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How To Line Up Funding For Your Commercial Real Estate Deals

We talked briefly, if you watch prior videos, about residential lending and some of the basic mortgage programs. This is commercial lending. This is typically if you see on the screen, typically five units or more. Residential lending is a single family, two family, three, a triple decker or are four units.

Commercial lending tends to be five units or more. It can be something that’s less than five units if it’s held in a special purpose entity like an LLC. If you own the property individually and it’s under five units, it’s typically residential property or residential mortgage broker or a lender could help you. If it is five units or more or held in a special purpose entity like an LLC, then it is commercial lending.

Typically what you find with commercial lending it is performance based. When you’re dealing with residential lending you’re dealing with your credit score. You’re dealing with your debt to income ratio and you’re dealing with loan to value and a couple of other factors that affect you personally.

When you’re dealing with commercial lending, it’s more lenders are making the decision based on the performance of the property. When I say performance of the property I mean what rents are coming into the property? What is the rent roll for the property? What is the total gross rents that the property collects versus the total expenses or outlay of cash needed to operate the property on a monthly basis, on an annual basis?

Typically what commercial lenders like to see is what’s called a debt coverage ratio of let’s say 1 1/4 or 1.25 which means, I’ll give you the simplest example. If you have debt on the property or a mortgage on the property and that mortgage is about $1000 per month, most lenders like to see at least 1250 in income coming in or a 1.25 debt coverage ratio. They also want to see that the property is cash flowing on a regular basis. They want to see that you can sustain the property over a long period of time and that it is going to be successful for you. Again, it has less to do with your credit score and your personal debts. More to do with the property’s performance over time.

What else can we talk about commercial lending? Rates tend to be a little bit higher than residential lending. Typically a half a point I would say from my experience. You’re seeing a half a point, maybe a point more depending on the risk that the lender assumes with the property. Commercial lending can be recourse and nonrecourse as well. Nonrecourse loans means that you do not need to give a personal guaranty. If the property for some reason does not perform, and the note is not paid, you will not be personally liable for that. When you’re talking about residential mortgages, if you do not pay you get foreclosed on and that foreclosure goes onto your credit report there’s a ding there when you go to purchase another property.

If you are relatively new to the commercial lending space, most lenders probably will want you to give a personal guaranty to the LLC or the entity holding the property. Once you have a little bit more experience, or you hit a certain loan volume, a certain loan number, typically a million dollars you can usually look for a nonrecourse loans where you are not personally liable for that entity or the performance of that property if the property does not perform to expectations.

Last but not least, you are typically going to find LTV between 75 and 85% so loan to value ratios between 75 and 85%. Which means unlike residential lending where you can put as little as 0% down with a VA loan or a 3 1/2% down with FHA and 3% down with mass housing, most commercial lenders are going to want to see at least 15-25% what they call a skin in the game. They want you to have some equity into the property right off the top. That equity can be the equity pulled together by partners. You can have several owners of one LLC pulling funds together to make that down payment of 15-25%. That’s a lot of times what you see especially with properties of a million or two or three million dollars where it is unlikely that one individual has the capital or even if they do, wants to risk the capital themselves. You find that a lot of individuals tend to pool money together with two, three or more partners form that LLC to meet that down payment requirement.

That’s commercial lending in a nutshell. If you would like more information on commercial lending, or would like to be connected with some of our commercial lending contacts, please click the link in the description below and fill out the quick form. Tell us a little bit about yourself and we can connect you with one of our contacts, one of our lenders that we do business with.

Financing

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4 Task You Must Complete to Maximize Your Property Sales Price


 

Hi All, I Just want to go over briefly four things that you can do when you’re selling your multi-family. Your two, your three, your four unit, your residential multi-family property. Four things that you can do to make sure that you maximize the price. That you get the most. When putting that property on the market, you walk away with the most money that you possibly can as a potential seller.

Four things that you can potentially do. Let’s start with number one. You can provide a unit vacant. Why would it be beneficial to you as a seller to provide a unit vacant when selling your multi-family? You have two potential buyers when you’re selling, let’s say a three family property. You have the owner-occupant buyer. Someone who’s going to purchase the property, move into the property, move into one of the units and rent out the other two to supplement their income. Then you have the investor. An owner-occupant buyer is almost always going to pay more for the property, their primary residence, the place that they’re going to live, than a potential investor.

Investor’s going to come in and they’re going to analyze the numbers specifically and strictly and say, “Does this property make sense from a financial standpoint and if it does or it doesn’t, I’m going to make my decision based on that.” An owner-occupant buyer is going to move in and make it their own. It’s the place that they live. There’s an emotional attachment to that place. By you providing a unit vacant, you’re essentially allowing them to move in. Without a unit vacant, essentially if all three units are occupied, only an investor can buy that property from you. Basically you’re eliminating the owner-occupant opportunity if all three units are tenant occupied and there’s not a space for an owner-occupant.

The first thing I would say is I wouldn’t go out and necessarily kick a tenant out, but if there’s a tenant moving out and you’re considering selling somewhere around that same time, you know you have a lease expiring in three or four months, it may be a good time to say let’s put the property on the market while I have this potential vacancy and move in at that time.

Number two. Make obvious repairs. If there are some things that need to be done, you are going to maximize your selling price by making sure that the property is shown in it’s best light. That seems obvious to some people but many people don’t do it prior to selling. Making sure that any appliances that are broken, light fixtures, front door, back door, the front porch, back decks, making sure that those things that are quite obvious as soon as you walk up to the building or as soon as you walk inside a unit, this is clearly not the way it should be. Making sure that those things are done prior to putting your house on the market or prior to putting that property on the market is going to maximize your sale.

