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Are you a current or aspiring landlord in Massachusetts? No matter how many years you have in the rental business, fully understanding your local market is one the most important thing you can do to ensure your long-term success. Receiving regular market updates will help you determine when’s it time to buy and when it’s time to sell. It will also allow you to see what your apartments rent for in comparison to your neighbors. Should you be increasing rents?
Here’s a preview of Roslindale’s multifamily sales and rental market statistics for the month of September.

Total Multi-Family Listings SOLD: 31
Average Living Area by Square Feet: 2,874.00
Average Listing Price: $532,735
Average DOM (Days on Market): 53.87 Days
Average Sales Price: $520,680
Average Rent for 1 Bedroom Units: $1,367
Average Rent for 2 Bedroom Units: $1,664
Average Rent for 3 Bedroom Units: $2,161
Average Rent for 4 Bedroom Units: $2,400

Want to get a FREE Sales and Rental Market Report for your specific area(s)? Just send a quick email to Contact@MandrellCo.com to receive your monthly report. In the title put the words “FREE Boston Sales Statistics” and in the body, add the up to 3 areas for which you’d like to receive data . Your name and email will be added to the next monthly reporting cycle. It’s that simple to stay up to date and ahead of the curve!

Please call us directly at 617-297-8641, for custom reports or questions above the data provided.
Report data provided by MLS Property Information Network, Inc.

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Are you an investor or are you in the business of speculation? Investors typically look for a cash flow return on their investment based on a sound cash flow analysis. They purchase a property when the projected ROI make sense compared to other investment options. Buying a property with little to no cash flows and hopes of appreciation is called “speculating”. There are no financial predictions, but rather a hope that the market will continue to rise and you will make a financial gain the in the future. There are two main problems with type of investing which are as follows.

1. What happens when the market goes south? If the economy tanks and your property values decrease will you be forced to sell at a loss? An investor with a cash flowing investment isn’t affected as much by down turns in the market. Despite a loss in value, the investor is still putting cash in her pocket every month when their tenants pay rent.

2. What happens when the property needs repairs? If you’re investment isn’t putting cash in your pocket and you need a new roof where are those funds coming from? You’ll now be forced to dip into your personal funds and make a further investment into the property rather than the investment taking care of itself.

Want to know how to evaluate rental property in Boston? Watch the video above and download our Cash Flow Analysis. If you have questions about the form or the video, please give us a call at 617-297-8641 or email us at contact@mandrellco.com

Download the Cash Flow Analysis here!

 

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Understanding local rental rates in your Boston neighborhood is extremely important to your success as a landlord and real estate investor. There are three basic stages to any investor’s career, which are the buying, holding and selling stages. In each phase your knowledge about the current rental market will determine if you come out on top or not.

To give you an example, let’s assume we’re considering at a rental condo in Boston’s Beacon Hill.  When you’re evaluating whether or not the property is a good deal, an obvious factor is the potential rental income the property can generate. You must understand the Beacon Hill market, the tenant base and the length of time or DOM (days of market) of your average rental. It’s also a good idea to understand what your tenant base is looking for in a rental. Is the area dominated by families, single professionals, students or is it and older community? This knowledge will help you determine the types of finishes and improvements you’ll need if any.

There are many investors who’ve had tremendous success in the rental business and have been able to hold onto properties for a number of years. When these landlords eventually go to sell, they’re in a less than perfect position despite their past success. The reason for this is that they’ve failed to keep up with current rental rates in their markets. Often, landlords with long-term tenants will keep rents low despite the steady increase in values throughout the neighborhood. These landlords do this in fear of disturbing “a good thing”. They have a great tenant who’s been paying rent consistently and they fear of increasing rents would possibly disrupt that consistent flow of income. While this is a valid concern, what most investors don’t realize in that they are devaluing the property. The easiest way to put this into perspective is to pretend you’re a potential buyer and you’re considering two identical rental condos. The condos are identical in every way and they are both coming with the existing tenant base. If condo A has rental income of $1700, while condo B has rent income of $3200 (current market rate), most potential buyers are going to value condo B higher despite the fact that it’s identical to unit A. If we assume our Beacon Hill Investor owned unit A, s he would have to take a lower sales prices than her competitor selling unit B, not to mention all the additional rental income she didn’t collect over the years.

The best way to combat this potential scenario is to consistently monitor your local rental rates. Have your real estate agent send you regular reports like the one attached below. The report will tell you what apartments have rented, how long they’ve been on the market, and the average price  those rentals have rented for.

The example report is for a landlord in the Beacon Hill area. She has a 2 bedroom unit with 850 square feet. The report shows activity in the area for the last 3 months.

Beacon Hill 2 Bedroom Market Report

Would you like a FREE rental and sales market report for your area? Simply email Contact@MandrellCo.com with your criteria and we can have it out to you within 24 hours! You can also call us at 617-297-8641.

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5 Must Know Concepts For Boston Real Estate Investors

There are five basic real estate concepts every investor must understand and I’ve outlined each of them in the video below and text below.

 

Appreciation:
When an asset increases in value it is said to have “appreciated”. The opposite of appreciation is depreciation, which is the decrease in an assets value. I concept of appreciation is important to the “buy and hold” real estate investors because (typically) the longer and asset is held the higher it value. The increase in real estate values has usually kept pace or grown faster than the US rate of inflation, hence why it’s known as one of the best hedges against inflation. You can estimate your property’s future value by using a “compounding calculator” and choosing a rate of inflation. I like to use the rate of 2.5% which is relatively conservative.

Amortization (Debt Pay Down):
Amortization is the systematic decrease in your investment property’s debt. When you make your mortgage payment each month a portion of those payments decrease the principal balance of your mortgage and a portion will go to the bank in the form of interest payments for the use of their money. In the first 5-10 years of a 30 year mortgage the majority of your mortgage payments will go toward interest. You start to pay off more of your principal balance toward the middle and end of your amortization period. You can calculate your principal balance at a future date by using a mortgage calculator with an “amortization schedule” attached.

