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Investment and Development

Real estate valuation. FNC index

Posted by Rona Fischman September 28, 2012 01:59 PM

I spoke to Robert Dorsey of FNC about how this index was created and what he can do with it. (Nice guy. He even speaks “non-math” well.)

Yesterday, I wrote about S&P Case-Shiller and their repeat sale methodology. It is a good index, but FNC has something Case and Shiller couldn’t get in the 1980s – more data. FNC gets its property information from loan origination databases – in other words, right from the mortgage property appraisals and BP0s (Broker Price Opinions.) This provides a more detailed picture of the size and condition of properties being sold than public records can. It gives information that accounts for depreciation or improvement of the property between sales. It is simply more and better data. FNC collects that, then, blends it with public records.

They worked at the database for ten years to build the index based on all the physical characteristics typical for housing. (Those include physical characteristics, like size and condition. It also can factor in school districts, distance for a specific site, zip code, waterfront properties, and more.) This allows for a good look at neighborhoods and what happens to housing prices there.

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Park your money here?

Posted by Rona Fischman March 27, 2012 12:13 PM

Bill Kuhlman, CRS, who is the broker/owner of Kuhlman Residential looks at real estate investment and stock investment for the long haul.

Two weeks ago, I compared the total return on investment between three stock indices and median sale prices between January, 2000, and March, 2012. Last week I reported on the performance of the Dow Jones Industrial Average (DJIA) versus the rise in the median price of U.S. homes between 1970 and 2010.

The bottom line is that the DJIA closed 13.03 times higher on December 31, 2010, than where it was on January 1, 1970. Over the same period, the median sale price of U.S. homes grew by a factor of 6.83, just a little better than half the growth of the Dow.

What it comes down to is that the rate of return on stocks has, over this particular 40-year period, far outperformed the national median sale price for homes. And you’d have made out like a freakin’ bandit if you had bought into the stock market on December 31, 1979, and sold on December 31, 1999, bookending the two best decades in the history of the stock market.

But, if you had bought an average-performing group of stocks on December 31, 1999 and sold on December 31, 2009, you wouldn’t have been so thrilled, losing over 9 percent of your investment in that decade. Worse, if you’d sold on March 9, 2009, when the Dow was at 6,547.05, you would have suffered a loss of 43 percent of your investment.

Median residential real estate prices in Boston since 1970 have significantly outperformed the national numbers. I wish I could give you the data to back up the statement, but I haven’t been able to find Boston-only data all the way back to 1970. Even with the Case-Shiller Index, which I consider to be the most-accurate measure of the performance of the housing market, I could find local information dating back only as far as 1987. (Again, I invite the research-proficient among you to find some usable data for Boston or Massachusetts home prices stretching back to 1970.)

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Comparing the rate of return on real estate versus other investments

Posted by Rona Fischman March 13, 2012 01:55 PM

Bill Kuhlman, CRS, who is the broker/owner of Kuhlman Residential is back with an overview of local real estate investment trends.

Last week, while examining the true costs of one client’s home ownership versus renting, I factored in the cost of a lost potential opportunity for my clients to invest their down payment in another investment rather than using it to purchase their home.

I said I’d give some information this week on the rates of return of some different investments, relative to real estate. Here is a quick and admittedly shallow analysis.

Most people would be surprised to learn that even with the softened national housing market over the past five years, values are still up 36.7 percent from the period beginning January 1, 2000 and ending March 1, 2012.

Taking stocks

One common investment alternative to real estate is the stock market. Here’s how the major stock indeces have done between January 1, 2000, and March 1, 2012, according to MSN Money.com and the Case-Shiller report:

Dow-Jones + 18.4%
S&P - 1.0%
NASDAQ -24.4%
Residential Real Estate +36.7%

The Case-Shiller report examines resales of existing homes, so it compensates at least in part for the impact of the numbers by new construction sales, which can skew the numbers upward since there is a premium paid for new construction.

Mass. hysteria

In an attempt to determine Massachusetts single-family and condo sales, combined, since 2000, I wanted to start with a base of average prices for a one-year period six months before and six months after January 1, 2000. I then compared those with the figures for single-family and condo sales between March 1, 2011 and February 29, 2012. This includes all sales of these types of homes, so any skewing from new construction is included in these figures. Since there isn’t as much new construction in Massachusetts as in most of the rest of the country, this effect isn’t as large here as in other markets.

