Jason and Elizabeth got what they deserve
Sam Schneiderman, Broker-owner of Greater Boston Home Team continues his Monday series.
Nine years ago, Jason and Elizabeth were a young couple living in an attic apartment on the Brookline/Brighton line. Someone told them that they couldn’t afford to buy on their own, but they had friends willing to help them with the down payment on a two family in return for a percentage of the tax benefits and profit.
They had questions about home buying, becoming landlords and buying with partners. We talked and it became obvious to me that if we could find them a two family with numbers that worked, they could buy without partners and keep the tax benefits, income and profit potential for themselves.
Since children were part of their 5 to 10 year plan, we discussed what would happen when they needed more space. We came up with four options that would depend on their incomes and the future market:
1. They could expand their living space into the second apartment.
2. They could keep the two family as an investment and buy a single family.
3. They could sell the two family and buy a single family.
4. If the location warranted, they could convert to condos and sell them for more than the two family would be worth.
I sent Jason and Elizabeth to a reputable lender that verified their credit and told us how much income was needed to support various purchase prices. We discussed where we would be most likely to find the right two family. After many disappointments, we found the ideal property near Tufts that would give them good rental prospects and was in a neighborhood likely to support condos in the future.
Over the years, we discussed refinancing, upgrading, converting the front porch into a playroom and general upkeep, always with their “master plan” in mind.
Now that they have children and their daily commute required them to spend too much time commuting, they were getting anxious to implement the next phase of their plan. Over the past couple of years, we developed another long term plan for their next home and they have been holding off until the market in their neighborhood became profitable again and the time was right.
Congratulations to Jason and Elizabeth. Last week, they closed on the sale of two condos (sold at and above asking price with multiple offers on each unit) and bought a great renovated Victorian single family on a dead end street closer to their jobs.
Last week, I wrote about the benefits of planning ahead when buying a home.
Jason and Elizabeth are a couple that developed a 5 to 10 year plan, stuck with it and got what they deserve.
Perspective: Having an exit strategy BEFORE you buy is the best way to insure success.
Comment
Permalink
Email
Wow, that's a really wonderful story. In a universe of endless cries and despair ("The End is Nigh!") here is a success! Light! Brightness! Oxygen!
I am very familiar with the area Jason and Elizabeth purchased their multi-family home, but the fact is that 9 years ago a multi-family home in that location was roughly only 60% of price you would find today for the same property. This story is about a home purchase in a drastically different real estate market and time.
that is great for Jason and Elizabeth, that their plan worked out. as i mentioned in my comment to the previous post, most things don't go as planned, especially when external forces are at play.
we had a plan, which has gone down the toilet with the economy at the moment. and i would hazard a bet that there are more like me than like Jason and Elizabeth, who had everything go according to plan.
maybe you and rona can do "real estate plan makeovers". i would volunteer to go first!
Congratulations to Jason and Elizabeth. They bought near the bottom and sold near the top. Nice timing.
Note to prospective investors: there is virtually no chance you will repeat Jason and Elizabeth's success over the next ten years if you purchase at today's inflated prices. Generally speaking, prices need to come down MUCH further before Boston property becomes an attractive investment opportunity.
They didn't sell near the top. The post clearly states that they sold their condos last week.
Good for them. I'm glad they were prudent and their plan worked out.
They didn't sell near the top. The post clearly states that they sold their condos last week.
Good for them. I'm glad they were prudent and their plan worked out.
Holly, they bought in 2000, which was just as things were beginning to get crazy. So "near the bottom".
Let's say the peak was 2007? They had 7 years of (inappropriate/unsustainable/illusory) gains, and then, at most, 2 years of comparatively gentle nominal losses.
7-2 = 5. That's pretty good, and they were smart to buy a two-family, obviously got some good advice from Sam et al, managed to not overextend themselves, etc.
But I would argue that they got more than they deserved, and that just because they had a plan doesn't mean that their experience is, or should be, typical.
It's not about enjoying despair; it's about realizing that past performance is no guarantee of future results!!
HollyP (#5 and #6): You missed the subtle point... Selling a condo in Boston "last week" is the same thing as selling "near the top". The correction is just getting started here. Prices are are headed MUCH lower.
Sam,
I think you should take a bow for promoting financial literacy and providing an actual service to your clients. This post and last weeks illustrates what can be possible in your industry.
JChristian, as someone who bought her first home in 1991 at the bottom of the last trough in the RE market and saw that home's value nearly double by 2000, I don't consider 2000 "near the bottom."
There's no pleasing some folks. Timing is everything. Financial decisions are always the product of both planning and luck. I sold some stock to fund the downpayment for my house. Shortly after, the stock market started to head down. I bought my house just before prices started to head up.
Was I lucky or smart? I like to think a little of both. But probably more lucky than smart - I'm not sure you can ever be smart enough to completely override good or bad luck.
Susan:
People often appear lucky because they are smart enough to stack the deck in their favor. This is particularly true with investments. If I recall correctly, you own a duplex in S. Boston. You rent out one unit and live in the other. You paid around 90-100x total monthly income (hypothetical based on market rent for both units). If you had rented both units, the property would have been cash flow positive from day 1. In short, you made a smart purchase decision. You stacked the deck in your favor. No surprise, 10 years later you have done well. Nice job!
I suspect Jason and Elizabeth were also smart enough to stack the deck in their favor. (The fact they actually had a 5-10 year plan with various contingencies speaks volumes about their level of preparation.) No surprise, they also did well.
I don't think it's about being smart OR lucky... I think it's about being smart AND lucky. My two cents...
SAM says... this is not about whether they bought low and sold high or even whether Jason and Elizabeth got lucky. The point of this blog is that with some good planning and a couple of possible exit strategies it IS possible to stack the odds in your favor as a buyer. The space limitations of this blog do not always allow for lots of details, but I can assure you that there were times when Jason and Elizabeth weren't feeling so lucky. During the course of their ownership, they had an extended vacancy to deal with and there were times when the price of single family homes in areas they wanted were soaring out of control and beyond their reach.
I like this quote from Roy D. Chapin Jr.: "Be ready when opportunity comes...Luck is the time when preparation and opportunity meet." Jason and Elizabeth sat on the sidelines waiting for the right time to implement their plan and took action on very short notice when the time was right. They were able to act because they had a plan, which is more than most home buyers can say.
Their new home was purchased using the same kind of planning that went into their two family purchase. Will they get lucky when they sell? Maybe or maybe not. But I can assure you that they have a sensible plan in place to enhance the value of their new home so that when the time comes to move on the odds of luck being on their side will probably be stacked in their favor.
Sam - If this is the property I think it is- #26 , white house , South side of street,owners, unit at first floor,driveway at left side ,... We have recently used this property as an example of what not to do with investments.
Funny how different perspectives can be from a brokers view and an investors view..
Remaven....It sounds like you may have the right property, but bear in mind that Jason and Elizabeth are not real estate investors. They are a couple that had other goals and wanted to use their 2 family property to achieve those goals for their family. We also considered a 1031 tax deferred exchange into another 2 family or investment, but that was not right for them for a number of reasons that I can't discuss here and they chose not to go that route.
If you'd like to share how you use this property as an example and confirm that it is the correct property, feel free to email me using the link in the first line of the blog post.
This blogger might want to review your comment before posting it.
Recent Posts
browse this blog
by categoryINside Boston.com