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Never Pay Capital Gains Taxes On Your Investment Property Sale

What a 1031 exchange is, it basically is a tax vehicle that allows you to trade up to larger properties. Let’s say for instance you have a three family and you have some equity and you’re thinking about selling. If you sold that three family you are going to get hit with a capital gains tax, or you’re going to hit for capital gains taxes on the sale of that property.

If the value of the property went up, if you’ve obviously been taking a depreciation allowance every years so your basis is down, the federal and state government are going to say, “You received capital gains from this investment and you are going to get taxed on the sale. To avoid capital gains taxes and to use that money or the portion of tax that the federal government would have taken, to enhance your portfolio it makes a lot more sense to avoid those taxes and use that extra cash to grow your wealth and put it into the next property.

What a 1031 allows you to do is to avoid capital gains taxes, long as you’re following the IRS rules and you are trading up or using the proceeds of that sale to fund your next property. It’s typically used to trade up for a larger property. Let’s give you an example, I sold a $600,000 property and I bought it initially at, let’s say $400,000, I paid the debt down to three, and I was probably going to have a capital gain of let’s say around $200,000 on that property, if not a little bit more.

If I get hit with a capital gains tax and then use the proceeds to invest, I have less money to invest. A smarter, easier way would be to, not easier way but a more intelligent way, would be to use a 1031. Be within the law use a 1031 exchange to trade up to a larger property. Basically what you have to do is you have to use a 1031 exchange company and you have to follow certain guidelines to avoid that capital gains taxes. You have, I believe, identify a property within 60 days and close on that property within 90 days.

Those laws are changing depending on what administration is in, and where we are in housing and how the housing market is doing. Those are the type of things that you want to make sure, using a qualified company, because as those laws move and the rules change, you want to make sure that you are within compliance so you do not get audited or get hit with tax after the exchange

Make sure you’re following the time tables and identifying your property and purchasing and securing the property within a solid period of time. That’s what a 1031 exchange is. That’s how you can use it. Some of the best and the brightest real estate investors in the business are using 1031 exchanges over and over and over again to trade up to larger and larger properties and keep their money moving. They’re constantly keeping their money moving.

For more information about 1031 exchanges or to be connected with a 1031 exchange company, please click the link below in the description, tell us a little bit more about yourself and what you’re looking for. We can certainly connect you with some of the companies that we use on a regular basis. Thanks, hopefully this was helpful.

Financing

 

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New Construction Duplex – Get It Before It Goes On The Market!

50 Peacevale Road, Dorchester MA  – $595,000

Expansive two-family home offering quality finishes and peace of mind, to make you love coming home.

Designed and built to Oxbow’s high standards of elegant, efficient and smart. This home combines vibrant exterior detailing, thoughtful interior elements that anticipate the need for privacy and the opportunity for entertainment with the newest systems, energy efficiency, and materials found only in new construction. We want you to love coming home.

First Floor Unit offers 2 bedrooms with granite counter tops, hardwood floors, stainless steel appliances and much more.

Owner’s Unit offers 3 bedrooms, 2 bathrooms, stainless steel appliances, granite counter tops, hardwood floors, in-unit laundry, expansive finished attic space. This unit provides the perfect opportunity to let your imagination run free with numerous options for the attic space. Property comes with highly sought after off street parking.

Property Specifications

3,680 square feet of living space

2 Bedroom/1 Bath First Floor Unit: 1,220sf

3 Bedroom/2 Bath Upper Floor Unit: 2,460sf

Full unfinished basement

Fully Equipped Kitchens

Washer and Dryer Hookups

Off Street Parking

Please contact Denisha McDonald for more information and to schedule a showing. Denisha@MandrellCo.com or 617-982-3337

50-peacevale-first-floor-ff 50-peacevale-second-floor-f 50-peacevale

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On December 14th, 2016 I finally closed on my first rental property! For over a year I have been educating myself as much as possible in real estate investing to one day finally take the plunge. That day finally came. A couple months ago, a property on the MLS cam back on the market. It was a 3-family in Mattapan that needed a decent amount of work to get it up to rental condition. Listed at 390k, I initially tried to get the property at 350k, a price that, once I ran numbers, felt would put me in the best position when it came time to refinance out of my purchasing loan, which I ultimately used hard money for. I submitted the offer with no contingencies, all cash and gave up the buyer’s side commission because I knew on the back end it would be worth it, but that was still not good enough and after some continued negotiation, had to settle for purchasing it at the full asking price. This would create additional challenges, but at the end of the day, if you believe in the deal, you’ll make it work.