Prepare for a spring or summer sale. If you are, let’s say it’s January, 2017 and you are moving into, considering selling, you have about three or four months before that spring market hits, that April, May, you really want to preparing your property for that spring marker or that summer market coming up. The reason you want to ideally sell in the spring or the summer, you have a larger pool of buyers at that particular time. Investors are going to be around all year round. But your owner-occupant buyers, if they’re renting an apartment right now and considering buying, their leases typically end sometime during the summer months. You’re going to have a much larger pool of buyers. People typically like to move during the summer when things are easier and not moving in the snow, especially in a place like New England. Preparing yourself mentally, getting your documentation ready, letting your tenants know about the sale, and making sure that you’re getting those things done during the winter months so when the spring and summer rolls around that your house or your property is prepared for that sale.

Last but not least, overpricing your property. Don’t overprice your property. Price it, I would say accordingly. Talk to your realtor, pull comparable sales, what’s going on in the neighborhood, what makes sense for this particular property compared to other sales. When you overprice the property, what you’ll end up with is potentially a stale listing. A stale listing is something that’s been sitting out there for 60, 90 days and now it’s not getting as much attention as it should be. When you do that you actually tend to get a lower sales price then you would have if you just priced the property appropriately from the beginning and sold it as quickly as possible to the best buyers during this spring or summer market.

Again, providing a unit vacant you’re going to get more money from an owner-occupant than you are from a potential investor. Making the obvious repairs. Making sure that your property is presentable and showing in the best light. Preparing for that spring or summer sale and not overpricing your property. Making sure that your property comes on the market at a reasonable and fair price compared to other similar properties that are selling on the market. If you do these four things, you’ll be sure that your sales price is maximized and you’ll get the most money and put the most money in your pocket after the property is sold.

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South Boston’s Multi-Family Sales Are On The Rise. Check Out These Stats!

South Boston Multifamily Sales & Rental Market Report   

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? Is now a good time to sell?
Here is South Boston’s multifamily sales and rental market statistics for the last 6 months.

Total Multi-Family Listings SOLD: 24

Average Living Area by Square Feet: 2,958.00

Average Listing Price: $1,308,736

Average DOM (Days on Market): 49.11 Days

Average Sales Price: $1,256,778

Average Rent for 1 Bedroom Units: $2,189

Average Rent for 2 Bedroom Units: $2,828

Average Rent for 3 Bedroom Units: $3,616

Average Rent for 4 Bedroom Units: $4,178

 
I Want To Know My Home’s Value!
 

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 you’d like to receive data for. 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.

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4 Documents You Must Have During A Successful Home Sale

I Want To Know My Home’s Value!

I want to talk to you today a little bit about documentation, preparing to sell your multifamily property, any property in between two and 20 units. Typically, we’re talking about two and four units, residential property, but this also applies to larger investment properties as well. Documentation, getting ready to sell. What are you thinking about? What are the documents that you need to gather? I’m giving you right here is four sets of documents that your potential buyers are going to want to ask you about, your realtor is going to ask you about, so you might as well go ahead and get these documents prepared as early as possible.

The first set of documents that you want are your tenant leases and the rent roll. You don’t necessarily have to provide the actual physical copy of your leases to your potential buyers, but what they’re going to want to know is when did those leases start, when do those leases expire, and then the second half of that is what each tenant is paying. That’s a big part of selling a multifamily. It’s a big factor when potential buyers are buying multifamily, are am I going to be able to move into a unit? If one of the tenants are below-market rent, when does that lease expire and when am I now able to increase the rent. Making sure that you’re collecting that information, understanding when are your leases expiring and what each tenant is paying and being able to provide that information to your realtor, so your realtor can provide that to potential buyers.

The second set of items that you’re going to want to collect are systems warranties. Did you recently have the roof changed? Did you recently install a new heating system or a new AC system? Appliances, did you recently install appliances into any of the units within the buildings and are they still within warranty? That is adding value. If you are able to take those warranties and provide those to the new potential buyer and show this refrigerator was installed last year and it’s still under warranty, that is a great way to provide value, so you really want to go out and see if you can collect any warranties that you have from roof to heating systems to appliances, anything else. Systems maintenance. When was the last time that your heating system was serviced? If you have a good maintenance schedule in place, you should have been documenting that over the years and being able to turn that over to a potential buyer is going to create value and give the buyer a sense of ease knowing that the systems were maintained over the years. That is something else that you should be looking for in preparation for selling your multifamily house.

Last but not least, we live in Massachusetts and then throughout the country, 1978 lead paint law. Lead paint is no longer used after the year 1978, but within Boston and a lot of the areas surrounding us, these homes were built 1910, 1920s, so a lot of them still do contain lead paint. If you have lead paint documentation, if your apartments have been lead paint certified, this, again, creates a lot of value, creates a lot of comfort with your potential buyers and if you can provide that documentation right up front to show them that that’s not something that they don’t have to worry about any longer, they can now move children under the age of six in and not have to worry about the lead paint hazard. That is going to create a lot of value for you. It’s going to help you potentially get a quicker sale and for a higher sales price in making sure that you are also collecting that lead paint documentation as well. Four things, tenant lease and rent rolls, warranties, maintenance schedules, and then a lead paint documentation. If you provide those four sets of items, you should be in really good shape to get your property sold.

