All Forum Posts by: Anthony Thompson

Also re: tenant laws, if you are curious Jim, you should definitely read (or keep close for reference) the Rhode Island Landlord Tenant Handbook. The laws themselves are at RIGL 34-18 Residential Landlord and Tenant Act. (Generally, the RI Landlord Tenant Handbook just translates the laws into more understandable, human-readable text.)

Jim, I think you hit the nail on the head with not counting on a lot of appreciation, but a lower entry price making it much easier to get into deals than Boston.

It always comes down to the #s. A 15% return on 15K down on a 150K house in RI might be generally better than a 6% return on 45K down on a 450K house in MA - unless you have a lot of $ you need to "put to work", then it might be better to do a few bigger deals at a lower return than many farther-away deals at a higher return.

(I'm not saying you can easily get a 15% return in RI, I'm just speaking hypothetically about #s.)

I'm definitely a #s guy, but there are other factors to take into account with real estate as well. We pay for those tax benefits (depreciation) with illiquidity and hassles - your stocks probably never call you up about their broken toilets or sue you.

As @Colleen F.  pointed out, generally speaking the laws are a bit more landlord-friendly in RI but I wouldn't let that be the deciding factor. (I wouldn't say that RI laws are landlord-friendly, just that my understanding is that MA laws are more tenant-biased and RI laws are more even-handed, so relatively speaking RI is better as I understand it.)

For you personally, I'd say if you're new to landlording then definitely stay local in MA while you learn the business. I know that there are people that hold properties long distance but to my mind that's more of an "advanced" strategy, once you know the business and can better manage whoever you have on the ground managing things.

(And then, if you were going to go long distance anyway, I'd say you might want to pick an area with better economic fundamentals than RI.)

Also as Colleen alluded, it helps if you have some other reason to be in RI besides only a property or two. One of the reasons I recommend new people stay local is because, especially at the beginning, you're going to be over at your property for one reason or another, more often than you expect. Having to do that for something that's far away is a little less painful if you have some other reason/benefit to be in the area (e.g., family).

The main site for RI properties is riliving.com so for your question of "would it make sense to look in this area", I'd say find some properties in the area, look at their asking price and what you'd likely have to put down for them, and then look at Craigslist for rental comps. For several example properties, you should be able to answer your own question of "does it make sense".

If you don't know how to do this, there are plenty of resources here on Bigger Pockets, and you should definitely learn how to analyze a rental property before buying one! I'm sure if you have specific questions about the analysis you could post here and get help too.

Kevin, I don't have personal experience with the program you're describing, but over the years I have seen many clauses like that.

There are two aspects to the issue: 1) What can you get away with? and 2) what should you get away with?

For the first, I guess you have to look at the details to see how the requirement is checked/enforced. For example, is there some kind of "affidavit of owner occupancy" or something else that they want you to submit with the offer. If so, read it closely and decide if you're comfortable with signing it.

For the second, only you can decide whether it's OK to, essentially, lie to the listing agent and owner (bank) about your intentions.

However I would also ask, if everyone decided to do that, where would that leave the genuine owner-occupants who are trying to buy an affordable first home they can add value to over the years? (i.e., there may be a reason for the owners-only-15-days policy besides bank capriciousness)

But now going to the page results in "404 ERROR"?

Perceptions up here in RI are that gas is preferred, oil is not really liked, and all-electric is the worst. So there is a strong preference for gas for both renters and homeowners, from what I've seen.

I have to wonder if that may change, though. One economist recently said that he expects by 2050 children won't know the smell of gasoline, i.e., we'll have moved off of it as a main energy source. And I've always thought, isn't electricity the easiest to generate through alternate means, and to transport/store/use?

I believe there will be changes in the energy landscape (see Solar panels could destroy US utilities - according to US utilities) in the next few decades. However unless you're an expert in that area, even if you have an idea of the trends, getting the timing right is difficult. (Related: We all know interest rates will rise sooner or later, but exactly when is anyone's guess)

So the only thing you can really do is choose based on your customers' preferences today, since "money today is worth more than money tomorrow" anyway. Today, in my market, that seems to be gas. If that changes 10 years from now I'll have to adapt - with lots of other people.

