All Forum Posts by: Nick Noon

Welcome to BP @Kevin Degnan

I am from Chelmsford and am looking to start my investing portfolio as well.  I am looking to owner occupy a multi for my first investment and then maybe new construction/rehabbing after that to buy and hold.  

I am planning on going to the Chelmsford REIA meeting on Wednesday. I have never been to one but am hoping to meet people in the business to see what's out there.

You can find a ton of information on this site and 99% of the people are here to help you along the way as well and can answer any question you have.

There are a couple good posts on here about LLC's and to get one or not. The consensus I have seen is that a lot of people have them, but there really is no need to if you are just starting out. I think there are a lot of people on here that believe having an LLC is a false safety net, since you can be accountable peronally even as an LLC. And yes, I hear it is hard to obtain financing from banks when you're doing it as an entity....but there are also other banks who only loan to LLC's.

Ask around, you can get some good information.

I'm with @Kyle Penland

Doesn't sound like a good deal at all for all the reasons he has mentioned. CapEx and vacancy rate being your biggest issues. Who's paying the Sewer, Water, Gas, Electric? Property taxes?

Just very very quickly looking at the numbers....your negatively cash flowing $450/month.  

You would need a P&I payment of $400 at a minimum to have it be worth diving into the numbers any deeper. AKA...buying the house for $80,000 +/- or putting down a larger down payment...but then you would look at your ROI.

Should be better places to invest your money.

When I say "not that I would do that"....I mean take out a 25 year loan.

I am going to be taking money out of my 401k as well for a down payment.  The others are correct in saying that you can only take out half of your balance.  Although I would clarify that by saying you can only take out half of your VESTED balance, meaning if your husband is not fully vested (usually a 5 year employment period) and your husbands company has made contributions (matching/bonuses) then you will only be able to take 50% of your VESTED balance out up to $50,000.  

Also, like the others say, make sure he is planning on staying there during the life of the loan.  I would imagine that his 401k has a website that he can log onto and model a loan on.  My company uses Alerus and i can log on and simply model a loan and they tell you exactly how much you can take out.  I can take a loan out and pay back between 0 and 25 years for a residential loan, and like the others have said you pay the interest to yourself.  This is all tax free mind you.  Not that I would do that as I would be losing gains on my money in my 401k.  

Now...should you do it?  I guess, let me ask you this:  How much is he getting for a return on his money in his 401k?  I have been getting around 8% annualized on my portfolio which i think is average for most people.  With a buy and hold you should be doing well above that percentage if your doing it right...and that should even be your marker when you run the numbers on your property investment.  Is your money better off in a 401k or on the buy and hold property.  They are both investments, and typically you can make a better percentage on a property investment.  Not to mention you pay the money back to yourself over time anyway so its a double win.  

And your doing this with all pre-tax $$$.   

Can't see why you shouldn't.

I think property management is like having a pet.  Strict training in the beginning and then reinforcement of training from then on.  As soon as they start running it "their" way they will keep doing it. 

@Rob Beland

Although I am no professional and don't know the in's and out's of MA law, I think you should be able to cut in submeters into the lines.  These would most likely be BTU meters.

I just finished building a 315 unit project in Boston and we actually put a water submeter in every unit to measure their water consumption.  These are private meters that "we" own and are not provided by the utility companies.  Basically the owner gets the bill from the utility company and pays the bill, then they use a different company to take in the data from all the submeters collected from the BMS system to write their own bills to the tenants to get reimbursed.  

We did not do this for gas for the simple reason that this was a heat pump job and every unit had their own heat pump to regulate temperature by use of condenser water.  Theoretically they could put a BTU meter at every heat pump and measure the amount of thermal energy going into the heat pump, but they figured it was more cost efficient to just build it into the rent.  (It would require a hell of a lot more low voltage wiring and BMS points)

You mention that you have 6 "zones" controlled by thermostats, which doesn't technically mean you have 6 units. If you have one thermostat in a one bedroom unit and you have 2 or 3 in another unit, this is where you are going to have to develop an algorithm to solve the cost each tenant owes.   For example:

Unit #1:  Thermostat A

Unit #2:  Thermostat B, C, D

Unit #3: Thermostat E and F

Unit #1 would owe the BTU readings on Thermostat A, while Unit #2 would owe BTU readings on thermostat B + C + D.  

Basically you are going to have to convince the tenants that you are being fair and charging them for their portion as you are basically their "utility company".  I would professionalize the bill and put the hard data on it from your utility bill.  This would be different if you had House meters (from the utility company) that you could just put in their name, but as you said this would require a boiler for each unit.  This will also get interesting if there are any common areas that are being conditioned from one of the thermostats that you are making the tenant pay for (i.e. a common hallway or staircase)

Again don't quote me, but this is my experience with large commercial projects that I have built. 

Let me know if this makes sense.

I'm not sure what the market is like in other areas, but I am finding in my area (northeast MA) that multi family properties are going very quickly.  Properties are quickly going "under agreement" soon after being listed.  I think with the low interest rates that people are starting to buy property instead of rent.  I feel like if you don't evaluate the property within a few days and make an offer you've lost it; especially the homepath properties.

I was talking with my father's fiance who is a real estate agent for Caldwell Banker and she was saying that they are waiting until after Easter when the snow is melted to start listing some of their portfolio, although she sells in a higher price point market where homes go for between $700,000 and $1,500,000.  

Just wanted to see everyone's take on the market and what they are seeing as far as how fast cash flowing properties are going.  

Hey @Brendan

I've been in chelmsford most of my life and currently live here renting.   My gf is now carrying my child so we are looking at buying a house.   She actually just signed up for a class to get her real estate license so we can hit it from both sides.  We have both agreed to try and get a multi family to start our investment portfolio.   Looking for one in the lowell area currently.  

Good luck in the future. I am planning on attending the REIA meeting in chelmsford in a couple weeks to meet some other investors

Hey johnny,

I am a "pre invester" myself living in chelmsford currently. I grew up in the area as well and am looking to house hack in lowell in the next couple of months. I also have been doing construction my whole life and am currently a PM for a large GC in Boston so it sounds like we have a lot in common. I have been keeping my eye on lowell multi families and they are going on fast. The market seems to be flooded with the low interest rates that are available so properties are staying on lono so you have to move fast. I am hoping that after the Snow clears and the weather gets better that a lot of properties will start hitting the market. I have not been to any REIA meetings yet, but I plan on going to the one in chelmsford which are the first Wednesdays of the month. Sounds like it's a good thing to do according to everyone on this website so I am antsy to check one out.

good luck on your future endeavors and maybe I'll see you out there sometime.

Okay, yea that's what I was planning on doing.  I just wanted to make sure there wasn't something I was going to do that was "frowned upon" or illegal in the real estate business before I starting making offers of higher values to get closing costs. 

As always, thanks for the help!