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Malden 2-4 Family Sales Are On The Move… Just Look At The #’s

Malden’s Multifamily Sales & Rental Statistics

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? Is now a good time to sell?

Here is Malden’s multifamily sales and rental market statistics for the last 6 months.
Total Multi-Family Listings SOLD: 87
Average Living Area by Square Feet: 2,640.00
Average Listing Price: $543,735
Average DOM (Days on Market): 43.11 Days
Average Sales Price: $534,782
Average Rent for 1 Bedroom Units: $1,453
Average Rent for 2 Bedroom Units: $1,854
Average Rent for 3 Bedroom Units: $2,138
Average Rent for 4 Bedroom Units: $2,345

I Want To Know My Home’s Value!

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 you’d like to receive data for. 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.

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You Should Buy An Investment Property Before Your Primary Home. Here’s Why:

VIDEO: Many would be investors start thinking about investing in real estate too late in the game. Here are a couple few why you should start thinking about real estate investing long before you buy your dream home.

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Do You Know What A Multi-family In Quincy Sells For? Check Out The #’s!

Quincy Multifamily Sales & Rental Market Report
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? Is now a good time to sell?

Here is Quincy’s multifamily sales and rental market statistics for the last 6 months.
Total Multi-Family Listings SOLD: 80
Average Living Area by Square Feet: 2,523.00
Average Listing Price: $642,735 (What seller asked for the property)
Average DOM (Days on Market): 45.11 Days (How long it took to sell)
Average Sales Price: $632,778 (What buyers actually paid for the home)
Average Rent for 1 Bedroom Units: $1,445
Average Rent for 2 Bedroom Units: $1,772
Average Rent for 3 Bedroom Units: $2,133
Average Rent for 4 Bedroom Units: $2,533

I Want To Know My Home’s Value!

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 you’d like to receive data for. 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.

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When you are preparing to sell a MultiFamily, Here are 8 things you should do to ensure a smooth transition and to limit surprises. 

  1. Hire a Certified Professional Accountant (CPA) who is well versed in real estate. You want to know what your tax consequences are when you sell. There are capital gains taxes associated and you want to know next steps before you begin the process.
  2. Talk to a Realtor who is familiar with your area and multi-family homes. It is not just about listing your home, they need to understand the intricacies of a multi-family and how rent, condition, location etc affects the value. Is it a buyer’s market or a seller’s market?
  3. Does it make sense to sell as condos? Boston is experiencing a real estate boom and oftentimes in some neighborhoods, it is more profitable to divide the property and sell as condos as opposed to selling as a multi-family.
  4. Informing tenants of the sale. You want to inform them as early as possible. You want to be respectful of your relationship because a disgruntled tenant can hinder the sale of your property. You want their cooperation in coordinating showings, assist them in providing information for relocating.
  5. Gather property Financials. Buyers want to know the additional cost associated with the property so they know if the numbers make sense
  6. Gather tenant lease information. The buyer will want to see the lease agreements. When do leases expire? Are they market rent rates or below market rents?
  7. Fix any major and minor repairs in home. You want building in best shape possible as first impressions are lasting. Also, home inspections are a time to renegotiate the price. If you do not want to renegotiate the price, repair as much as you can that makes sense (discuss with realtor) so that you get the strongest offers.
  8. Connect with a real estate attorney. You want to ensure your best interests are protected.

For more information and helpful tips, please follow our blog posts or connect with us on  facebook or email at contact@mandrellco.com

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The majority of Bostonians hate writing a check to their landlord every month, particularly if you live in Roxbury, Jamaica Plain, and Lower Mills areas. Sometimes you are cursed with noisy neighbors, or a super strict landlord who is looking for any reason to push you out so he can get the next highest paying tenant.

If any of the above applies to you, you probably want to buy a home…yesterday! Wanting to buy a home and being ready to do so are two different things. Are you financially ready for the monthly mortgage payment and budgeting for repairs?

Here are five signs that you’re not ready to buy a house just yet. But don’t fret; even if you are struggling with these financial issues, you can still become a homeowner. You’ll just need a bit of patience and improved financial skills.

Buying a home is expensive. You’ll need money for a down payment. If you are buying a home with an FHA loan, you’ll need a down payment of 3.5% of your home’s final purchase price, depending on your credit score. For a $300,000 home, that comes out to a down payment of $10,500. Thanks to Mass Housing, we have a 3% down payment program, but that still equates to $9,000. These numbers do not include closing costs, moving costs and other miscellaneous costs associated with moving into a new home. 

Closing costs are the fees that mortgage lenders, title insurers, attorneys and others charge you to originate your mortgage loan. We generally tell people plan for an additional 2% to cover these costs which equals $6,000.

It’s true that you can get help with some of these costs. You can use gift money from relatives, for example, to pay for all or part of your down payment. You might be able to convince a home’s seller to pay for all or part of the closing costs. In our current market, sellers are not inclined to do closing cost assistance unless you plan to purchase well above asking. 

What to Do

It’s best to start searching for a home only after you’ve saved enough money to cover a down payment and your estimated closing costs. Another option would be to look into programs available by your municipality that encourages home ownership by providing financial assistance. There are also some non-profits and other organizations that allow you to purchase with 0% or a rate lower than industry standard. (NACA.com)

Sign 2: Your Credit Score Is Bad

Your credit score is a key number when you’re applying for a mortgage. The best interest rates go to individuals with the best credit scores (above 740). The lower your score, the higher your interest rate and subsequently, the higher your monthly mortgage payment. You can purchase a home with a 580 credit score according to FHA guidelines but there are only a few lenders willing to accept a score this low. 