Equity Spread:
Your equity “spread” can be calculated simply by taking the value of the property at any given point and subtracting the debt on the property at that same point. When you first buy an investment property your equity spread is equal to your down payment, assuming you purchased the property at market value. To find your equity position at a future date in time, calculate your future value and your future principal debt on the loan and subtract these two number.

Cash Flow:
Cash flow is the money left over after you’ve collected all your rental income and paid all your rental expenses. If you’re renting two 3 bedroom condos and collecting $2000 from each unit, you have a monthly “gross income” of $4000 from your rental portfolio. If your mortgage, taxes, insurance, water and repair expenses total $3000 per month you have a surplus or “cash flow” of $1000 monthly or $12,000 annually.

ROI (Return on Investment):
ROI is a measure of your investment performance. For example, if I have a stock investment and it provides me with and ROI of 6% and a rental property that give me an ROI of 10%, than my rental property is providing me with a better return on the money I invested. The higher your ROI the better.

Did you find this video and blog post helpful? Please follow our blog for more real estate investment tips.  Drop your email address at the top right hand side of this page!

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Installing hardwired smoke detectors are as easy as twisting a wire. Follow these step by step instructions on how to do it yourself.

Step 1:

Purchase compatible smoke detectors.  It’s best to stick with the same brand.  It’s imperative that they use the same wiring.  Incompatible smoke detectors will not work with each other.  If there is a fire, one smoke alarm will go off  but will not trigger the other detectors, leaving some tenants unaware of the potential danger.  Incompatible smoke detectors will show a red glowing light.  They may also sound randomly and trigger the other alarms to do the same.  You may be able to silence it temporarily but they will continue like this until the incompatible detector is removed or replaced with one that’s compatible.

Step 2:

Pick a time of day to work when you know you get great light in the stairwell windows if there are any.  Bring a flash light if you need it.

Step 3:

Make sure your tenants are aware of the work being done.  Let them know they don’t need to be alarmed if detectors start going off during a certain period of the day.  You’ll need to test the alarms to make sure they’re working.  Since this is your first time you might want to do so more than once as you go.

Step 4:

Turn off the power to smoke detectors.  This will likely turn off the power in the stairwell as well.  The stairwell window light or flashlight will come in handy.

Step 5:

Remove smoke detectors and smoke detector mount from stairwell wall.  You may want to dispose of the old smoke detector, but if you should consider saving the newer ones that simple aren’t compatible with the detectors you are installing.  If you manage more than one property, you might be able to use them elsewhere. Hold on to all screws use to mount the detector.

Step 6:

Remove old smoke detector wiring. There will be 3 wires red, yellow and white connected to the other wires in the wall with caps on them not always indicating the color of the connecting wires.  Remove the caps and then unwind the wires until all 3 smoke detector wires are free. Replace this wire with the new smoke detector wires.  The white and black wire power the detector.  The red wire connects that smoke detector to others on the property.  If there are no other hardwired smoke detectors present connecting it may not be necessary. The red wire often comes with a covering for this reason.  Be sure to put caps back onto all the wiring.

Step 7:

Add new detector mount to the wall.  You should able to use the same screws from the older detector.  Mount the smoke detector, turn the power back on and your mission is complete. Well, depending on how many you have to install.

Step 8:

Take a look at the detectors and make sure they’re all glowing green after you’ve completed your work. If you want to check your work before installing all the new smokes, try detaching the older smokes and then turning back on the power.  If the newer smokes are glowing green and not sounding you know you did the job right. If they are glowing green, but still sounds there may be an older detector you’ve have not removed, possible in the basement or somewhere else you forgot to look.

This is easy work that just takes a little time and patience. Feel free to call me anytime with questions.  617-818-0408. I’m always happy to help where I can.  I’m your Boston Rental Property Specialist!

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So you want to invest and build wealth in real estate huh? You’ve heard stories about other people who’ve purchase rental real estate and made a good living and now you want to do the same? I can tell you that getting started in real estate isn’t difficult it just requires the right state of mind and a prolonged focus. There are many very intelligent people that completely understand real estate and the benefits of investing but avoid the venture due to lack of patience. These people are looking for instant gratification and that’s not something real estate can bring. Success in this business require a long-term mind set and the ability to see into the future. It requires a sacrifice of time, energy and money today for a greater amount of all three down the road.

Answer the questions below to gage whether you’re ready to dive into the world of investing.  There are no right or wrong answers and no grade, but this quick test will help you understand whether investing is the right path for you.

1. Are you a patience person? When you decide you want something do you go after it aggressively?

2. Do you tend to get discouraged when things do go exactly as planned?

3. Do you take rejection to heart? When someone tells you “no” do you ask someone else?

4. Can you picture the life you want 5-10 years from now or are you more focused on today?  

5. Are you willing to give up some of your time and energy today and become a student of the market?

Real estate investing isn’t for everyone and not everyone that enters this industry will make it down the path to wealth.  It’s a tough road but for those who can stay on it long enough they’ll be able to build the type of wealth they’ve only heard about in those above mentioned stories.

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CLUE stands for Comprehensive Loss Underwriting Exchange. A CLUE report is similar to a credit report for your home, and contains all the pass insurance claims taken out against the property over the previous 5 years. The report will show the reader if a particular property owner has filed a claim for fire, water damage, mold and various other types of potential lose.

Why should you care about this report?

More and more buyers are requesting that home sellers provide CLUE reports as a contingency to the purchase contract. These buyers want to get a better picture of the homes insurance history and any potential problems that may be lurking if they were to purchase the home. Having this record of the property’s past insurance claims is also a good way for buyers to determine the future insurability of the home.