Financing the deal was another challenge as I really wanted to find a lender that would finance a percentage of the purchase price and renovations. It was not until it was too late that I found a couple lenders where this was possible. At least for the next one, I will have this component lined up for a more streamlined process. I ultimately had to settle on using hard money, which is great for a short turnaround, but is so incredibly expensive to someone like me who hates to waste money. When it comes to hard money, if you have any other option, please use it instead.

Since the closing, it has been a mad scramble to start the renovations and make sure everyone is working constantly and as efficiently as possible. This is just another thing you will have to do when you slightly overpay for a property. Despite the challenges early on, I couldn’t be happier or more excited to have closed on my first rental property. Every day that passes makes me want to find the next deal more and more. Just always be ready for the more than likely roller coaster ride!

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In our latest series of educational webinars, we explored the topic of self managing your rental properties vs. hiring a property manager. In the fourth and final section of the webinar, we talk about six ways to create more value in Boston rentals, creating a “preventative maintenance schedule” and should you hire a professional and what do they charge.

For more resources and tips on managing your properties, please contact us.

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In our latest series of educational webinars, we explored the topic of self managing your rental properties vs. hiring a property manager. In the third of four sections of the webinar, we talk about protecting your real estate investments and essential landlord/tenant forms that you will need throughout the course of running your business. Many people will say it’s not “if” you will get sued, but “when” so learning about all the strategies that can protect your investments is imperative.

For more resources and tips on managing your properties, please contact us.

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In our latest series of educational webinars, we explored the topic of self managing your rental properties vs. hiring a property manager. In the second of four sections of the webinar, we talk about how you should handle your income, expenses and taxes when it comes to your rental properties. This is another area of focus that is very important when running your business.

For more resources and tips on managing your properties, please contact us.

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In our latest series of educational webinars, we explored the topic of self managing your rental properties vs. hiring a property manager. Even if you initially plan to self manage your properties, it is important to still factor in the cost of hiring a property manager. In the first of four sections of the webinar, we talk about the eight tools every small landlord needs, mastering your rental market and marketing your rental units. Each topic is very important when running your properties like a business and making the best decisions for the business.

For more resources and tips on managing your properties, please contact us.

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The Roxbury Real Estate market is experiencing a boom. Condo sales are through the roof and buyers cant seem to get enough. Single families and multifamilies are selling off market more than on market and being converted to condos because the demand is greatest. 

Mutli family home values have aggressively increased due to the high demand for rental units and the lure of condo conversions. MF homes were selling for $532,000 in 2014 and to date (keep in mind we are only in July) are selling for $879,000.

Multi Families 2014 2015 2016 (January to July)
# Sales 24 33 13
Average Sales Price $532,595 $574,782 $879,308 
Days on Market (DOM) 53 57 105

Half way through the year and condo sales have already matched the entire year of 2015 sales and surpassed that of 2014. Values have increased by $100,000. Savvy investors have taken notice and have been trying to meet the demand for luxury condos in the community. 

Condominiums 2014 2015 2016 (January to July)
# Sales 29 34 32
Average Sales Price $290,023 $404,094 $387,293 
Days on Market (DOM) 65 58 62

Single family sales have always been lower because they are hard to sell due to their large size. The average family does not want the responsibility of these massive Victorians. Savvy buyers have started converting them to multi-families to utilize the space. 

Single Families 2014 2015 2016 (January to July)
# Sales 12 14 7
Average Sales Price $435,975  $406,214   $444,964 
Days on Market (DOM) 63 94 43

For more information on the Roxbury real estate market, connect with your area specialist Terrance Moreau

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We are currently in the process of finishing (hopefully) a 3 family listing in Dorchester, which has had many speed bumps along the way. The owner of the triple decker decided to convert the property into three separate condos, going against the advice that he received from the listing agent. The problem with doing this was that he was therefore, involving many more parties to the buying process than there would be, had he just sold the property as a whole.

Five takeaways from this experience from an outside perspective:

• You need to value your time: Most people do not put a value on their time. Sometimes you need to ask yourself, “is this worth my time” and if your time could be better spent doing something else, then the answer is no. Doing everything yourself isn’t always the best option.
• It is better to hire out the work: Similar to the first takeaway, you hold up the project when you try to do everything yourself. Big picture, it is best to hire a contractor to do all the work. Yes, it is more expensive doing this, but the quality of work should be the best it can be and more importantly, this frees up your TIME.
• Listen to people’s advice: By going against the listing agent’s advice, the owner has added months and months onto the sale of his property. In hindsight, he ultimately admitted that he wished he took the original advice he received and sold the property “as is.”
• Don’t chase extra money: The decision to convert the property to three separate condos was due to the thought that by doing so, the owner could roughly an extra $100,000 off the sale. Even though this will be the end result, the extra six months the project took, along with many other factors, eats into those profits more that you realize until all is said and done.
• Learn from your mistakes: Everyone makes mistakes. The most important thing is that you learn from that mistake and do not make the same one again. Fortunately, the seller acknowledged his mistakes and mentioned that he would do things very differently if this situation arose again.