What to Do

First, order at least one of your three credit reports from AnnualCreditReport.com. You are entitled to one free copy of each of your three credit reports — maintained by the national credit bureaus of Experian, Equifax, and TransUnion — once every year. Once you get your report, read it carefully. It will list how much you owe on your credit cards and how much you owe on student loans and car loans. It will also list whether you have any late or missed payments during the last seven years. Those late or missed payments will send your credit score tumbling.

Next, order your FICO credit score. You can do this from the credit bureaus, too, but you’ll have to pay about $15 to do so. If your score is low, and there are negative marks on your credit report, it’s time to start a new history of paying all your bills on time. You also need to pay down as much of your credit card debt as possible. Both of these actions will steadily increase your credit score, though it could take months or even more than a year before your score recovers enough to make you a good candidate for a mortgage loan.

Sign 3: You Have Mount Everest of Credit Card Debt

Your debt-to-income ratio is another key number when it comes to buying a home. Lenders want your total monthly debts, including your estimated new mortgage payment, to equal no more than 43% of your gross monthly income. If your debt-to-income ratio is too high, you’ll struggle to earn approval for a mortgage. Some lenders will go as high as 50% due to the high cost of rent but generally, they want to see that you are not up to your eyeballs in debt.  

What to Do

I would say pay off your credit card debt but if you could have, you probably would have by now. I will STRONGLY recommend you always make more than your minimum monthly required payment. 

Sign 4: You Routinely Miss Your Monthly Payments

Making late payments, or missing payments completely, is a sure sign that you’re not ready for the financial responsibility of owning a home.

If you miss a mortgage payment by more than 30 days, your credit score will fall by 100 points or more. If you miss enough, you could lose your home to foreclosure. This is not like a landlord where you get warnings before it affects your credit… this is immediate. 

What to Do

Learn better financial habits before you apply for a mortgage. Set up reminders on your phone or computer alerting you when bills are due or use my favorite method… automatic payment. You could set aside one day each month dedicated to paying bills if you prefer the old fashioned paper method. Don’t apply for a mortgage until you’ve broken the habit of regularly missing your monthly payment due dates. 

Sign 5: You Don’t Have a Stable Job

You’ll need a steady, reliable stream of income if you use a mortgage to finance the purchase of a home. If you’re worried that you’ll lose your job, or your income is sporadic with no real pattern, you should probably NOT purchase a home. Generally, you need 2 years of full time work history. If you are self employed, you will need other documentation to help qualify you for a loan. 

What to Do

Find a job that is reliable and that pays you a stable income each month. Don’t take the risk that everything will work out. You don’t want missed mortgage payments on your credit reports. And if your job is unstable? You’ll greatly increase the risk of these red marks. If you are self employed or you operate on seasons… then you should think of yourself as a chipmunk… get good at storing away for the slow months. 

I hope this advice was helpful. We strive for our clients to be responsible home owners and want to ensure you will not be putting your home up for sale due to foreclosure. We want to help you BUILD WEALTH THROUGH REAL ESTATE!

 

For More information, please contact one of our agent specialists for your area or connect with us on… 

Dorchester Real Estate Agent

 

 

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Recently I was finally able to go to my first Boston Wealth Builders event, “Building Wealth Through Multifamily Investing” and it was everything I hoped it would be. A big thing for me when deciding to go to any real estate meetup is to not have to sit there and listen to a bunch of sales pitches from whatever guest speaker they decide to have attend that day. Instead, this is event was purely educational, covering topics such as evaluating your target market, determining property values, calculating cash flow, etc. As a beginner investor it was great to be educated on so many different topics involving multifamily real estate investing.

Another aspect of the event that I really enjoyed and thought was powerful was the several guests that attended to also speak. There was a mortgage broker from Sierra Pacific Mortgage, an attorney from Mahoney Law Group and a real estate agent from The Mandrell Company. No, they were not there to sell, but to cover their own topics as well as reinforce the organizer’s presentation.  The mortgage broker went into great detail about all the different loan options that are available to people, along with several that some people may not be aware of. Also, he explained some of the qualifications that his company goes by that may present an easier option to obtaining a loan that could help you fund your deal. The attorney provided a handout which essentially documented a step by step walkthrough of what you need to be doing throughout the process of purchasing a multifamily property which was incredibly helpful. Lastly, the real estate agent supplied a ton of additional information as well as his own personal experience of what he is noticing in these current markets and where some of the best places might be to look for multifamily properties.

At the end of the event they had allowed plenty of time for questions to be answered and even let people talk individually with any of the speakers that were there. This was a great opportunity to start networking with the type of people that you need to establish relationships if you want to be successful in this business. Ultimately this was the biggest take away from that day’s event. The importance of networking cannot be stressed enough and to be a part of a group that prides itself on creating an environment in which you can connect and build relationships with like minded people is something that I definitely look forward to continuing.

 

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I have 2 friends who both recently purchased their first homes in the Boston area. While I’m happy for them both, my friends took two completely different approaches to home ownership, which resulted in two wildly different financial scenarios. Below are the details

Larry (friend #1) makes about $40,000 annually, has very little consumer debt and a fair credit score (650). Larry was pre-approved by his mortgage broker for a $300,000 homes purchase based on his financials. As of 2016, $300,000 in Boston will buy you an entry level single family in the city which is what Larry decided to purchase. His mortgage, taxes, insurance, and water bills cost Larry about $2,077.30 after a 5% down payment and paying his own closing cost. His monthly cost of detailed below.