BTW, the relatively small number of newly constructed housing units in Mass. helped protect our values relative to many areas where speculative overbuilding fueled the housing crash in markets such as Las Vegas, Phoenix, Miami, and the Inland Empire in California.

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All the costs of buying and selling

Posted by Rona Fischman March 8, 2012 01:47 PM

In response to reader comments, Bill Kuhlman, CRS, who is the broker/owner of Kuhlman Residential writes about how much more (or less) someone sold their house for, compared to what they paid for it. He is doing as complete a job as possible of outlining all of the true costs of ownership. These include the down payment, taxes, home improvements and repairs, preparing the property for sale, broker fees, insurance, etc.

Just think of Bob and Judy: A Case Study

It’s a valid criticism that Realtors® need to include all the costs, and not minimize them. So I contacted one of the couples I wrote about and got their okay to use their data in a case study to examine all the financial aspects of the purchase and sale of their home to answer the question, “Would they have been better off renting or purchasing that home?” We’ll call this couple Bob and Judy, in honor of one of my favorite early Talking Heads songs.

Warning: This article is about four times as long as my typical blog posts. But it’s a complicated subject, and I felt it just didn’t make sense to break it up into two or three posts.

On the dark side

Bob and Judy bought their home in February, 2002, and sold it in September, 2008, for $79,000 more than they paid for it. For ease of calculations, let’s call that 6.5 years. It makes the math simpler, and one month will have a negligible effect on the bottom line.

They put down $35,300, and took out two mortgages. The payment on one mortgage was $1,648 per month, and the second was $223, for a combined monthly principal and interest payment of $1,871. Multiply that times 78, for the 6.5 years they were in the home, and you get a total of $145,938.

When they bought the home, it was in decent shape, but it needed a new roof and was very tired, cosmetically. For major and minor repairs and home improvement, over the years, Bob thinks $45,000 is an accurate estimate. This includes the roof, significant repairs to the front and back porches, and a moderate kitchen upgrade, as well as a variety of smaller items like electrical work, painting, a minor bathroom upgrade, and so on.

Bob suggested I point out that $25,000 of this was done in preparing the property for a quick sale. They would probably have delayed or avoided, altogether, making some of these improvements if they had stayed in this home. He thought it was worth distinguishing between ongoing choices while staying in the home versus enhancing its marketability.

No question: $45,000 is not an insignificant amount of money to invest in one’s home over 6.5 years. That’s an average of about $7,000 per year. Some homeowners will have more maintenance/improvement costs, some will have less. Again, this is just one case study.

Property taxes were $3,264 per year when they bought, and were $4,516 when they sold. So we’ll figure they paid an average of the half-way point, $3,890, times 6.5 years, or $25,285.

Let’s assume their homeowners’ insurance averaged about $750 per year, or $4,875, total.

In buying the home, they probably spent about $3,500 in closing costs, and about another $1,000, combined, on a home inspection, a pest inspection, and a lead inspection. When they sold, their closing costs were around $1,200.

So far, living in this home has cost Bob and Judy $256,398.

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About condos and the blog entry that never dies

Posted by Rona Fischman December 2, 2011 01:48 PM

I seem to have authored the blog entry that never dies. I am confounded by why it was on the “most emailed list” earlier in November, 2011; I wrote it in November, 2010. I found it back on the “most emailed” list again on this Wednesday. It is generating a lot of email to me and hits to my website.

Among the email was a question from DM. Since his question is rather complex, and I don’t have all the details, I sent him to Community Association Institute. They are a great resource for people working with condo associations.

DM also asked me if I would also throw it out to my audience, since there are some experienced people there.

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Safe as multi-family houses

Posted by Rona Fischman October 25, 2011 01:40 PM

The topic of cash being used to buy real estate mentioned that investment is strong in student areas. Some investors are flocking to multi-family houses near colleges. Today, I take a closer look.

Regarding buying a multi-family house near a college campus, most of what I said two years ago is still true:

The New York Times had an article about our triple-deckers this month. [June 2009] Besides quoting what Dennis Lehane thinks of them, Abby Goodnough quoted these statistics about foreclosure in this kind of housing:

In Boston, three-family homes represent 14 percent of the housing stock, but made up 21 percent of foreclosed property in 2008, according to the city’s Department of Neighborhood Development… Ms. [Evelyn] Friedman, [chief and director of the Boston’s Department of Neighborhood Development] believes the foreclosure rate on triple-deckers is even higher than the data indicate, because many were converted into condominiums in recent years. These are counted in a separate category that made up 48 percent of the city’s foreclosed properties last year.

