(MA) 617-297-8641 (RI) 401-641-5774

Contact@MandrellCo.com

Boston Wealth Builders:                               Join the Group:           www.BostonWealthBuilders.com

This is a group discussions are focused on building long-term wealth through real estate.  We realize that building wealth is not about your weekly or monthly take home pay; it’s about the income producing assets you acquire over your lifetime.  We understand the difference between earned income and passive income and we strive to create more of the latter.

We realize that every individual is at a difference stage in their investing career and we strive to make each meeting all inclusive. This is group is a great way to meet other people with a similar mind-set and with similar financial goal. Find a mentor or become a mentor to others in the group. House flippers & wholesalers also welcome to join!  We are always looking to purchase real estate if the numbers work.

Metro West Investors:                                  Join the Group:                 www.MWInvestors.com

Metro West Investors is a great group for those who do or are looking to do their real estate business outside of the Boston area. This group looks to connect buy and hold, flippers, wholesalers, and other investment professionals. Our meetings take place at various places from Newton to Worcester.

Real Estate Investor Education & Trade Show coming to Natick in September. This will be a terrific opportunity to meet other investor and tradesman from Boston to Worcester. You’ll also learn about many new industry products and services that can streamline your life as an investor.

RSVP today at http://www.meetup.com/InvestMetroWest/events/125273042/

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Real estate is an excellent investment vehicle for building wealth, especially here in Massachusetts where we have a large number of multifamily buildings. The 3 family home, as an investment tends to make a ton of sense when it comes to the balance between the purchase price of the building and rental income you can achieve from one of these buildings.  Let’s take a quick look at a recent purchase made by one of our clients.

Purchase Price:  $500K    Down Payment: $100K    Mortgage: 15 Fixed @ 4%

Expenses: (Mortgage, Taxes, Insurance, Water, & Misc):  $3,800    Income:  $4500 ($1500 * 3 Units)

Monthly Cash Flow:  $700

$700 monthly cash flow is great, but the real financial benefits come from the long-term effects of this investment on my client’s portfolio. If you noticed above she opted to take a 15 year loan and pay off her debt sooner than the typical 30 year plans. Let’s take a look at where she is financially in 15 years:

Debt Pay Down:

As you make your monthly mortgage payments the principal balance is slowly decreasing. This debt pay down is called the “amortization” of your mortgage. If you look at a mortgage amortization chart (which is usually provided with your loan documents) you can pinpoint what the principal balance on your loan will be at any given point over the term of the loan. This assumes you are making all your payments on time and only paying the minimum amount due each month. As your mortgage balance decreases your net worth increases. With the above scenario my client is done paying or has “fully amortized” this loan in 15 years.  She will receive a discharge notice from the bank and no further payments will be due. Her tenants will have essentially paid off a 400k debt for her and increased her net worth by that much.

Property Appreciation:

Appreciation is the increase in your property’s value year over year.  The rate of appreciation you will receive in future years is impossible to predict but history tells us that property values tend to increase at a rather consistent rate over time. Removing recent market adjustment years (2006-2011), US real estate values have appreciated at a rate of approximately 6% annually, with Massachusetts falling right in line with average rate. If we take our property from above with a current market value of $500k and assume we achieve at least a 5% rate of appreciation over the next 15 years, we would be looking at a property value of $1,039,000.

Rent Appreciation:

Rent prices tend to move upward with inflation. Just like the cost of bread and gas, rent rental values always go up. With that said, the same $4500 per month ($54,000 annually) my client is collecting in rents today will be much higher in the future.  If we assumed rents in her building also increased at a rate of 5% yearly, she will be collecting $9,355 per month after 15 years. That’s over $100K annually in passive income!

Net Worth & Passive Income:

If you take these numbers as a whole, thats when things start to get exciting. 15 years from now this mortgage will be completely paid off and it will have been done by someone other than my client. Her tenants are paying off the debt every month with their rent checks. Not only is she getting the debt paid off but she will be putting $700 (or more) per month back into her pocket over the next 15 years. At the end of the 15 year term her debt will be gone and her rents have now grown to $9355 per month, which she can put in her pocket or use to go out and purchase other investments.  Her property has also appreciated to over 1 million in value which will be a major contribution to her total net worth number!