As a seller, the last thing you want is anything to snag the sale of your home once a potential buyer is on contract. A good idea would be to proactively obtain this report before a buyer request is made. Promptly providing this information to the buyer also makes the home more attractive and gives a potential buyer a certain level of comfort to know that nothing is hidden.

Every homeowner may request one free report per year is and can be ordered online from www.choicetrust.com.

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What Are Taxes Consequences For Selling My Investment Property?

The reasons for selling a rental property vary. Landlords who personally live in and manage their properties may move and want to buy a different investment property near their new residence. A landlord may also want to cash in on the appreciation of a rental property rather than accumulating cash flows through rent. It may even be a case of a property that is losing money, either through vacancy or not enough rental income to cover the expenses. Regardless of the reason, real estate investors looking to sell will have to deal with taxes in some way shape or form.

A deferred exchange, also called a 1031 exchange (after the IRS code section that allows it), permits the seller of rental real estate to take the profits from a sale and invest them in another rental property without having to pay taxes. This is a federal tax provision that is also honored by all but two states (Georgia and Mississippi). It is referred to as a deferred exchange because taxes will have to be paid when the last property is sold. However, because there are no limits on the number of 1031 exchanges you are allowed to participate in, you could continually roll over profits into new properties and never pay taxes. You must use an exchange facilitator or other impartial third party to hold the proceeds between sales, and the transactions must conform to strict timelines.

When you sell rental property, profits, or capital gains, and losses are categorized as either short-term or long-term. Short-term profits are taxed at the same rate as ordinary income. Long-term capital gains are taxed at between 5 and 15 percent, depending on your tax bracket. Neither short-term nor long-term capital gains are subject to the social security tax. The maximum long-term capital gains rate is typically lower than the ordinary tax rate for most people selling real estate. To qualify for the long-term rate, you have to hold real estate for at least one year. Se sure to speak with your CPA or tax preparer about the specifics of any sale so you are prepared. 

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Do I need different insurance if I’m house flipping? What type of coverage do I need for vacant homes?

Make sure you are properly covered! Vacant homeowners insurance (vacant home insurance hereafter) is special insurance protection placed on a residence that is expected to be empty or unoccupied for over 60 to 90 days, or perhaps much longer. Every insurance policy offered by a property insurer is different and there are even variations from State to State, but no “regular” homeowners insurance policy is able to cover a house that is not being lived in.

In order to properly protect the home, the existing policy needs to be cancelled and a special vacant home or vacant building policy needs to be put in place. A new policy has to replace the old. The vacancy policy is not the same as the existing homeowners policy in most cases. The homeowner has to understand what the differences are, and also should expect to pay much more for a vacant homeowners policy.

Read more at http://www.articlealley.com/article_818308_33.html?ktrack=kcplink

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As an investor trying to build a significant portfolio of rental properties, it’s in your best interest to have a good relationship with small local banks within the areas you plan to invest.  The local credit unions or savings and loan will provide several distinct advantages over larger commercial institutions (like Bank of America).  When you’re in the in the market to purchase additional units or to refinance some of the units you own, these local banks will be your best resource for those funds.  The following are 3 advantages of using your local lender for your financing needs.

  1. Quick Loan Decisions: Your local bank is often going to make decisions at a quicker pace than the larger commercial bank. Loan officers are often on the spot and decisions need to be checked by less people as it moves up the change of command. The banks appraisers are also typically local and will be able to put a value on the property mush sooner.
  2. Local Banks Know the Market: Being local means they institutions have an intimate knowledge of the local real estate market. They understand the trends in particular neighborhoods and can better evaluate particular loans that hit their desk. If you’re investing in a hot spot of the city and values are quickly trending upward, the local credit union is more likely to be aware of this trend and make the loan more comfortably.
  3. Adjustments to Lending Criteria:  Here is where your relationship with the banks really comes into play. The typical commercial lender has a minimum credit score, maximum loan to value ratio and other guideline that they need you to fit… and if you don’t you don’t get the loan. Your local savings banks will also have guidelines for lending but will allow for some wiggle room based on the applicant’s history and reputation. If you’ve had a long standing account history with the bank and have done what you say in the past this will mean something here. For example, if you’re trying to purchase a new rental unit and don’t have the full 20% down payment (commonly required for investment purchase), you’re more than likely able to negotiate this requirement than you are with a large commercial bank. If you can show that you have a long standing history of re-payment and have completed several other projects, your savings bank will usually bend for you.
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Supply & Demand:  Like everything else in the economy when the supply of a particular good increases the price will typically decrease. This is simply because buyers can buy somewhere else if not with you. You can’t over charge for a home if your neighbors 3 doors down are also selling a very similar house at a lower price. The two of you are competing with each other and will actually drive price down for both of you.  Conversely the opposite is true if the supply of homes for sale is low. If buyers don’t have many options to choose from then sellers can usually charge a premium or create a bidding war. When buyer demand is higher than the available inventory of homes it creates a “sellers” market. When the supply of available homes for sale is high and demand is lower is creates a “buyers” market.

Municipal Improvements:  New roads, bridges, schools and highway expansions all have an impact on property values. The downtown redevelopment taking place in Quincy is a perfect example of this. Quincy is in the process of converting the city’s downtown area in the same way Boston did the big dig. The city is directing major traffic away from its center and creating alternate routes to major highways. The city also built a new high school and middle school. Major projects like these have a tremendous impact on the property values for surrounding homes. Existing residents tend to stay in place with improvements happening while new residents are trying to get into the area pushing demand upward. The opposite can happen to a city’s home values when the wrong projects are puts in place or there is a long-term lack of improvement.