I am a huge fan of owner-occupied multi-family housing. The Times’ reporter reiterates what I think:

Best of all, three-deckers put homeownership within reach of the working class. Buyers could live in one unit and rent out the others, assuring they could afford payments and upkeep for years to come.
For years, two- and three-family ownership has not been a viable option. As purchase prices increased far beyond rental rates, the owners of a two- or three-family home found themselves paying more to live in their properties that their tenants. FULL ENTRY

Buying real estate for an IRA

Posted by Rona Fischman October 24, 2011 01:44 PM

Sam Schneiderman, Broker-owner of Greater Boston Home Team is our Monday afternoon guy. Today he discusses another way that some investors are buying investment property.

I have an investor-client that has purchased several properties with me. He's from out of state and bought a couple of properties for his college age kids to live in while in Boston. He's been talking about buying real estate with his IRA for years. Recently, my teammates and I helped him purchase a property for his IRA. Aside from the logistics of moving the money around and an extra layer of paperwork for authorizations, the process was pretty straightforward and very similar to any other cash deal.
This was the first time that we have represented an IRA as a client. I will share my experience and observations with you. Please understand that this discussion is about buying investment property with an IRA and does not work for a primary residence or a second home.

Why buy real estate with an IRA?
Financing for investment properties can be challenging and expensive, depending on the property or the buyer. It appears that using an IRA to purchase a property for cash eliminates the expense and challenges of financing and also allows the investor to take any profits tax-free later, after age 59 ½.
The disadvantages of buying investement property with an IRA include:
- loss of all tax benefits. (The IRA can not deduct mortgage interest, property taxes, condo fees, maintenance or take depreciation.)
- The IRA must have enough cash to purchase the property.
- The IRA must have enough cash on hand or positive cash flow from rental income to pay maintenance costs, taxes and management fees.
- All income and expenses must flow in and out of the IRA.

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The greening of real estate underwriting

Posted by Rona Fischman October 21, 2011 12:25 PM

For my readers who care about environmental issues: remember that next Friday, October 28 is Walk/Ride Friday, brought to you by Green Streets.

On a national level, there is a change being proposed for real estate mortgage underwriting that would make energy costs part of the value calculation. Energy costs would be added to the cost of home ownership for qualifying borrowers for a mortgage and would also be considered part of the appraisal calculations.

From the Institute for Market Transformation:

The SAVE (Sensible Accounting to Value Energy), championed by Senator Michael Bennet (D-Colorado) and Senator Johnny Isakson,(R-Georgia), require federal loan agencies to assess the expected energy costs for mortgage loan applicants. This can be accomplished through modest adjustments to underwriting guidelines and appraisal practices and could be implemented over a manageable period without disruption.

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Safe as houses. Cash is king?

Posted by Rona Fischman October 4, 2011 01:07 PM

Cash buyers are the hot topic this weekend. Both the Boston Globe and WBUR published on this.

Generally, about ten percent of real estate transactions are paid with cash. This year, the average in Massachusetts for the first three quarters is forty percent. It is this change that piqued the interest of both the Boston Globe and WBUR.

Jenifer McKim at the Boston Globe mentions some overlapping categories of cash buyers:

Very rich cash buyers purchasing deeply discounted high end condos.
Speculators buying distressed properties at deep discounts to flip or rent.
Investors buying rental property near colleges.

Over at WBUR, Curt Nickisch was working on a similar story this week. He also added this statistic to the mix:

In some Massachusetts communities, more than half of home sales this year are have been paid with cold hard cash. Those communities include Provincetown, New Bedford and Cambridge.

I am not sure how to categorize these cash buyers. Some are downsizers buying retirement properties, some are investors, and some are purchasing “kiddie condos.” (Parents buying condos for their student-children. This is a hybrid between investing and buying a second family home.)

Are you laying you cash down for real estate this year?

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Development and natural beauty

Posted by Rona Fischman August 5, 2011 02:00 PM

“Some people called it a federal land grab that would ruin Cape Cod forever.” explains Donna Tunney in Wicked Local. We call it the Cape Cod National Seashore. Tunney continued,

“Some said it was sorely needed to save the peninsula from all-out commercialization. Others admitted they didn’t have a clue what it meant, and that only time would tell.”

Time has told. What do you think? Did the National Seashore save Cape Cod from over-development, or did it encourage more development? I especially want to hear from Cape residents and people with life-long experience of Cape Cod.