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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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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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Credit affects all major financial decisions that involve someone lending you money/credit. It should be no surprise that your credit score will also affect your mortgage rate. Your credit scores affect the kinds of mortgages you can be approved for, how much you can borrow, the mortgage rates you’ll pay and even how much you’ll pay for private mortgage insurance (PMI). It’s not impossible to buy a home with damaged credit; it’s just much more expensive.
Credit scores are instrumental in applying and being approved for a mortgage. When it comes to FHA financing at least, you will be required to have a credit score of at least 580 in order to be eligible for a loan. The higher your credit score is beyond that, the better the terms will be. With a 580 credit score you also qualify for the low 3.5% down. If your credit score is below 580, you can still qualify for an FHA loan but you will need a 10% down payment. The drawback to a 580 is that your interest rate will not be at the national average, it will most likely be slightly higher. Consult your mortgage lender for more information. (We work with several lenders who work hard to get you the best rate, to be connected to one of them, please click here)
This is why it’s so important to understand your credit score in the months before you apply for a mortgage. If you do have impaired credit history, you’ll want to work to improve your credit scores before you even apply. And if you already have good credit, you’ll want to keep it as high as possible by avoiding taking on other new debt.
We host seminars throughout the year regarding improving credit and have affiliations with credit repair companies.
For more information, feel free to contact us.

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Thinking about making a rental investment property purchase? Investing in real estate can be very exciting but also very nerve wrecking. Most investors act too quickly or not quickly enough on a potential purchase leaving themselves in a bad situation or without ever securing a deal. Before you submit an offer on the property ask yourself the following questions.

Is this property right for me and my investment needs? What are my short and long term investing goals?

Is this the right property for my risk tolerance? Do I have cash in the bank if things don’t go exactly as planned?

What is the structure of this property? What is the tenant makeup of the building? Will I manage myself or should I hire out?

What are the conditions of the properties big ticket items? Roof – Windows – Heating – Foundation – Plumbing – Electrical?

What are the buildings expenses to operate? What income does the building produce? Whats the return on my investment?

Your answers to these question will provide you with a good feel for the property, your financial situation and hopefully give you a very quick yes or no as to your decision to move forward. It’s also a good ideas to visit each potential purchase with your real estate agent as well as your handy man. These two team members should be best equip to help you make a sound investment decision.

Looking for more tips on investing in rental property? Join Boston Wealth Builders by visiting http://www.BostonWealthBuilders.com. Membership is completely free!

 

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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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We have a unique opportunity that’s just come into our office. We have a client looking to sell a 4000 square foot lot in Dorchester with approved plans to build a 3 family home. The building would consist of 3 bedroom, 2 bathroom units and would include one parking spot for each unit. The seller is looking for $195,000 or B/O. The Dorchester multifamily market is still red hot and this deal is not expected to last long. Please email us at Contact@MandrellCo.com for more information and/ or a copy of the city approved plans.

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Are you a landlord in the Boston area or are thinking about getting into the rental business? If so, make sure you fully understand the required and optional insurance coverage available to you. Having the right insurance in place could mean the difference between a well run real estate business and financial ruin.

Here are several insurance policies every Massachusetts landlord should be aware of:

Owner Occupied Coverage – If you purchase a multifamily building and you intend to occupy the property as your primary residence you’ll be required to obtain homeowners insurance. This insurance will typically cover the building itself as well as all the buildings fixtures. This policy will not cover your tenants personal belonging (or yours if not specifically written in the property).

Rental Property Insurance – Let’s assume you initially purchased a Boston triple decker as your primary residence and then you decide you want to move out and rent the unit you’re currently occupying.  It would be a very good idea to contact your insurance agent prior to doing so. When you initially purchased the property you paid for insurance that covers you as an owner occupant, but not as an investor. Once you move out of that property and it now becomes and investment and no longer “owner occupied”. Investment real estate requires different coverage and you’ll need to discuss these changes with your agent. If you don’t switch your policy after moving out, and attempt to make a claim, the insurance company may argue that you had improper coverage and deny any payments to you.

Vacant Property Insurance – If your property ever becomes entirely vacant for an extended period of time, make sure you alert your insurance agent. There is often a different policy needed for a property that isn’t being occupied due to a higher risk of damage. Vandalism, rodents and frozen pipes are just a few of the many things that are more likely to take place in a vacant building. Make sure you’re fully covered.