Inflation:  Inflation is described as “The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.” Inflation affects the value of your property by changing its replacement cost. If the prices are going up in general then we can assume the materials to build a home are getting more expensive …which means the total cost of replacing your home will go up. If you walk down the aisles of home depot today the cost of building products are significantly higher than they were 10 years ago. Labor wages are always on the rise as well. If material cost and labor cost of building a new home are trending upward then the cost of existing homes (already built) will follow closely.

Cash Flow:  This is where property owners have the most control. Your cash flow is the monthly rents you collect minus the properties operating expenses. You can positively affect the properties cash flow (and value) by increasing the income and lowering expenses. Income increases come from raising the rents as well as finding other sources of income …like laundry, parking and storage. If all else remains, as cash flow is improved the property’s value will increase.

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Boston Home Sales Process & Timeline

Are you thinking of selling property in Massachusetts? If so, make sure you fully understand the selling process prior to making a move. Many first time sellers have experienced the property exchange process from the buyer’s perspective but are often unsure of themselves as sellers. From the time you accept an offer to purchase there is about a 45 day period before the closing day and transfer of ownership. During this period of time there are many things that need to be done on both sides of the transaction to ensure a smooth transition from one owner to the next. Below is the home selling process (and timeline) from the view of the selling party.

Marketing:

After hiring your real estate agent they will immediately start marketing your property for sale. There are several marketing methods used depending on the type of property and the selling party’s wishes. Some investment property sellers prefer not to have a “For Sale” sign placed on the property or conduct any “Open House” in fear that is will negatively disrupt their relationship with their tenants. In these cases your agent can work closely with you to create another plan of attack for marketing including various internet strategies.

(Day 1) Offer to Purchase & Negotiation:

Your property has been successfully marketed and in and ideal situation you receive multiple offers from potential buyers. Your real estate agent will sit down with you and discuss the pros and cons of each offer received. Don’t assume that the buyer with the highest price is always the winner in this case. The terms of the offer are also very important as well as other factors like where the buyer is obtaining financing and the buyers overall financial strength. Often you will find that it makes a lot of sense to accept an offer slightly less than another if the buyer is paying cash and can close without the extended time table that is required with most banks. Often there is a lot of back and forth between you and the buyer before the final details are nailed down.

(Day 3) Home Inspection:

After both parties come to an agreement on price is terms the buyer is typically allowed 10 days to inspect your home for damages and other items that are hard to detect or just not apparent to an inexperienced buyer. A professional home inspector is usually hired to walk through your property and assist the potential buyer in locating potential issues. If there are (what the buyer determines to be) substantial issues located the buyer has 3 choices.

  1. Move forward and purchase the property with the original price and terms.
  2. Renegotiate the price originally agree upon to reflect the new information.
  3. Walk away from the transaction all together.

(Day 15) Purchase & Sales Contract:

Assuming we end up with items number 1 or 2 from above and the buyer is going to move forward with the purchase, both parties would enter into the purchase and sale contract. At this point both parties want to hire a real estate attorney to represent their interest in the contract. This document will lay out all the details of the sale including, when the buyer must have his mortgage company commit to the loan, the responsibilities of the seller, and when and where the closing (passing of papers) will take place. The buyer is also going to place a large deposit in escrow as consideration for the deal. This deposit is typically 5% of the total purchase price.

(Day 25) Appraisal:

Most buyers will need a bank to finance the purchase. Banks require that they have independent professional determine the value of a property before they will lend money on that property. Shortly after the purchase and sales contract is signed an appraisal of your property will be done to determine its value. Your real estate agent can assist you with the details of the appraisal process.

(Day 35) Smoke Detector Inspection & Final Water Reading:

As the Seller, you are required to obtain a Smoke & Carbon Monoxide Certificate from the local Fire Department. All smoke detectors must be photo-electric. Your real estate agent will come to your home prior to the date of inspection and be sure to place all required smoke and carbon detectors appropriately and verify they are in working condition. If you cannot be present during the smoke inspection your real estate agent can cover the appointment for you. Your agent will also order final water readings for you. This final read will determine what you owe the municipality for water at the date of closing. After this amount is paid, future water bills will be sent to the new owner.  

(Day 45) Final Walkthrough & Closing

Prior to the closing the buyer will typically requests a final walk through to inspect the property. At this point you will want to make sure the property is completely free of personal items, trash and other materials that may deter the buyer from closing. If you are selling a tenanted home, you will want to notify your tenants that you will no longer be the owner and provide them with the contact information of the buyer. You will also need to turn over any tenant security deposits held. Either you or your real estate agent should be present at the closing with the house keys, tenant contact information, leases, and the original smoke certificate.

The final arrangements for closing are in the hands of the lending bank’s attorney. It is often not until the last minute that the closing time and place is determined. This can be very inconvenient for all parties involved. With this in mind, keep your schedule open around the closing date.

Still have questions about about buying or selling? Contact us at 617-297-8641 or Willie@MandrellCo.com. You can also read more about how we assist our clients by visiting our sellers page!