The Cape Cod National Seashore is celebrating its 50th anniversary this year. When I made my annual trek to Eastham, I took a celebratory guided tour in Eastham’s Fort Hill area. Being the real estate nerd that I am, I was interested in the part of the presentation that involved a real estate deal that didn’t go so well.

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Young adults renting their first place

Posted by Rona Fischman June 23, 2011 01:54 PM

I kick off the rental season with an encore with the advice that I gave in 2008. That summer my eldest nephew, Nate, moved to Somerville after graduating from U Conn. He has since been joined by his cousin, Heather (and undergrad) and his brother Dan (a Ph.D. candidate at Northeastern.)

Before Dan started roommate shopping, his father (my brother) called me to ask about whether he should buy a kiddie condo (not his term) or a multi-family house near Northeastern, since Dan will be there 5-7 years. Those of you who know read me regularly know that I told him Dan should rent.

Since 2008, rents are higher and sales prices are lower, but not enough for me and for my family. At the end of 2010, I ran the numbers on two-family housing and they came up short.

Here’s the advice I gave Nate in 2008. It still holds for Dan and my brother David:

The Boston Globe just published two articles about young adult housing. One discussed how recent graduates should not jump into buying a condo or starter home.

The second Boston Globe article reports that higher number of juniors and seniors are choosing dormitory housing because of increased costs.
The first one makes points worth repeating:

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Exaction, extortion or illegal? Mandatory dedication of open space parcel held unlawful

Posted by Rona Fischman June 1, 2011 02:11 PM

Attorney Richard D. Vetstein discusses a court ruling about development. The question today is about the power of local zoning boards. Do they have too much and are they power hungry? Or are they trying to take care of their community? What is your experience in your town?


Score one for property rights advocates
Massachusetts has the well-deserved reputation of being one of the most challenging states to permit a new housing development due to its myriad of rules, regulations and zoning by-laws. Real estate developers seeking to build a new subdivision typically go through an arduous permitting process before the local Planning Board, Board of Selectmen, Board of Health, Conservation Commission, Zoning Board of Appeals and other town boards.

Open space set-asides
In what has become very much en vogue and required in the last decade are towns requiring that the developer dedicate or deed some of its developable land for open space and recreational purposes. In the recent case of Collings v. Planning Board of Stow, the Appeals Court ruled that the planning board went too far in requiring that the developer set aside almost 6 acres of a 5 lot subdivision for open space and “environmentally significant areas with views.”

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Restrictions – What you can’t see can affect you

Posted by Rona Fischman April 4, 2011 01:20 PM

Today, Sam Schneiderman, broker owner of Great Boston Home Team discusses how private property rights can be legally restricted.

One of the most important considerations that a buyer should factor into the purchase of their next home is what they want to do with the property during the time that they will own it. That is important because, contrary to what most people think, property ownership does not give owners the right to do anything that they please to their property. There are various ways that the use of private property might be restricted.

If a buyer has a buyer’s agent, the agent should be made aware of the buyers plans for the property before the offer is written. As a buyers broker, I’ve written offers allowing additional time to research potential restrictions. I’ve also advised buyers to walk away from properties that they could not legally modify to meet their future needs or expectations.
He are some ways that individual property rights might be restricted on individually owned property. Due to space limitations, next week I’ll discuss restrictions for situations where more than one party shares the use of the property:

Zoning:
Municipal zoning can affect an owner’s ability to modify or expand a home or other structures, add an “in-law apartment”, erect a wall or fence, build a patio or deck, or widen a driveway, among other things.

Thinking of buying a smaller home than you need and expanding later or tearing down and rebuilding a garage? Check with the building department and zoning code to be sure that you will be able to do what you want to do.
Before you even think about buying near a commercial property of any kind? Remember that today's office building or nursing home could become tomorrow's kennel or nightclub, if allowed by zoning in that area.

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From Wall Street, some truly radical solutions to the housing mess

Posted by Scott Van Voorhis December 8, 2010 07:03 AM

Like some giant Rt. 128 pileup at rush hour, the backlog of foreclosed homes just keeps growing.

So how about pre-approving soon-to-be-foreclosed homeowners for new mortgages? Or even granting amnesty to illegals who snap up foreclosure specials?

No, these are not ideas being bandied about by our supposedly socialist president. Rather they are some of the outside-the-box solutions thrown out by one of Wall Street's top housing experts.