Renters Insurance – One of the best things you can do as a landlord is alert your tenants about renters insurance. If there is ever a flood, fire, break in or anything that results in your tenants loosing personal property, they are not covered under your homeowners policy.  It’s a good idea to alert them of this fact (during move in) and encourage them to get coverage. Renter’s insurance policies can be obtained for as little as $300 annually for approximately $10,000 in coverage.

Email us (Contact@MandrellCo.com) and we can send you the form we use to educate our tenants about the need for renter’s insurance.

Umbrella Insurance – If you own more than one rental property, you should speak with your insurance agent about an umbrella policy. Simply put, an umbrella policy protects you from any losses that exceed the coverage amount in your property’s policy. Ask your agent if this type of coverage would be right considering your future investment goals.

Anytime you make a significant change to the occupancy or the structure of your investment property, you want to be on contact with your insurance agent. It’s also a very good idea to review your coverage amounts and deductibles to really understand what your policy covers…and what it doesn’t.

Visit us on Real Estate Investment VideosYou-Tube for more investment real estate tips and tricks.

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Is your New Years resolution to get yourself more involved in the Boston real estate scene? Here are a few great events to get you headed in the right path.

Mutlifamily Investments 101 – Investing & Home Buying Seminar

Thursday, January 22, 2015  – 6:00 PM to

 This is a great event for first time landlords or if you’re thinking about getting into the business. The seminar will run you through all the basics of investing in Boston real estate including evaluating cash flow numbers and multifamily techniques. You can find further details and RSVP with the following link. http://www.meetup.com/Networth-Investors/events/219497293/

How To Get An 800+ Credit Score & Never Be Denied For Anything

Saturday, January 24, 2015  –  to

Are you or someone you know looking to buy a home or invest but a less than perfect credit score holding you back? This is the meeting for you! Learn the ins and outs of your personal credit and how to effectively increase your score!  For location and to RSVP click the attached link. http://www.meetup.com/Urban-Money-Matters/events/219296945/

Home Flippers Financing Summit

Saturday, January 31, 2015  –  9 to 5

Are you looking to flip houses in Mass but not sure how to get the financing? Have you heard about investors flipping property using private financing or “other peoples money”? Come learn how they’re doing from real Boston investors. This seminar will teach you how to find and recruit private money investors to fund your flips!  Seating is limited!
Purchase your tickets with the following link. http://www.eventbrite.com/e/house-flipping-finance-summit-tickets-14920536727?aff=WillieMandrell

 

 

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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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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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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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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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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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With tax season ending a little more than a month ago… I’m sitting here thinking about all the questions I received this year about minimizing investor tax liability and wanted to share some quick tips. 

The tax deductions you will receive as a landlord will only be as good as the expense records you keep. To maximize your annual deductions (or minimize your expenses) you should establish and maintain a meticulous record keeping system for your rental properties. If you ever have to go through and IRS audit, you want to easily show that you were eligible to claim the deductions you did. On the other hand, for every 100 dollars in tax deductions, you will have approximately $25 in tax savings (for tax payers in the 25% bracket), so it’s in your best interest to deduct everything in which you are entitled. Nolo’s – Every Landlords Tax Deduction Guide is great book for learning more about tax deductions and the filing requirements of landlords. This book is updated annually and always contains the most recent laws and tax codes.

One of the best ways to ensure you are maximizing your annual deductions is to keep neat, thorough and exact expense records. Be sure that you are keeping hard copy or electronic files for receipts, invoices and anything else that documents your purchases. If you own more than one rental property, you should separate these records by property and year as required by your schedule E (the federal tax form completed for rental property owners).

A hand written or electronic expense journal is also great to have and should coexist along with your files. Use your journal throughout the year and take notes that will help you or your accountant properly prepare your returns. You will want to use this journal to record explanations for unordinary expenses, miles traveled for your rental business, items you paid for in cash and anything else you may not remember when the time comes to file. Quicken Rental Property Manager is a terrific tool help landlords maintain rental records and if set up properly, it can capture your expense records without data manual entry.

Separating your personal from your rental business banking is another great way to stay organized throughout the tax year. One of the first things you will want to do when becoming a landlord is to open a separate checking account (and maybe a credit card) for your rental business. Deposit all your rental income into this business checking and only pay for rental expanses from that account. Doing so will allow you to easily identify rental expenses when the time comes to file. It will also allow your monthly bank statements to serve as excellent reference tools from year to year, without the hassle of weeding out personal items.

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Attention contractors and investors. Great rehab opportunity. Legal 3 family being used as single. 2 studio lofts and one 3 bedroom apartment. Exposed brick & beautiful wood work throughout. One working furnace. Bus stop out front. Great buy and hold investment property or good for owner occupant. Roof replaced last year. May not qualify for conventional financing. Seller motivated. Bring offers!

Call us for more information! 617-297-8641

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