All Forum Posts by: Steeve Breton

@Ben McBride 

We're neigbors and I've had 3 small multis in Framingham for a few years now.  Good market.  I've wondered about Waltham but haven't been interested enough to pursue it.  Connect w/ me so we can plan a coffee/lunch meeting.

@Jacob Pereira, I invest in other people's rehab deals via LLCs and they always wire the profits to my account as they wind down the LLC. They then send a me a 1099 at year end. Pretty simple. Your tax guy just includes it as interest income like you get from the bank (regular income).

Did you end up creating the LLC and operating agreement?

It's been a couple of months, how's the deal going?

@Bhekizwe M. Please read through the 3 pages of responses on this post. 2% is possible in lower price point, blue collar, midwest markets. Here in the Boston area where values are much higher it is pretty much impossible to hit 2%. We consider 1% to be very respectable on a $300,000 duplex. The should still get you aprox 10% cash-on-cash return. So do a full cash flow analysis on a few properties in your area and you'll get a sense of whether you're in a 2% or 1% or X% market. Then figure out what that % needs to be to meet your cash on cash (or ROI) targets and go from there. Good luck to you!

@Henry Lorrainegood info on the Boston metro west area.  I've lived in Natick now for over 15 years and love it. So convenient, great schools, down to earth people even in the upscale neighborhoods, and the it's a well run town operationally and fiscally.  The commute to Boston/Cambridge is about an hour each way during rush hour (6:30-9 am and 4-6:30 pm) if driving.  Natick, Framingham and Ashland have good commuter train access as well.

@Aaron Stone downtown Framingham, like many towns is very blue collar.  A bit more so as it is the largest town in the US ... should be a city.  Immigrant population is mostly Brazilian and a smattering of other Central American countries.  If living in Framingham your best shot at flipping may be Worcester which is about 20 min west.  Best of luck!

Also, I have apartments in Framingham.  If you plan to rent I'm happy to give you the scoop on neighborhoods and rents.  I do find that Rentometer.com is fairly accurate here too.

@John Matthews In my examples above the CoC is around 12% but the total returns are in the 25% range once you factor in amortization and 1.5 to 2% appreciation. Not that you should count on the latter. That said, I understand where you're coming from. CoC is the only thing that matters when you're trying to replace your income with rental properties. You might consider flipping or wholesaling to generate some income while you build your portfolio.

PS.  @Nancy L. West of Boston properties generally retail at just under 1% Rent-To-Value.  I won't buy unless I can improve it to a little over 1% RTV.  Not to get into it on this post but RTVs for higher value properties tend to be lower... but then many of your expenses are also a lower % of your rental income.

A lot depends on what you really want out of your investments based on where you are in your life and possibly depending on your financial plans (early retirement, etc). In my mid 40s with a fair amount of $ in the stock market I started to take my stock profits and invest in 3 family properties around Boston. I stick to B neighborhoods. Putting down 20% ($75-80k) and getting low teens for CoC. That's with streight up 30yr fixed and my int rate is a bit higher because I hold the properties in an LLC. That return is solid for me. Plus:

1. It's much safer than the stock market as long as you get educated and do good diligence on your market and properties. 

2. On a $300k property the loan amortization is substantial, as is appreciation (even at 2% inflation)

3. I use the passive losses (depreciation) to offset some of my passive income (i'm a passive partial owner of a small business)

So, for me low teens CoC is great. The fact that I can do it in my back yard is also important to me.

Cheers, Steeve

Hi @Chris C.  what are the Rent to Value ratios in the Troy/Watervliet/Cahoes area? Curious how it compares to the Boston suburbs.

Oops. Premature post.

Brian, I'm comfortable with lending from someone I know in this situation as it isn't a favor to me but rather an offer I am making that benefits us both.

I just want to make sure there aren't other aspects of doing the deal this way that I may not have considered. I don't want to gush over the cash flow or CoC returns and miss potential pitfalls.

@Brian

Hi All,

I may be looking at my first Creative Financing deal.  I have an offer accepted in the Boston area for a Mixed Use 4 unit building.  I have a couple of commercial lenders willing to work with me. Alternatively, I also have a retired friend who’s looking for a stable return of 5% on his retirement funds. Below are the two options as I see them along with the numbers.

Background: I’m a buy & hold investor. I’d like to hold for the long term to generate income in retirement (20 years away) but also happy to use the income now to help put my kids through college. I have 2 other properties with fixed 30 year debt on them and both producing good cash flow.

My Question: In a nutshell option 2 allows me to put less down, increase cash flow, and reduce interest rate risk. The downside is that I’m not building equity via a loan amortization. Any other aspect I should consider?

Option One – Commercial Loan:

• Purchase price $395,000
• $98,750 (25%) down, 25yr amortization at 4.5% with rate adjustments every 5 years.
• No limit on how high the rate can jump.
• Yearly cash flow before taxes = $11,500 … after taxes = $9,350
• Cash on cash return on before tax cash flow: 11.5%

Option Two – Friend's Retirement Funds:

• Purchase price $395,000
• $79,000 (20%) down, and an interest-only loan set at 5%.
• I would probably build in 5 year renewals where the rate can go up by no more than 1% or 2% base on what the mortgage market is doing.
• Yearly cash flow before taxes = $15,500 … after taxes = $14,100
• Cash on cash return on before tax cash flow: 19.5

Other Notes:

• Rents are below market on this property and I’ll be doing light paint & carpet work. I think the value will increase by at least $50,000 in year 2. This should give me plenty of equity for refinancing the property down the line.
• I believe I could get 15 years out of this retirement money and this could open the door to more retirement funds on future deals.

Thanks
Steeve