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Similar to any other business, to succeed in real estate you needed to have a clear business plan for yourself. It’s very difficult to stay motivated and on the right path when you’re not sure where the path is headed or when you’ll arrive. Many investors buy real estate and hope things will turn out well in the future. Great real estate investors buy real estate that fulfills their particular goals and understand exactly what success looks like and when they will arrive. Here’s how you can become one of those great investors:

  1. Start with an end goal in mind. The best way to start your business plan is to visualize where you want to be at a specific point in the future.  Some investors have a 10-15 year plans while others have shorter timelines and create 5 year plans for themselves. Neither is wrong but I like the idea of having a 5 year plan that you can complete and then recreate for another 5 years once you’ve reach those goals. Your goals should include real estate investment achievements as well as personal development, since these two things are in many ways directly related. Write down everything you want 5 years from now (personally and professionally) and think big!
  2. Work backwards! Now that you understand what the finished line will look like start to work backwards and break your 5 year plan into shorter manageable goals. Understand exactly where you need to be in year 4, 3, 2 and after year 1. I also like to take it a step further and break my goals down on a quarterly basis which allows me to step back and see where I am every 3 months.
  3. Develop your comfort zone. Your comfort zone (your niche) is where you will make your mark in the real estate industry. There are many types of real estate (including singles, multifamily, condos, residential, commercial) as well as many cities and towns to develop your niche. The decisions you make at this point are going to help you narrow your focus and become an expert in your market. You don’t need to know everything about all real estate to become and successful investor. You just need to master your specific niche! While one investor is an expert in single family investments in a few South Shore towns, another equally successful investor is mastering multifamily investments on the North Shore.  Look back at your goals and choose the type of real estate and locations that will most help you reach those goals. Your task is to now learn everything you can about your chosen niche. The more you learn the easier it will be for you to spot opportunities in your particular market and to build your portfolio of investments.
  4. Constantly keep your end goals in mind as you follow your plan. Adjust your plan as your future wants and needs change but never scrap it. Remember to think big and stay focused. The most successful investors all have one thing in common…their ability to keep their eyes on the prize!
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Boston Wealth Builders Seminar Are you interested in learning more about investment real estate? Would you like a great place to network with new and experienced investors? Join Boston Wealth Builders! We are a group of house flippers, landlords, wholesalers as well as many other investment industry professionals throughout Massachusetts. We gather and discuss local industry trends, new products, marketing techniques, where to find the best deals and how to finance your purchases. We meet in Boston as well locations North, South and West of the city, so there will always be a meeting near you! The group is growing at a tremendous pace and we would love to have you be part of it. Come learn a little and share a little with us! Join anytime for FREE at www.BostonWealthBuilders.com . Hope to see you at our next event!

 

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FREE POF Letters/ Hard Money Pre-Approval:

Julio Evangelista and Commonwealth Equity will be providing attendees of the MA Real Estate Trade Show with Hard Money Pre-Approval Letters! If you’re getting into the flipping business you need a letter of approval or POF to make offers on offers on rehab deals. Come to the Trade Show and leave with a letter for your business! RSVP if you haven’t already… http://www.meetup.com/Networth-Investors/events/125269232/

FREE Business Head Shots:

Boston Photography is offering FREE head shots during the Trade Show! Get there early to make sure you don’t miss out. Use these photos for your business cards, website and lots of other marketing material.

Learn to Flip Houses W/O using Your Own Cash:

Andrew Schena from Capital Equity Partner will be teaching you how to find private investors, market your business to them and secure their funding for your real estate deals! If you’re in the business or soon to be in the business of house flipping you won’t want to miss this event. This event takes place prior to the MA Trade Show and will have limited seating. If you have not already RSVP’d please do so at http://www.meetup.com/Networth-Investors/events/130624832/

MF Real Estate Investment & Home Buying Seminar:

Interested in multifamily investing but don’t know where to start? Already own rental property and want to take your business to the next level? Come join us this Saturday for this Multifamily Investment event. Come listen, learn and share your experiences investing in rental real estate!

RSVP at http://www.meetup.com/Networth-Investors/events/133283712/

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The numbers don’t lie! Before you decide to accept your next tenant application take a closer look at their income. Many landlord find themselves in trouble shortly after accepting a tenant into their rental units…mainly because the tenants are financially overextended.

A good rule of thumb is to require that your tenants annual income is at least 40 times the monthly rent. For example, if two roommates are looking at a $3,000 per month apartment, you would require a combined income of $3,000 × 40, which equals $120,000. To determine how much rent you they can afford, simply divide their combined annual incomes by 40.

You might have also heard that you should spend no more than 30% of your annual income on rent.  Spending 30% of your yearly income on rent is believed to be an affordable amount, leaving enough money for all your other expenses. What’s the difference between 30% and 40 times the monthly rent? Absolutely nothing, they’re just two different ways of deriving the same number.  The 40x trick is just easier to calculate.

For example, let’s take $120,000 of income.

  1. 30% of $120,000 = $36,000.
  2. $36,000 ÷ 12 months = $3,000 per month.

But to make the calculation easier, just divide $120,000 by 40.

  1. $120,000 ÷ 40 = $3,000 per month

Again, to determine how much rent your tenants can afford, simply divide your combined annual incomes by 40. Don’t have a calculator handy?  Use the following table to look up your maximum rent.

Gross Annual Income

Max Monthly Rent

$40,000

$1,000

$44,000

$1,100

$48,000

$1,200

$52,000

$1,300

$56,000

$1,400

$60,000

$1,500

$64,000

$1,600

$68,000

$1,700

$72,000

$1,800

$76,000

$1,900

$80,000

$2,000

$84,000

$2,100

$88,000

$2,200

$92,000

$2,300

$96,000

$2,400

$100,000

$2,500

Need help renting one of your units? Contact us! We can help you find qualified tenants….often at no cost to you!

Contact@MandrellCo.com or 617-297-8641

 

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Let’s assume you have two identical multifamily buildings on the same street, in the exact same condition and built in the same year. The tenant quality for both properties is similar and both properties have the same monthly expenses.  The only difference between these two properties is the amount of rental income being generated. Both properties started out with rental income of $3000 ten years ago. The owner of property number one has consistently increased rents to match the rate of inflation and is now achieving $5000 in monthly income.  The owner of property number two has only raised rents a few time during the years and is currently collecting $4000 monthly. He’s always felt as if he didn’t need the extra funds to cover expenses then why be greedy and bother his tenants.