Larry’s Payment Information
Principal & Interest: $1,360.63
PMI: $250.00
Water/ Sewer: $50.00
Taxes: $250.00
Insurance: $166.67
Total Monthly Payment: $2,077.30

Pros & Cons:

  • Larry has the joys of single family living and doesn’t have the responsibilities that come with tenants 
  • If anything happens to Larry financially, he is on his own when it come to covering his monthly obligations
  • Larry was able to purchase this home with 5% or just 15,000 out of pocket.

John (friend #2) makes nearly the same annual salary of $40,000. John also has very little consumer debt and a 650 credit score. Instead of accepting the same $300k pre-approval Larry did, John decide to talk to his mortgage broker about purchasing a multifamily property, more specifically a Boston triple decker. John planned to live on one floor and rent out the other 2 units to help cover his monthly cost.

John’s mortgage broker did some research and found that apartments in John’s area were renting for $1650 per month on average. If John occupied one unit and collected rents from the other two, he would be putting an additional (after his own salary) $3700 per month in his pocket. In this scenario, John’s mortgage broker re-evaluated John’s financials and determined that if John was to purchase a triplex, he could afford to spend up to $550,000. Simply put, the additional rental income allowed John to purchase a larger home. After John collected rental income from his tenants each month, John was left with a balance of $4.17 that he need to cover. John was essentially living for free. ($1650 per month x 2 rental units = $3700 – Monthly Cost of $3,704.17 = $4.17 balance)

John’s Payment Information
Principal & Interest: $2,554.17
PMI: $400.00
Water & Sewer: $150.00
Taxes: $350.00
Insurance: $250.00
Total Monthly Payment: $3,704.17

Pros & Cons:

  • John was able to purchase this property with 5% (27,5000) out of pocket.
  • John has a very small obligation every month  (4.17$) to cover but what if one of the tenants moves out? John will need to save money to cover the cost of vacancy. He will also need to cover the cost of repairs to the building/ tenant units. 
  • John doesn’t have the privacy single family home provides.
  • John will eventually raise his tenants rents. If rents go up, John’s income from the property goes up as well. Now he’s putting money in his pocket every month after his expenses…”cash flowing”
  • If John ever moves out of his apartment he could also rent it for market value. In the near future he could be putting $2000 into his pocket every month.
  • John does need to create a reserve account for the raining days that come as a landlord.

 

Would you like to speak to one of our mortgage brokers and find out what you qualify for? Are you interested in purchasing a multifamily home and need more information? Give us a shout at 617-297-8641 or email us at Contact@MandrellCo.com

 

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10 Must Do’s Before Selling Your Boston Triple Decker

Are you preparing to sell your multifamily property (2+ units) and want to make sure you earn top dollar from the market? The best way to maximize the resale of rental apartments is to get buyers to fall in love with the building. Here’s a list of 10 things you can do to ensure buyers open up their wallets.

1. Inform your tenants of the sale:
A multifamily seller’s tenants can often make or break a transaction. If the tenants are non responsive to showing requests or provide damaging information to prospective buyers it could instantly mean a lower sales price or possibly no sale at all. The best thing to do to avoid trouble is to have a conversation with your tenants about your intention to sell. You’ll need to inform them that potential buyers are going to be viewing their living space and they will need to make themselves (or their unit) available during certain scheduled times. Let them know you’ll be respectful of their living quarters but will need access for potential buyers soon. If there are any complaints that have yet to be resolved, now would be the best time to handle these issues.

2. Prepare the property financials:
When you’re selling a multifamily home you need to consider your potential buyers and their wants/needs. Many multifamily homes are purchased for investments purposes. If you’re perfect buyer is an investor, they’re going to want information on the buildings operating expenses. You should gather this information and be prepared to show it to potential buyers during the selling process. Operating expenses include: Taxes, Insurance, Water/Sewer, Common Area Cost (Heating & Electric), Utilities, Trash Removal, General Maintenance, and anything else needed to keep the building running smoothly. They are costs your potential buyer will need to consider during the purchase.

3. Provide details on your systems:
When were the heating systems installed? When was the roof installed? What is the age of the hot water tank(s)? How old are the windows? Any electrical or plumbing upgrades recently completed. Have your real estate agent provide you with a check list of home systems so you can make sure you’re fully prepared to answer questions the buyer or investor has.

4. Get a home inspection done:
Home inspections are just for buyers. As a seller you can also have a home inspection done for the property prior to placing it for sale. This proactive approach will cost you a few extra bucks, but it will also allow you to see exactly what your potential buyers are going to see. The more issues you can resolve prior to the buyers home inspection, the less you’ll have to negotiate and the more the buyer will pay.

5. Bring your rents to market value:
If market rents for a two bedroom apartment in your area are $1500 a month (but you’re a nice lady) and you’re charging your tenants $1100 dollars per month, you’re hurting the value of your property. Charging tenants less than market value is what many landlords do to keep good tenants in place. They think to themselves that they don’t want to upset things and force the tenants to move out. While there is nothing wrong with this strategy, landlords are not helping the resale value of the building. For example, if you have two triple deckers side by side with one landlord collecting $1100 ($3300) per month while the other landlord is collecting $1500 ($4500) per month, all else being equal, the multifamily with the hire rental income is going to have a higher value. Put yourself in the buyer’s shoes. If I have the option to purchase two identical income producing homes, why would I pay the same price for a building producing less income than its counterpart? I wouldn’t. If you’re timeline allows, it may make sense to increase the rents a few months prior to selling your property to show the increased income. Consult your realtor about this strategy and make sure to properly assess the current rental market.