Rick, I'd suggest going to any of the RI or Mass groups mentioned in this recent related thread, and then talking to some of the agents present until you find one you resonate with: https://www.biggerpockets.com/forums/432/topics/16...

Abou, as Jason and Colleen said, there is a RI real estate investor group (http://www.rireig.com) and also several Mass groups - the only one of which I've gone to is Black Diamond REI (http://www.blackdiamondrealestateinvestors.com/). I believe RIREIG meets monthly (third Thursday of the month) and Black Diamond twice a month (Tuesdays - see website for schedule).

I've also been investing in RI since 2005 and would be happy to meet with you and/or your partner sometime, just send me a private message. My partners and I are cash buyers, if you're looking to wholesale (as many new people do) or I can also give you my thoughts on buy-and-hold as that's my preferred long-term strategy.

Robert, since your investor said, "I want to Buy REO's", your best bet would be the MLS and since your signature says you are already a broker in RI you should already see them.

I think there is even an REO field in the MLS you can search on. Same thing with "price reduction"s.

For his other criteria, amazingly I am also looking for 15-20% profit margin. If I find a great deal like that and don't want it myself, I'll definitely keep you and your investor in mind.

If s/he is willing to go up to 750,000 for a single property there may be better appreciation opportunities in the 400K+ segment as I've gotten the feeling that there's a bifurcation between price-sensitive "bread and butter" homes (for the "99%") and price-insensitive "high end" or "luxury" homes, and that the demand/growth is much more in the latter lately.

@Ricardo M. Assume a hard money lender will want to see you come to closing with at least 30% of the purchase price (40% may be more realistic), and then will want to see that you have adequate funds for the rehab on top of that.

If you are newer to the game, the lender will want to see you have a sizable rehab buffer for things you'll miss. This is why I recommended a light rehab to start with. (Note that I assumed the $20,000 you mentioned was for the rehab money only, and that you also have separate funds besides that to go toward the downpayment to close.)

As for doing four flips/deals in your first year, do one and then get back to us on how you feel about rehabs and how many you want to do in the rest of the year.

@Ricardo M. Every deal is different, but yes you need to keep all of that in mind.

I was only referring to the rehab part of the deal structure, saying you should include a sizable buffer for extra rehab costs on your first few deals.

Things like closing costs and holding costs like taxes, insurance (vacant property insurance if you won't be living there), utilities, private/hard money interest, etc. are totally separate and need to be factored into your purchase price also - unless you like losing $ or working for free.

Oh and don't forget to include your PROFIT in your calculations - if you don't factor it into your purchase price, it won't be there when you sell.

Basically if you are going to "fix and flip", you need to (as Steven Covey said) "begin with the end in mind" and start with comparable sales ("comps") for similar properties (same area, same type of property) sold within the last 6 months, to determine "after repair value".

Then you subtract your closing costs to buy, holding costs including loan interest (I would plan for 6 months on your first few deals even though that's generally on the high side), your rehab costs with a significant buffer for error, closing costs to sell (including agent commission - don't kid yourself that you're going to sell it without an agent), and your desired profit.

That gives you your "maximum allowable offer", which should not be your opening offer to the seller/bank. That is a maximum, so you must expect push back / negotiation and start lower (5 - 25K lower depending on the size of the deal and how much you want.

It is also useful, and good practice, to do a "buy and hold" analysis even if you intend to flip it. Basically if the market turns (e.g., interest rates go up and buyers disappear for some time), will the property make or lose $ based on the $ you had to put into it to get it to rentable condition and the market rents for similar properties.

In all things, be conservative. Overestimate your expenses and how long things will take, and underestimate how much you'll get when you resell. It would be better to have it take longer to find your first deal due to being conservative, than to be too aggressive with your #s and lose $ and maybe be blown out of the game early on.