 Both property owners are now looking to retire soon and considering selling their investments. Both owners speak with the same real estate agent and try to determine an appropriate selling price for the buildings. The owner of property number one was given a likely sales price of $500,000 based the numbers he provided the agent. Owner number two was provide a potential selling price of $400,000 based on the numbers he provide the agent.

There is a 20% different between the $500,000 that owner two received and the $400,000 that owner two received. There is also this exact same 20% difference in the rental income they are achieving!

Nothing affects the value of rental real estate more than its rental income. It sounds obvious but not everyone fully understand how underachieving on your rentals can affect your investment long-term. In the above (very close to real life) scenario, both owners ended up selling their investments for very close to what their agent quoted them. From her consistent attention to local rental rates and steady trend upward in what she charged, the owner of property number one was able to achieve close to $75,000 more than property owner number two. Owner number two was able to achieve a better than expected sales price ($426) partially because the buyers saw potential to increase rents after purchase and get the property back to achieving at its highest point.    

 Note: not only did the first owner retire $75,000 richer…she also achieved roughly $20,000 in additional rental over the 10 year span they both owned their properties.  

$3000 Initial Rental Income * Annual Inflation Rate: 5.5%  

Year 1 : 3169.22

 Year 2 : 3347.99

 Year 3 : 3536.84

Year  4 : 3736.35

 Year 5 : 3947.11

 Year 6 : 4169.75

 Year 7 : 4404.96

 Year 8 : 4653.44

 Year 9 : 4915.93

Year 10 : 5193.22

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Are you considering selling your multifamily property? If so, you should know there are two types of buyers for your property and they differ in how they approach a purchase. The first potential buyer would be the owner occupant buyer. This person plans to move into the property after purchase and use the home as his primary residence. The 2nd buyer is the investor. The investor is buying your property for investment purposes and will likely keep your current tenants or rent the property to new tenants.  As a multifamily seller it’s important to understand the differing mindsets and resources of these potential buyers. Understanding their wants and needs will allow you to better prepare for the sale and maximize your price received. Let’s take a look at both buyers in further detail.

Owner Occupied Buyers:

  • This buyer plans to purchase your property as their primary residence tends to be a bit more emotional in their decision making.  This can be good or bad for you. If your property shows well and seems to attract lots of attention during initial showings, buyers may jump to make the purchase before someone else does and ultimately pay more than they would have without the appearance of competition. The opposite is possible as well. If your property doesn’t receive much attention, this buyer will automatically assume “if no one else is interested, there must be something wrong that I’m not seeing”.
  • Owner occupant buyers will obviously need a vacant unit at the time of closing. If you have all tenants on long-term leases you will not be able to secure this type of buyer.  Some owners prefer to wait until there is a vacancy within one of the unit before they put the property up for sale.
  • Owner occupant buyers tend to pay more than investors. Their purchase is more about whether the property suits their particular needs and less about cash flow numbers. Owner occupant can often receive better financing at lower rates than the typical investor. This is another factor contributing to their ability to pay a higher price for the same property.

Investor Buyers:

  • Real Estate investors tend to be less emotional in their decision making. They are buying your property for investment purposes and the financial must make sense for them to make a move. A good investor would rather miss a good deal than to buy a bad one.
  • Investors are looking at your properties cash flow and return on investment. To land a good investor for your property you will want to show that you are achieving market or above market rents for the area and that your expenses are relatively low compared to other investment properties. It’s a good idea to keep strict records while you own the property so you are able to show these to potential investors at time of sale.
  •  Investor buyers can often buy your property “As Is” and can close quickly compared to owner occupied buyer.  If you have a property in need of heavy work, it may not qualify for owner occupied loan programs. In this case you will need an investor to step in and buy the property. Investors also have money that is more readily available allowing them to close on your property on a short timeline.

Interested in selling your home or investment property? Call us today at 617-297-8641.

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One of the best things you can do as a new real estate investor in walk up and down the aisles of home supply stores like Home Depot & Lowes. Not that you want to be swinging a hammer on a job site, but there’s simply no better way to educated yourself on the cost for home repairs and upgrades. The knowledge you gain from this task will help you understand:

  1. The cost of construction materials and how easy or difficult a particular job may be. This will allows you to be better equipped you are when evaluating a particular property purchase. 
  2. How to negotiate with contractors for a particular job. For example, I know that if a contractor is quoting me $500 to replace a standard vinyl window, his labor must be between $250 – $300. I know this because and I can buy a standard vinyl window at HD for $200-$250. Now I can decide whether my contractors labor is worth what he’s asking, negotiate his price or gather other contractor quotes.
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Whether you are a life-long resident of the Greater Boston area or new to the city, here are some helpful hints to assist you with your apartment search:

