All Forum Posts by: Anthony Thompson

On further thinking, now knowing that it's a 2F and a SF on one lot, it's more apparent why comps would be challenging.

I would approach it as, who is more likely to buy such a property, an investor who will effectively think of it as 3 units (albeit across 2 buildings), or a regular homeowner? I would think the target buyer would be much more in the investor camp.

So if it was me doing the comps, I would try to find 3-family properties and see if I could establish a rough value from them, and then discount by, say, 10-15% for the fact that 2 buildings on one lot is unusual and there's arguably twice the maintenance (two roofs, two heating systems, etc.). For my own purposes I'd probably lean closer to discounting by 15% but an appraiser might take off less.

Guesstimating these adjustments is where the "art" comes from, though appraisers do it so often and have much more data & experience making those adjustments that it's a little more science for them I think.

And remember that an appraiser will give the income approach more weight in a multi-unit situation like this, so you should too. I'd use sales comparison (3-families with a bit of a discount for multiple buildings) as a backup or secondary check on the # you come up with from the income approach.

@Alexander Zurn thanks :)

Assuming you are serious about the property, $25 would be worth it to me to see that, yes. Though if you wanted to hold off until you get comps and some reasonable assurance it will appraise out I'd understand. But if it was me, since you're already under contract I'd just get the zoning cert.

It sounds OK the way you describe it. I'd just want to be sure that you can actually rent to 3 unrelated parties, i.e., that the SF cottage isn't some kind of "in-law" dwelling. I'd guess not since it's a separate structure but it's worth asking.

Even if you intend to occupy the cottage now, at some point in the future you may want to move out and rent it, and you want to be sure you can do so - or at least know ahead of time if you can't and factor that in.

I'd do the rental comps on a per-apartment/unit basis, because that's how the appraiser will do it. If you can get more down the road by renting out per-room to students that's just gravy for you.

Though I will say, others have told me that renting on a per-room basis can sometimes be more management headaches. But the folks who told me that were in Providence, not Bristol, and I'm pretty sure it wasn't students so you'll probably be fine.

Alex, I've run across properties like the one you describe a number of times over the years, though I couldn't point to a specific one at the moment.

The first thing that pops into my mind when I see a tiny 3rd floor like that is, make sure it's a legal 3 unit. Very often those kinds of properties are in fact legal 2 units with an illegal 3rd someone put in somewhere along the way. Many a property owner has bought a "3-family" only to find out later that it was actually legally only a 2.

Legal use is determined by the building department, not the tax assessor, so you can't go by the # of units you see on the assessor website. You'll need to contact the building department for the town and specifically say you're trying to confirm the "legal use". This may be something you'll need to do in person, and I find I always get farther when I go in person anyway.

Every town is different, some will want you to fill out a form and pay a small fee (and wait a few days) for a "zoning certificate", while others will just pull the file drawer and give you a copy of the last legal use on file which is still the current legal use as far as they're concerned.

On the rents, I don't usually look at it as $X/bedroom. Usually I find there's a certain base price for a 1BR apartment (e.g., 800) and then a markup for more bedrooms (e.g., 2BR might be 1050, 3BR might be 1200). You kind of have to do rental comps for each BR configuration and you'll have to make adjustments in your mind for the comps of course (like this one was just redone, this one's bigger or smaller, etc.).

If you really can't find good rental comps and are worried about your #s you could walk into a local realty shop somewhere in Bristol that does rentals and have a conversation with one of the newer agents. Basically explain you're buying a property and looking to get a sense of rents in the area, and you may be looking to build a relationship with an agency for filling future vacancies (the carrot that will justify their spending time helping you).

Usually you'll get a newer agent who's on desk duty and who's hungry to build their client base, and they'll be happy to help you. They may be young/newer but they'll still probably have enough market exposure to help you with the rental comps.

The "income approach" is leaned on more heavily for appraising multi-family properties than the sales comparison approach so having good rent #s and expense #s (as best you can estimate) will be important.

I'm guessing some Bristol agents will be on BP and reply with their willingness to help you get recent comparable sales, but if not and all else fails you can send me the property info by PM and I'll see if I can assist with finding some comps. (Remembering, of course, that doing comps is as much of an art as a science and there's always a margin for error - that's why appraisers call it an opinion of value.)

Ketan, that's a good idea. If you don't already know about it, https://ripropinfo.com has links to all the assessor pages and some other helpful links on the bottom of the page too.

We've gone from selling most of our deals (wholesaling) to holding on to most of them (buy and hold), depending on where the market cycle is; right now we're holding on to most of the deals we run across.

The ones we don't hold onto tend to be in bad areas. Now, if you're willing to buy in bad areas I think there's a lot more deals available. But, few people want to hold properties in bad areas (including, for the most part, us).