6. Assemble your real estate team:
Do you have a real estate agent? Does that agent understand the local market, the investment business and what potential investors are searching for? Do you have a good real estate attorney to represent you during the transaction? Your attorney will help work out the details in the purchase & sales contract which you and the buyer will sign. Have you spoken to your CPA or tax preparer? Do you fully understand the (if any) tax consequences for selling this investment property?

7. Have leases and tenant documents available:
Have your tenant leases and security deposit information available to show potential investors. Once both parties are in agreement on a selling price, and an offer has been accepted, your buyer will want to see leases and ask about deposits you have in place. This is important to them as these will be the documents they will need to honor after the property is in their name.

8. Make necessary repairs to the property:
If you’ve done a pre-sale property inspection, you now have a good list of what the property will need to avoid any buyer concerns. Now is the time to take care of these issues. Ask your realtor for local contractors and handy men and have them take care of what’s necessary. Making these proactive repairs will help deter the buyer from requesting a discount and help you achieve top dollar during the sale.

9. Have a Realtor provide the home’s value range:
Your home’s value isn’t determined by a real estate agent, the bank or an appraiser. All of these people (or entities) can provide you with opinions of value based on their market knowledge, but the true value of your property is always going to be determined by the open market (buyers). Your building is only worth as much as someone in the market is willing to pay for it. When buyers determine what to pay for a particular property they review what other properties have sold in the neighborhood similar to the one they’re considering. They do what’s called pulling “comps”. They “comp” or compare your house to other sold homes in the area. When determining a value, your real estate agent will do the same and provide you with this information. They will sit with you and go over other recent sales in the neighborhood and determine where your property lines up.

10. Brush up on the current real estate market:
Are you operating in a buyer’s or seller’s market? What’s happening within the local economy and is now a good time to sell? Your real estate agent will be able to help you answer both of these questions. It’s important to know if the current market benefits you as a seller or does it work in the favor of buyers. A sellers market is anytime inventory (amount of homes on the market) is really low, but there are a larger number of buyers looking to make a purchase. This is the best time for you to sell. In a perfect world you’ll have multiple buyers bidding for your property and driving the price upward. A buyers market is a condition when there are more homes available than willing and able buyers.
The local economy should also play a role in your sales decision. Is there development going on in the area? Are interest rates good and loans readily available for buyers? If money is tight and buyers aren’t able to find lending, you’ll have a tough time finding a suitable taker for your property.

Contact me directly to learn more about how The Mandrell Company can help you sell your multi-family for the most money in a reasonable time frame.

Willie@Mandrellco.com or 617-755-4938.

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Roslindale Real Estate Is on FIRE! Here’s What’s Selling…

Are you in the market to buy, rent or sell property in Roslindale? Before you make a move, understanding the local market condition can make all the difference. We’ve outlined below exactly what’s happening with Single Family, Multifamily, and condos in the area. All these number reflect what’s taken place over the last 6 months. 

Single Family Listings

Total Homes SOLD: 72

Average Living Area by Square Feet:   1,897.04

Average Listing Price:    $488,750

Average DOM (Days on Market): 40.15                                 

Average Sales Price:  $491,923   

Condominium Listings

Total Condos SOLD: 97

Average Living Area by Square Feet:   1,196.04

Average Listing Price:    $372,240

Average DOM (Days on Market): 25.15                                 

Average Sales Price:  $374,938

Multifamily Listings

Total Multifamily Buildings SOLD: 26

Average Living Area by Square Feet:   2,808.04

Average Listing Price:    $583,240

Average DOM (Days on Market): 65.15                                 

Average Sales Price:  $588,327  

Would you like to get your own FREE Sales and Rental Market Report catered to your specific area(s)? Just send a quick email to Contact@MandrellCo.com to receive your monthly report.  We can provide you similar data for any town or city in the commonwealth.

Please call us directly at 617-297-8641,  for custom reports or questions about the data provided.

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It is no surprise Boston rents have skyrocketed it seems over night. Some areas have seen increases as much as 25 percent over the past few years. Salaries are not keeping up with the pace of housing costs. This fact hurts middle to low income tenants but provides great benefit to landlords and young professionals with cash to burn for convenience. 

The hub is one of the most expensive markets in the nation. Overseas investors purchase properties without seeing them, they simply want somewhere to park their money and earn a great return on that investment. The Boston market is ideal because we are the educational hub, young professional and business hot spot.

Not only do we have oversees investors, but also new investors who want to own a property and have tenants help pay their mortgage. In the short term, the owner’s “rent” is cheaper as tenants pay the bulk of the mortgage. In time, as property values appreciate and owners take advantage of the many tax benefits of owning real estate, it becomes a more profitable and solid investment. If the market crashes, your home may lose value as far of sale price but your income from the property is stabilized and you are not financially affected if you are a responsible landlord. 

In addition to owner occupant investors, we have young professionals who are looking to diversify their portfolio by adding a little local real estate. They do not reside in the property but rather use it as a generator of additional income. Boston’s market is very strong and has weathered most of the financial downfalls of the nation so it is seen as a more safe investment.