  • Good apartments rent quickly!  Largely because of its enormous student population, the greater Boston rental market explodes beginning mid-January and continues until August 31st.   Unless a real estate office has exclusive rights to rent a particular apartment, showings for the units are shared by MANY Real Estate offices.  Competition, therefore, can be fierce and apartment availability is an ever-changing process, often hour to hour.  The best strategy is to look at as many apartments as possible during a short period of time and be prepared to put down applications and a check for one month’s rent to take the best off the market.  
  • Many landlords require 24 hours notice to show an apartment so try to call your agent at least a day or two before you want to see places and plan around your work/school schedule, accordingly.
  • Narrow your search to 2 or 3 areas at most.  It’s helpful to physically explore, and speak with others about the neighborhoods you intend to rent prior to viewing apartments there, especially if you’re from outside of Boston.  This will help your agent to do a more detailed search of only the apartments in your top areas.  The following is a link to an informative Boston Neighborhoods descriptive site:  www.bosarchitecture.com/neighborhoods.html
  • Learn the price range you should expect to spend in the areas you are considering.   If you are considering areas outside of Boston you will always get a better deal there, so eliminate those areas first before looking in the city.  See the Boston area rental chart below as a good guideline to what you should expect to spend.  If you are on the lower end of the price range you probably aren’t going to see newly renovated places, so if you need a really nice place it’s important to know that you will need to spend a bit more. 
  • Pets:  Almost all landlords will permit cats.  Your rental options, however, will be dramatically reduced if you have, or plan to get, a dog.  About 85% of landlords do not allow dogs.  Some buildings are “Pet Friendly” and may require an extra monthly or annual fee, while others may exclude certain breeds (e.g., Pit Bull) or dogs over a certain size (e.g., 40 lbs).  
  • Communication and staying connected with your agent is paramount in helping your agent to serve you best.  Phone responders, especially early in the process, will have a better chance of getting updated information on apartments, communicating your changing needs, and being served in real time amid a long queue of apartment seekers with whom the agent may be working.  
  • Financials:  If you are a student you will be required to get a co-signer/guarantor.  If you are professional you will have to show good credit and the rent cannot exceed 40% of your income for most apartments.  Boston area landlords generally require 2-3 months rent (first, last, and security deposit) prior to moving into the apartment. Occasionally, a small key deposit and/or lock change fee may apply.  The first month’s rent, applications, credit reports, copy of ID’s, Fee Disclosure, and co-signer forms might be required to take an apartment off the market.  Once you are approved, the lease and any required paperwork are submitted along with the remaining funds
  • Broker’s FeeSome landlords will pay a full months brokers fee, some will pay a portion (½ paid by landlord ½ by tenant), but most won’t pay any especially during the busy season from mid-January – end of August.  In other cases, a landlord may be willing to negotiate.  Always ask your agent what the fee arrangement is for each apartment you see. 

Finally, as a courtesy, let your agent know if you’ve suspended your search for any reason (found an apartment on your own, via another real estate office, or have postponed your move/search plans).

Best of luck!  We look forward to helping you find a great place!

Still have questions? Want to know what rental listings are available in your area? Contact Carol Parker at CParker@MandrellCo.com

City Of Boston Market Rents – 2013

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Should You Require Your Tenants to Have Renters Insurance?

Should you require your tenants to purchase Renters Insurance? Here are a few things to consider:

  1. Your home owner’s insurance policy will most likely not cover tenant personal items in the event of a loss. Most policies pay out to cover the repair or replacement of the building itself but not the personal items inside. Your tenants should be made aware of this fact at move in and reminded of it on a consistent basis.
  2. Most tenants do not purchase renters insurance for a variety of different reasons. Some tenants believe the policy premiums will come at a cost they cannot afford or they may believe that the value of their belongings is not worth buying coverage.  
  3. Renters insurance can be paid in installments and can be as low as $10-$25 per month for approximately $25,000 worth of coverage. You may also buy coverage for your tenants and consider including it into the price of their rent.  Policies are not hard to find and can usually be purchased at the same companies that offer auto insurance.
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Dorchester Income Property Sales & Rental Market Update

Below is a quick rental market update for the Dorchester area. Apartment rental numbers are provided for the last 30 days while, multifamily sales are shown over the last 6 months. You can download a full report for both below!

Rental Market Statistics over the Last 30 Days:

Total Rental Listings Closed: 23

Average Rental Asking Price: $1,751

Average Number of Days to rental the apartment (DOM): 31.91

Average Price Landlord Received When Rented: $1,758

 Dorchester Rental Market Update – Download Full Report! 

 

Sold Multifamily Homes Over The Past 6 Months:

Total Number of Sold Listings: 106

Average Living Area (Square Feet):  3,511.95

Average Listing Price: $413,123  

Average (DOM) Days on Market: 58.50

Average Sales Price: $407,990

 Sold Dorchester Multifamily Homes – Download Full Report!

 

Want to know what your apartments are worth?  Want to know what your property is worth? Want statistics for a different area? Call us at 617-297-8641 or email your request to Contact@MandrellCo.com

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As a rental property owner you understand that tenant turnover can be very costly. Every time a tenant moves out there will be a period of loss rent, repair cost for the vacated unit as well as cost associated with finding a new tenant.  As a landlord it’s in your best interest to retain good tenants as long as possible and to do that you need to provide your tenants with comfortable and convenient living arrangements. Here are a few items every rental property owner should consider for their property.  

Storage:  

Create a place for your tenants to store personal items they don’t want to keep in their apartment. Often you can build several storage bins in the homes basement and assign one for each apartment. If you decide to use a common area like the basement, make sure each bin has a door and the tenant has the ability to lock their items away. This type of system does not need to be very fancy and can often be done with 2×4’s, plywood and a pad lock.    

Laundry:

On site laundry is a big plus for many tenants, especially during Boston’s cold winter months. On site laundry can include providing a washer and dryer to each tenant or just providing a washer and dryer “hook-up” for each tenant to access. In either case you will need to hire the services of a plumber an electrician.  If your tenants pay their own utilities then you’ll want to make sure your contractors are making electrical, gas and hot water connections with each separate unit. If you happen to pay utilities for your tenants then you should consider the added cost to adding this service in comparison to the added value.  You may consider adding a couple coin operated machines in this case.

Outdoor Space:

Yard space, a terrace, patio, and roof decks are all value added items here in the city. Any type of personal and private outdoor space you can provide your tenants is going to bring higher rents and longer term tenants.

Parking:

Off street parking in Boston can go for big money. If you have land attached or near your rental property that can potentially be converted to parking spots, this could be a real nice opportunity to earn some extra cash.  We often meet landlords that spend a few thousand dollars leveling, paving, and marking out 2 or 3 parking spots, which they turn around rent for $150 per month.  Before a full year is over the spots have paid for themselves and everything going forward is profit.

