cap rate spread over my interest rate. 

@Sean Kelly-Rand

@Justin Chan

Not so much advising clients as using realistic numbers and expectations. 

Use market rents for your market. Don't just choose the highest rent comps...choose the most accurate comps. 

Ask around for actual renovation costs from repeat builders. To repeat Sean, if I could gut for $150k I would buy everything... a true gut costs much more. I am around $125k-$150k psf on two recent renos (not 100% gut but almost - BEFORE and after at AFTER at 97 Moreland). For a 3000 SF property expect to spend around $400k on a real gut. 

For a clean up (painting, new kitchen cabinets / counters, retiling bathroom and finishing floors, new appliances) you can do perhaps for $35k a unit. However, depending on the property condition you might need to consider a lot more than that as the property has so much deferred maintenance that your operating costs will kill your profit. Properties in ****** condition cost a lot to operate (unless your are very handy or have a handyman who is a jack of all trades.) 

Look at real operating costs besides just your mortgage. I pity anyone who only considers PITI.

There are some taxable benefits that you can't find with stocks or bonds - so you can take that in consideration when you are comparing income streams. 

Real Estate is both and asset and a liability...