Jamaica Plain and Roslindale are hot beds for hipsters and young professionals, and investors know this. Adding amenities and converting triple deckers to condo units is extremely lucrative and they are cashing in on the trend. Investors can spend full price on a triple ($600,000), convert each floor to a condo and sell each unit for upwards of $400,000 each unit. 

The benefits of buying a multi-family is very apparent to oversees investors and becoming more popular with young professionals. If you are interested in purchasing or selling your multi-family, please email us at Contact@MandrellCo.com.

One of our multi-family focused agents will be in touch and can walk you through everything you need to know, whether a buyer or a seller.

Contact us TODAY: Contact@MandrellCo.com 

 

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**Your lender decides what you can borrow but you decide what you can afford.**

When you make the decision to purchase a home, it is worth your time to consider total expenses and mortgage payments in your decision.
Lenders are careful, but they make qualification decisions based on averages and formulas. They do not take into account the nuances of your spending patterns and responsibilities. So, leave a little room for the unexpected, as well as the obvious new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.
Deciding how much you can afford should involve some careful attention to how your financial profile may change in the coming years. In the long run, your own peace of mind and security will matter most.
If you or your spouse suddenly became unemployed, would you be able to cover your mortgage and other expenses?
Would you be able to maintain your current lifestyle with your new mortgage payments?
Would you be able to pay your mortgage with the addition of a child?
Would you have money for emergencies (car troubles, broken heater)?
These are all things you need to think about when deciding to purchase a home. It is an investment into your future and you want to make a wise choice. To learn more about investing in real estate visit BostonWealthBuilders.com or schedule a no obligation consultation today!

 

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Word around town is that the big banks are going to start to foreclosing on many past due mortgages they have on their books. The feeling is they’ve been holding off until the economy shows signs of stabilizing and in many place we’re starting to see that stability. If you’re interested in locating investment opportunities through short sale and foreclosed properties, now would be a good time to start really eyeing to the market.

Here is our current Short Sale and Foreclosure list for Dorchester, MA.

197 Woodrow – Single Family
List Price: $235,853
Boston, MA : Dorchester 02124
36 Mount Ida Rd – Unit 3 List Price: $209,900
Boston, MA 02122
55 Devon Street – Unit 1 List Price: $234,900
Boston, MA : Dorchester 02121
123 Ruthven St – Unit 123 List Price: $241,000
Boston, MA : Dorchester 02121
77 Willowwood Street – 3 Family
List Price: $389,900
Boston, MA : Dorchester 02124
636-638 West Park Street – 3 Family
List Price: $424,000
Boston, MA 02124
47-49 Walnut – 3 Family
List Price: $480,000
Boston, MA 02122

Not interested in Dorchester? Are you interested in foreclosures and/or shorts sales in another area of Massachusetts? Please email (Contact@MandrellCo.com) your area(s) of interest and we can send you an updated report within a few hours.

 

 

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Dear Malden and local North Shore Landlords,

My name is Joe Rodriguez and I am a Licensed Realtor, and fellow Landlord on the North Shore. If you have an apartment(s) for rent, I would love to assist you in finding and placing the ideal tenant. As a real estate professional living and specializing in your rental market, I work directly with the most qualified tenants around, and currently have several such tenants looking for rental space.  I would love to visit your rental, take some pictures to begin showing it to my very interested client base, as soon as possible. If you list your rental with me and he Mandrell Co we will take care of your tenant’s application, credit checks, employment and background checks, lease agreements and more. Our services include:

  • Showings: We coordinate all showings of your vacant unit and allow you to relax and no have to worry about taking phone calls from non-qualified individuals.
  • Tenant Applications: We collect all tenant applications which includes all necessary documentation to verify the application information is correct.
  • Background Check: Our office conducts a series of criminal and sex offender checks on all applicants. We want to ensure you’re tenant is who they say they are.
  • Employment Verification: We contact the current employer of all applicants to verify their work  status and ensure their income was stated properly.

When you list your rental with me and The Mandrell Co, we will handle everything for you from start to finish. . The best part about listing your rental with us is that there is absolutely no charge to you for our services!

Please contact me if you’re interested in placing a well qualified tenant in your rental or if you have any questions about what we offer.

I look forward to working with you.

Sincerely,

Your North Shore Real Estate Specialist, Joe Rodriguez

 

Joe Rodriguez Real Estate ProContact Me: (401) 641-5774

Joe@MandrellCo.com

www.JoeRodriguezRealEstate.com

 

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What are 2-4 family homes selling for in Attleboro, MA?

 Are you in the market to buy or sell a 2-4 family building in Attleboro or a surrounding neighborhood? Do you have an empty apartment or a tenant scheduled to move out?  If you’ve answered yes to either of those questions, you should absolutely take a look at the sales and rental numbers below. These stats represent the local Attleboro real estate activity over the last 6 months. Understanding your sales and rental market is key to your long term success as a landlord and rental property investor.

Multifamily Family Sales

Total Homes SOLD: 21

Average Living Area by Square Feet: 2,822

Average Listing Price: $246,046

Average DOM (Days on Market): 61.23

Average Sales Price: $232,412

Local Rental Rates

Average Rent for 1 Bedroom Units: $746

Average Rent for 2 Bedroom Units: $1,159

Average Rent for 3 Bedroom Units: $1,420

Average Rent for 4 Bedroom Units: $2,150

Liz Newcombe - South Shore Real Estate AgentWould you like a FREE sales and rental Market Report catered to your specific area(s)? Just send a quick email to Liz@MandrellCo.com or call 413-834-8052 .  Liz can provide you similar data for any town or city in the commonwealth.
To learn more about Liz Newcombe visit http://mandrellco.com/elizabeth-newcombe/

 

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Are you a current or aspiring landlord in Dorchester?  No matter your years in the rental business, fully understanding your local market is one the most important things 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 units rent for in comparison to your neighbors. Should you be increasing your rents?