Intercom & Alarm Systems

Safety and convenience is the name of the game. There are so many different types of intercom and alarm systems out and the prices are really responsible. If your rental property has more than 2 living levels, consider investing in an intercom system.  Many of them allow tenants to “buzz” guest in and some of them come with video capabilities so the tenant can view the individual at their door. Alarms systems are always a good idea. Anything to make you tenants feel safer is a good investment.

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Massachusetts Home Buying Timeline

As a future home buyer, it’s a good idea to understand as much as you can about the process so little comes to you as a surprise when you get started. Many first time buyers or buyers who have been out of the market for awhile often think the process take much longer than it does, while many others think the process happens much more quickly than it really does.  At the end of this post you will find a Massachusetts home buying timeline you can save and use as a guide as you go along.   

The Offer to Purchase:

Once you’ve lined up your financing and found a home that suits your needs, the next step would be to make an “Offer to Purchase”. You and your real estate agent would discuss what you think the property is worth and if that number is what you’re willing to pay for it. When the OTP is submitted to the selling parties, it will have the price you’re offering as well as several contingency clauses. Contingency clauses are stipulation in the OTP that protect your interest and prevent the purchase from moving forward if they are not met. Two of the most common clauses inserted into the offer  are the “Home Inspection” and the “Mortgage” contingencies. We will discuss each of these.

At the time of your initial offer, a small deposit ($500-$1000) must be submitted to the selling party. This deposit is to “bind” the offer and is fully refundable if the seller does not accept your offer or if one of the contingencies are not met. The buyer will typically allow the seller 24-48 hours to respond to the offer with acceptance, rejection or a “counter offer”. If the seller counters your offer you will negotiate back and forth until both parties have an agreed upon price & terms or decide to  walk away.

Home Inspection Period:

Once you’ve come to an agreement with the selling party on price and terms, you will enter the “Home Inspection Period”.  This period typically last about 10 days and during this time you are allowed to hire a home inspector to professionally review the property you intend to purchase. The home inspectors job is to walk through the property with you and bring to light any current issues with the home as well as things that may arise in the future. She will also provide you with a full written report of her findings after the inspection is completed.

There are 3 paths you can take after the home inspection takes place.

  1. The inspection reveals there is nothing wrong with the home and everything is in great condition. At this time you would inform the seller that you will be moving forward with the purchase.
  2. The inspection reveals there are some minor issues with the home and based on these issues you would like to lower the price you initially offered the seller. You may then go back and forth with the selling party until both parties have again agreed on a new price.
  3. The home inspector found issues with the property that are beyond your comfort level and you no longer wish to purchase the home. At this point you will inform the seller that you are backing out the transaction. The initial deposit will be refunded to you per the home inspection contingency.

Purchase & Sales Contract:

Assuming you selected to move forward with the purchase of the property in either case 1 or 2 above, you would now move into the purchase and sales contract. The “P&S” is the contract that further lays out the details of the purchase. These details will include dates, times and “to do list” for both the seller and the buyer. Some of these items will include:

  1. What date the buyer will need to have his financing in order for the purchase
  2. What items of the sellers are included in the purchase and which are not
  3. How tenant finance will be handled (if the property is a multifamily building)
  4. What  date will the buyer take possession of the property (the closing date)  

At the time of the purchase and sales agreement the buyer will be required to place an additional deposit with the selling party. This deposit will typically be 3-5% of the total purchase price. This is again to bind the contract and will be refunded if for some reason the buyer failed to be approved for the mortgage. This return of deposit is outlined in the purchase and sales “Mortgage Contingency”.

The Closing:  

Closing day usually take place bout 45-60 days after the initial offer to purchase was accepted by the seller… assuming everything goes smoothly. The closing day is when both the selling and buying parties get together and make the transaction official. As the buyer you will need to bring any final money due to the table. The seller will need to make sure any outstanding bills in connection with the house are paid off allowing you to take over with a clean slate. On this day the transaction will be recorded with the local registry of deeds and the buyer becomes the new owner.

 Massachusetts Home Buying Timeline

Still have questions? Please call us and one of our agents would be happy to provide you with some assistance! 617-297-8641 or email Contact@MandrellCo.com

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I wrote a post a last week about building long-term wealth and had a few readers respond with questions. You can view the post with the following link. (http://mandrellco.com/building-long-term-wealth-real-estate/) One of the questions I received was concerning how to quickly calculate a property’s cash flow and expenses, … so I wanted to share the form I use to accomplish this. You can download the form below and I’ve also provided some quick notes on a few of the forms line items.                

 Note: The attached form uses annual amounts but I will use monthly figures for my examples

Total Gross Income:   Gross income is the total amount of income the property is producing. This will include income from rents, laundry, storage, parking, and any other sources connected to the property.

Vacancy Allowance: It’s assumed that your property will not stay occupied 100% of the year. People will move out and new people will come in. Vacancy allowance is the estimated portion of the year where you do not have a tenant paying you rent. I did not include vacancy allowance in the example from my previous post to avoid making calculation more difficult than needed. If we had included vacancy allowance I would have used the national average rate of 8% and multiplied that with my gross income of $4500.

Effective Gross Income: Effective Gross is Total Gross Income minus Vacancy Allowance ($4500 – $360=$4140)  

Net Operating Income:  NOI is simply your Effective Gross Income minus your Total Expenses.

Debt Service: Your debt service is your total monthly principal and interest payments on your mortgage. Many times borrowers chose to combine (escrow in) their taxes and insurance, while this cash flow sheet breaks these expenses into separate categories. The reason this is done is because your mortgage is a “variable expense” so to speak. If one investors puts down 20% and finances the property over 15 years and another investors places down 3.5% and finances it over 30 years, their payments will be complete different. Taxes and insurance will not vary from investor to investor, so they must be removed and shown in their own expense category to get total picture of what the investments true expenses are.  

Hope this helps!

Free Cash Flow Analysis Form

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