Building Wealth Takes Time:

My client is not very special …in the sense that anyone can follow this wealth building model and achieve exactly what she has done in the past and is in the process of doing again. Don’t have $100k to invest? You don’t need it. There are ways to achieve the same with a whole lot less. Don’t have time for tenant issues? Hire a property management company! With this model my client is achieving $700 in cash flow. I’m sure for $700 per month you can find a company to manage your tenant issues. Long story short… there is really no reason why this can’t be done by anyone.  15 years is not a walk in the park but the earlier you start the sooner you’ll get there. If you only had this one building and invested in nothing else during the next 15, you would still have a net worth of over a million dollars and earning over a $100k in passive rental income! Imagine if you bought several of these investments!

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Are you attending a University here in Boston? Will you need off campus housing? If so, give us a call us. Our company assists many undergraduate and graduate students in finding apartments while they are studying here in the city. We have a ton of resources at our disposal and are contacted by landlords all over the city looking for good tenants for their apartments.

Here are the top 5 things every student should know about renting here in Boston:

  1. Plan to start your search as early as possible. Boston rentals do not stay vacant very long so to land a great apartment you need to be proactive! Try to get ahead of the student rush and line something up a couple months in advance. This will be your best possible opportunity to get something close to your campus.
  2. Make sure you fully understand the cost of the apartment your plan to rent. When you move into an apartment, a landlord can charge you the first month’s rent, the last month’s rent, and a security deposit. In addition to what the landlord charges, you may also be charged a Realtor fee if you enlist the services of this professional. This fee can be up to a maximum of the equivalent of one month’s rent. For example, if you rented an apartment for $1000, you could be charged a maximum of $4000 to move in. 1st, last & security from the landlord and a full month’s rent from the real estate agent you hired.
  3. Make sure your roommates know the rules and plan to stay as long as you do. If one of your roommates moves out, you may still be responsible for paying his portion of the rent until you find a new one. When you sign a lease with a roommate, you are both committing to the term of that lease. If one individual does not hold up to this agreement you are both liable.
  4. You have probably invested more in personal property than you realize. Renter’s insurance is a good idea and can be surprisingly affordable. Don’t assume that your landlord’s or your parents’ insurance will cover your belongings.
  5. Before entering into a rental agreement, check out the condition of the apartment. If you can’t, have a friend do it for you. You do not want to be charged for damages that existed when you moved in! In most cases the landlord will do an “initial walkthrough” with you so you both can determine if there are items that need to be addressed prior to move in.

Still have questions? Need help starting your apartment search? Call us at 617-297-8641 or email Lloyd@MandrellCo.com.

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Thinking about buying a 3 Family in Boston? If you’re looking for a great ROI consider investing in the Dorchester area. This Boston neighborhood allows for better cash flow than any other neighborhood in the city. Prices are still relatively low compared to other neighborhoods, but the rental market is very strong. Rental prices have been headed upward for the past few years and the demand for available units is high. Here is a quick look at some of the averages and how this scenario could play out in the Dorchester market.

Average Price for 3 Family Home: $550,000

20% Down Payment $110,000 – Interest rate of 4% on a30 year fixed  

Mortgage payment of $2100.00 per month

Mortgage $2100 + Taxes $350 + Home Insurance $200 + Water & Sewer $150 = $2800 Monthly Expenses

Market Rent For 3 Bedroom Dorchester Apartment = $1600 * 3 Units = $4800 Monthly Income

$4800 – $2800 = Monthly Cash Flow of $2000 or $24,000 Annually

These numbers equate to a Return on Investment of nearly 22%, which is tough to find in other markets. There are some assumptions here that will lead ROI numbers to be slightly better or worse depending on each particular investment, but the overall averages speak for themselves.

Don’t let your lack of knowledge for Dorchester real estate steer your away from this great market. There are many local professionals that can assist you in locating great properties in the neighborhood. Like any real estate market, not every property will be a great investment, but when you take the time to do a little market research you can understand which properties will perform well. 

Don’t have 20% as a down payment? Want to run your own mortgage calculations? Click here to use our mortgage calculator!

Not interested in dealing with tenant issues? Looking for a great property manager? Click here to read more about our services!

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