Here are Dorchester’s multifamily sales and rental market statistics for the last 6 months.

Total Multi-Family Listings SOLD: 123

Average Living Area by Square Feet: 3,517

Average Listing Price: $532,918

Average DOM (Days on Market): 58.85

Average Sales Price: $527,420

Average Rent for 1 Bedroom Units: $1,451

Average Rent for 2 Bedroom Units: $1,691

Average Rent for 3 Bedroom Units: $1,823

Average Rent for 4 Bedroom Units: $2,170

Want to get a FREE Sales and Rental Market Report for your specific area(s)? Just send a quick email (or complete the contact form below) 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 you’d like to receive data for. 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.

 

 

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Are you a current or aspiring landlord in Massachusetts? No matter the years you have in the rental business, fully understanding your local market is one the most important things 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 units rent for in comparison to your neighbors. Should you be increasing your rents?

Here are Quincy’s multifamily sales and rental market statistics for the last 6 months.  

Total Multi-Family Listings SOLD: 66

Average Living Area by Square Feet:  2,543.61  

Average Listing Price: $526,589

Average DOM (Days on Market): 53.89

Average Sales Price: $516,286

Average Rent for 1 Bedroom Units: $1,358

Average Rent for 2 Bedroom Units: $1,737

Average Rent for 3 Bedroom Units: $2,330

Average Rent for 4 Bedroom Units: $2,265

Want to get a FREE Sales and Rental Market Report for your specific area(s)? Just send a quick email (or complete the contact form below) 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 you’d like to receive data for. 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.

 

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So you just bought your first rental property? Well, congratulations on the purchase and making a huge investment into your future. Now that you’ve become a new landlord, are you wondering what your next steps should be? Here are 8 helpful tips to get you started on the right path.

1. You’re now running a business and you have to treat it as such. This means getting your house and financial documents in order. It’s probably a good idea to buy a file cabinet or safe if you don’t already own one. Make sure you file mortgage, insurance, tax, water and tenants files in a safe place. It’s also a good idea to keep a digital (scanned) file back up somewhere as well. If your paper documents are lost or damaged, it won’t be difficult to replace them if you have an electronic back up.

2. Make contact with your new tenants. You need to introduce yourself as the new owner, provide them with your contact info and collect each tenant’s personal information. This may be a good time to talk with them about any issues the building may have and a little about your plans going forward.

3. Consider establishing separate banking accounts for your rental business. Ideally, you would like to have rental income come into one account as well as rental expenses paid out of that account. You want to keep rental records clean for tax reporting purposes. If you’re combining rental and personal business into one account it can make things more complex for you and your tax preparer. You may also want to consider a separate savings account (reserve fund) or credit card for your rental business as well. You always want to be prepared for rainy days!

4. While you’re at the bank, you may also want to open your tenant’s security deposit account(s). If you’ve collected or plan to collect a security deposit from your tenants, YOU MUST HOLD THESE FUNDS IN AN INTEREST BEARING ACCOUNT AT A LOCAL BANK. Just tell the customer service rep you want to open a “landlord/tenant” account. Before you’re able to open this account you’ll need to have each tenant sign a W9 form. This is so the taxes on the interest paid are reported under the tenant social security number and not you as the landlord.

5. Buy yourself some basic home improvement tools. You don’t have to be very handy to solve many problems in a home; you just need to have the right tool. I would make sure you own a power drill, screw drivers, hammer, tape measure, and a decent size ladder. One $40 tool that will save you thousands is a toilet auger! It’s very simple to use and will help you avoid some hefty plumbing bills when a tenant’s toilet is clogged.

6. Buy a few books for yourself and make sure you have a basic understanding of landlord/ tenant laws in Massachusetts. You don’t have to read each book cover to cover but you should have some type of reference available to you for when things come up. Don’t rely on Google for your answers. The law is different in each state and there are tons of “gurus” on the internet giving bad legal advice. NOLO has an excellent book selection and they’re always up to date/ easy to read. Grab yourself a book on landlord tax deductions as well. There are so many tax write offs for landlords and you don’t want to be missing ones you should be getting. Don’t assume your tax pro will tell you.

7. Create a maintenance plan for your property. A systematic maintenance plan is the best way to keep each of your properties in top shape and avoid costly repairs. Each landlord will have a different plan based on the properties you own, but your schedule may include the following:
a. Changing out the apartment air filters once every 6 months
b. Hiring a rodent exterminator every 6 months
c. Changing out smoke detector batteries every 2 months (important)
d. Cleaning out the gutter in the spring and the fall
e. Cleaning out heating systems in preparation for winter
f. Covering your AC units before the winter months
g. Sweeping, mopping and changing light bulbs in common areas every month

8. Have your real estate agent send you monthly rental comps for your area. So many landlords leave money on the table because they don’t know what’s happening in their local rental market. They buy a new place and allow tenants to stay in the unit without ever increasing rent. Not only are they leaving money on the table, but they are also hurting the value of their property. When rents are on the rise you want to be in the know. Make sure your agent is sending you rental statistics for your area at least monthly. These reports are automated and easy for your agent to set up.

 10 must have forms for all new landlords! Click here to download FREE rental property forms! 

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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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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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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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