All Forum Posts by: Patrick O'Connell

Thank you all for your replies! I will take all of these thoughts into consideration when making my decision.

Thanks again!

Best,

Pat O

Hello BP community - This is my first post where I am reaching out to the BP community for help and could use some advice on the situation I am in. I am an avid BP listener and really need to start leveraging this great community/platform more.

My story: I house hacked a duplex 2 years ago in a city outside of Boston (Metrowest). I bought it with 10% down, lived in it for almost 1 year and then moved out where I now rent out both sides. Based on comps, the property is now worth $75k more than I bought it for. I have great tenants who pay on time (knock on wood) but I barely break even in cashflow. The cashflow considers the mortgage (P&I), Insurance, Water, Vacancy allowance (5% of rent), Escrow payment, Repairs & maintenance (4% of rent), CapEx (4% of rent), an association fee since it is on a private driveway and a mandatory plow fee (due to the private drive). Buying on a private drive was my first mistake but it is what it is on my first duplex purchase (live & learn).

I could very well see this property continuing to appreciate due to the location and history of real estate in this area (although I know I should not factor in my numbers).  Brandon and David always seem to go back and forth on appreciation vs cash flow.  This property in particular falls under the appreciation side.

It is also important to note that I will be leveraging a portion of my HELOC (~$20k) I was able to get on this property to go in on a deal with a business partner on a 3 family where we are projecting 10%+ in returns.

The question I have is, what would @Brandon Turner do?  

Would you keep the property & let it run its course? Re-evaluate in a couple more years - Reap the benefits of my tenants paying the rent/premium, tax write off, etc? Could also use more of the HELOC to invest in other properties.

OR

Would you sell and invest into another property with higher returns? (And not purchase a property on a private driveway for starters...)

OR something else?

Interested in hearing your thoughts!

Also - Please feel free to connect! Looking to leverage this platform a lot more!

Best,

Pat

@Derreck Wells - Thank you for the info! Waiting to hear back on an offer - Always good to factor that cost into the numbers.

Thanks @Tim Upton! 

@Tim Upton - Looking through Biggerpockets threads to see how this typically goes for multi family owners in MA.  How did this turn out for you?  Do you mind me asking what the cost was?  

Thanks!

Pat O

Walter - Please excuse the delay!  It took 3 weeks initially to move in due to taking out the carpets and then putting in the laminate and painting.  I did this all on the weekends due to having a full time job in the city at the time.  I was fortunate to have my parents take me in during that time but this is what I needed to do to make it "Move In" ready.  The cost of having someone install the floors was $4k however, the cost of me installing them was waiting for 3 weeks...Up to you on how you want to do it.

All of the other renovations I did over time while I lived there for the 2 years - I really stepped it into high gear during the last 6 months though.  

As for figuring out the costs, I was big on spread sheets - Looking online for prices and figuring out what the budget would be - Also keeping in touch with my realtor to see if it would be worth it in order to create value.  The little things add up so make sure you include them in your costs.

I had an idea that I would get high $300's when I bought it - I just knew it was a good buy when I got it for under $300k and saw the same style houses going for high $300's at the time.  It's crazy how high those houses are selling for now.

I'm glad I did not over analyze for this deal which pushed me forward to just do it however, analyzing numbers better in the future will definitely help me.

Hope this was helpful!

Best,

Pat

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $295,500
Cash invested: $45,000
Sale price: $401,500

"Live in Flip" - Put 10% down, wrapped some of the closing costs into the 30 yr fixed mortgage, invested about $15,000 into rehab costs. Hopefully you can guess which pictures are the before and which are the after. Also, waited 2 years so I would not have to pay capital gains since it was my primary residence

What made you interested in investing in this type of deal?

This was my first time buying and wanted to start with a "Fixer Upper" I could build equity in. I was renting in Boston and looking to get back to Framingham which is my hometown. It was the best of both worlds to be back around family and have this opportunity - Plus my father is pretty handy (Master Electrician) which makes for cheap labor as long as there is a Ice Cold beer around for after...

How did you find this deal and how did you negotiate it?

I used my agent to find this deal - Diane Sullivan (Framingham/Metrowest MA). The asking price was $320k and I held strong at $295k. I also used the Inspection Report to negotiate ways to pay down the closing costs.

How did you finance this deal?

Saved up enough to put down 10% for a 30 yr conventional loan. I even wrapped some of the closing costs into the mortgage however this effected the rate. (Increased .25%)

How did you add value to the deal?

Ripped out the Carpets & put in New Floors
Baseboard
Paint
New half bathroom
New Vanity and Toilets for the full bath.
Mostly Cosmetics... Also added new windows and new front door.. I took down a tree in the back yard which really opened it up as well as some dead trees in the front to help the curb appeal - I truly think this added value. There is a beautiful Red Maple which sat behind those dead trees and by taking them down, it really let the Red Maple show.

What was the outcome?

I ended up selling the property January 17th 2019 - I bought on Jan 15th 2017 meaning I do not have to pay taxes. I used the money to then purchase a duplex which you can see on my page as well as pay off my truck so I would not have additional monthly payments.

Lessons learned? Challenges?

Always factor in closing costs! Being new to this all 2 years ago, I was in shock when I saw a bill for $8k.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Agent - Diane Sullivan (Framingham/Metrowest MA)