I meet with a lot of people and the usual way they end off with is, "Keep me in mind if you find a deal" but if it's a great deal we'll probably close and hold it for ourselves, if it's a more marginal deal we have a short list of people who have bought from us in the past who we're likely to call depending on the area.

We don't want to bring a parade of people through each property, we just want to get it done and move on to the next one. So there's a disincentive to branch out to new buyers if we don't have to and as long as we feel our buyers are offering fair prices.

I guess the best advice I could give would be to leverage your existing contacts/network. Try checking in with the agents/brokers involved in the properties you've already closed on. After all, they know you've closed in the past, that means you already have some credibility with them, compared to someone they don't know calling them and asking to be put on their email list for any new deals.

Also, don't underestimate friends and family. They may be very willing private lenders for your deals, or they may know about some distressed properties you'd never encounter on your own.

One of the things they tell new real estate agents is tell everyone you know what you're doing, and they'll make you list out everyone you know so you realize just how many people it really is. Besides your network being bigger than you probably realize, I think the point is that you may have more credibility with those in your network than you might think, and they may be much more willing to help you than you might believe or expect.

Ketan, in addition to @Russell Brazil's good advice, if I were you I'd research properties that have been owned for 10+ years and try contacting the owners directly. It may be more work, but some of your best deals will come from talking to and negotiating with sellers one-on-one. It does require a lot of persistence though - you do have to kiss a lot of toads before you find any princes.

For what it's worth, the fear never completely goes away. At every single closing, I'm reminded of the old maxim, "the two happiest days in real estate are the day you buy a property and the day you sell it" - and usually the seller has the wider grin.

No matter how good the deal, there's always a hint of "buyer's remorse" - you always wonder, why did I get such a good deal? Is there something hidden I didn't catch in my due diligence, is something major about to go, etc.?

The best way to reduce it is to be very thorough in your due diligence (investigating the property and situation), but it never truly goes away - at least it hasn't for me!

Alan, welcome to Bigger Pockets!

There's nothing to help getting over fear like taking action and having some success with it, even if only small; sometimes you have to choose achievable goals just to get a sense of progress and build up some momentum.

For example, you could set a goal to send out 50 direct mail pieces, or spend 2 hours driving neighborhoods close to where you live in an effort to get 10 "for rent" numbers to call to see if the owners might be interested in selling.

If you have something you genuinely think is a deal but don't feel comfortable pulling the trigger alone, you could always bring a partner in for the first few until you feel comfortable doing it yourself.

The usual rule is "if it's a deal, the money will find you", which is a way of saying in this market if you have an actual deal (substantially below market) you shouldn't have trouble finding a partner.

It's great that you went to RIREIG, and you probably know they meet monthly. If that doesn't sate your appetite I know there are a few other groups in Mass that may be of interest such as Black Diamond REI.

And of course, if you have specific questions you're welcome to post them here on BP!

Adam, welcome to Bigger Pockets! It's wonderful that you already have some experience with your existing 2-family and want to expand. Having gotten over the "first property" hump, your chances of meeting your goal are a lot higher so congratulations.

I'd also recommend checking out one of your local real estate groups such as Black Diamond REI in Massachusetts or RIREIG in Rhode Island.

At the very least drop in every few months or so - besides the networking opportunities, there are often very valuable updates on new or proposed legislation affecting landlords.

The general public knows that we're running a business when we rent out property, and expects us to know all the laws affecting us (and has no compassion if we don't), so being a member of a local group or visiting periodically is one way to try to stay current with those laws.

Again, welcome and congratulations!

Evan, I'm not in front of my books at the moment but generally rentals don't make a ton of cash flow. It would be very hard to have rental income as your only source of income, unless you owned a large # of units (well into the double digits).

I used to take money out of my buildings, but after year after year of "something" happening with the properties I learned it's best to leave most of the money in the property as reserves for "must do" repairs or "should really to at some point" improvements.

The real benefit of real estate, compared to other forms of investing, is appreciation, with an important secondary one being the tax benefits (offset up to 25K of ordinary income with rental losses, 1031 exchanges to defer tax on gains when selling, etc.)

That's why people often call real estate a "get rich slowly" scheme. It's not necessarily the easiest way to quit your day job, but it is a great way to build up a retirement account and/or education fund for children.

@Je C. welcome to BP! There are certainly a lot of great resources here.

I think you'll find, the more specific a question you ask, the better folks can help you.

I'm not familiar with southern CT but my guess would be it gets a good amount of spillover from the NYC economy (at least judging by my memories of Metro North rides :)

For Rhode Island, you might find Pawtucket (colloquially known as "the bucket", ha ha) better than Providence as it's closer to Boston and the taxes aren't quite as bad as Providence.

My other standard advice is to research/attend a local real estate investor association for the area. Again I don't know southern CT but in RI there is at least one good one, the RI Real Estate Investors Group (which I've been a member of for the past 13 years).

Good luck and as I said, if you have specific questions please feel free to post them and we'll try to help.