All Forum Posts by: Matthew Brenner

I am buying a similarly aged house in Fitchburg (1920) with updated electrical and plumbing and a newer roof. At the recommendation of others with experience in older homes, I am planning on 10% of gross rent for repairs and 11% for CapEx. Even with the house in good shape for an older home, I can easily see how this fund will get eaten up over time. Boilers will need to be replaced, the sewer lateral may need replacing some day, and structural elements (e.g. porches) will eventually fail.

You might not need 11%, because your building will pull in more rent than mine. My guess is that 8% might not be bad choice. Look at the systems likely to fail in the next few years and make sure that you are putting aside enough to cover them. 13% cash-on-cash sounds solid, but it's not 13% if you are hitting your emergency fund in the beginning.

Get advice from people experienced in lead mitigation and/or removal in the area you wish to buy. Do not listen to advice from those of us who do not work nearby. 

Again, you need to double check the lead laws for where the peppery is located. Scraping up chipping paint and repainting is not sufficient in MA, for example. Some people have gotten away with that, but the state requires more. Unblemished lead paint on moving windows, for example, is a hazard in MA. 

I want to say thank you to everyone for sharing their thoughts. Here are my takeaways:

Lead is always there. Maybe not strictly always, but often enough that you need to be aware of it. This matches my research and gut feeling, and it flies in the face of every real estate agent I have spoken with who likes to say, "It just as easily could not have lead."

At least one state is even more strict with lead paint than Massachusetts. Wow, I do not envy those of you who must buy older homes in Maryland. That said, there is still no "quick fix" for lead in MA, like removing flaking paint. We are held to a fairly strict standard, and rightly so. Kids don't need that exposure, and we cannot choose to not rent to families.

I can use a lack of lead inspection ("unknown" status) as a bargaining tool. Having a rough estimate of $3k-5k per unit plus the exterior gets me far ahead of my previous understanding. I see that, combined with MA's strong lead laws, could be used effectively.

I had so far limited my interest in properties to those that already have a letter of compliance, but that is difficult in my current budget. I now have the intellectual and negotiating tool to broaden my search while mitigating risk. Thanks for your collective input!

There's no harm in working with the housing stock you have available. Wait for that great deal.

Housing stock depends, in part, on your state. In Massachusetts, for example, triplexes have fewer rules to follow than four-plexes. That means you see many triplexes and fewer quads. Triplexes are so common that when I refer to a "Worcester three-decker", even my non-invester friends know the floor plan and building style I mean. 

Tune in for one of the webinars. They frequently give out a promo code then.

Not all of Massachusetts is like Boston or inside of I-495. Get out to central MA or further west, and there exist plenty of deals.

Personally, there is no way I world accept this loan. Having just worked with a broker on standard investment loans, I could put 25% down on a triplex and get 4.25% on a 30 year fixed. That's with no points and no requirements on where I do my banking. If you can qualify for a standard mortgage, I suggest you shop around for those. 

When is it worth purchasing a rental property when the presence of lead paint is "unknown"?

There are cities in MA where nearly every buy-and-hold investment property was built during the days of lead paint. The gross majority of these have not been tested. I am under the impression that lead paint remediation can easily run $30k or more. but it is hard to find exact numbers.

How do you handle lead paint risk in your investments?

Thanks for taking the time to reply!

Know your numbers well and get even more creative in meeting the potential seller's needs. If he does not want to sell, why? How can you help him?

Does he want his grandkids to have access to the property like his children did growing up? Work with him to figure out how much he will save by not owning the property. Offer to rent it to any of his children or their spouses at $XXXX per week for Y weeks per year where X times Y is less than or equal to the money he is saving. You might charge other people $300 more per week to rent, but this could be a way to get the deal done if the numbers still work.

Is Fluffy, their favorite dog buried on the property? Include a clause that you will not dig up Fluffy's resting place while you own the property.

Assuming the property is large, a solution could be as simple as giving him deeded access to walk the property at his leisure so long as he stays 50' from the house when it is occupied. He can visit whenever he wants and relive his memories.

Good luck. Remember when you call that you are doing this to get a property, but you also legitimately want to help him. If he rejects you, let him know that he can call you at any time if he changes his mind. Big decisions sometimes take weeks or months to gestate.

After a year in the house, you can move and get an FHA loan on a new property, assuming you meet the requirements for another loan (debt ceiling, credit, etc.).

If you don't want to wait, there exist 20% down loans on investment duplexes if you shop around. A mortgage broker may be able to help with that. If you cannot get 20% together, then it may be time to start driving for dollars.  Look for single family homes that may allow for creative financing.