Amherst Securities' Laurie Goodman is the queen of foreclosure numbers, as I noted in yesterday's post. Her warning that one in five mortgages is facing potential foreclosure has attracted attention from the likes of Dr. Doom himself, Nouriel Roubini.

But Goodman, in her housing market reports and in a recent panel I moderated for the Boston Security Analysts Society, is throwing out some truly interesting ideas that, if nothing else, deserve to shake up the current debate.

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Go for it Julie D

Posted by Scott Van Voorhis November 16, 2010 06:22 AM

That is the rough consensus of the blog regulars and not so regulars who weighed in yesterday on Julie D's renovation dilemma.

Julie D bought a Cape in Billerica a year ago for $370,000, but, in a market that appears headed south again, now wonders whether to put any more money into her home, which had been previously expanded and partially updated.

She wants to make some basic updates - a revamp of her home's 1960s bathrooms, new, energy efficient windows, a garden shed and even dormers.

But Julie D wonders whether it would be smarter to sock away any extra money and possibly scoop up an even nicer home at a better price five years from now.

Most of the comments on yesterday's post weighed in, albeit cautiously, on the pro renovation side of the debate.

In fact, Kermit Baker, a senior research fellow at Harvard University's Joint Center for Housing Studies offered a similar take.

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Election Day and home prices

Posted by Scott Van Voorhis November 2, 2010 06:52 AM

Head to the polls - do your great civic duty.

But don't feel bad if you are wondering where the candidates stand on some basic bread and butter issues.

Much hot-under-the-collar rhetoric has been expended on such crucial issues as nonentity Paul Loscocco's decision to jump ship as Tim Cahill's running mate and endorse Charlie Baker.
Yet there has been little serious discussion of what if anything is to be done with the Bay State's messed up real estate market.

Sure, the sales tax issue is important, and what to do about state government - slash and burn or hold and expand - is hardly inconsequential.

Yet the cost of buying a home, especially in perpetually overpriced Greater Boston, still looms as an even bigger long-term challenge, not just for frustrated buyers, but for the health of the state's economy as well.

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An election that could shake up Greater Boston's housing market

Posted by Scott Van Voorhis October 18, 2010 09:33 AM

Voters across the Bay State head to the polls Nov. 2nd.

And while most likely won't realize it, they will be deciding the future of the housing market, both in the Boston market and across the state, for years to come.

Most of the media attention has been lavished on the increasingly byzantine barbs and allegations being exchanged by the three gubernatorial candidates. Gee, news flash, maybe these guys really don't like each other - kind of funny how battles for power can bring out the worst in people.

Sadly, little if any attention is being paid to possibly the most consequential item on the ballot this coming election day - Question 2.

If passed, the referendum question would scuttle the Bay State's bluntly effective, though highly imperfect, affordable housing law that has been in effect for four decades now.

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Here’s a little something for the housing bulls

Posted by Scott Van Voorhis October 13, 2010 09:11 AM

OK housing bulls, judging from the comments on this blog, you are an endangered species. In fact, some days I wonder whether you are already extinct - that is until a stray, almost apologetic comment pops up weakly claiming things are not as bad as all those very vocal housing bears would let you think.

Well here's a new report, just out by The Concord Group, a housing consulting and research firm, which should give you at least something to fight back with.

We all know the downside of the current market - housing starts at record lows, stubbornly high jobless rates and a foreclosure epidemic that gets more messed up by the day. Oh yes, and even with lower prices and rock bottom interest rates, there are fewer buyers out there than back in 2009, when the Great Recession was still officially on the books.

Good thing that's all behind us now, but I digress.

The Concord Group looks at all this gloomy data and comes out with a surprising and very different conclusion than is currently the fashion now - a national recovery in the market for new homes by the end of 2012.

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Gentrification, discrimination and Christopher Columbus

Posted by Rona Fischman October 11, 2010 02:17 PM

Today Sam Schneiderman, broker owner of Greater Boston Home Team, reflects that discrimination in the Western Hemisphere has a very long history.

Columbus Day is a controversial holiday. It was designated to commemorate the explorer’s arrival in the New World; however, many believe that Columbus was more responsible for destruction and the collapse of the indigenous population than for prosperity and progress.
Opposition to the Columbus Day holiday usually focuses on the cruel treatment that natives received from Columbus and some later settlers, and the fact that the European conquest caused a significant decline in the native population.

In today’s real estate lingo we might be talking about gentrification and discrimination.

The settlers that followed Columbus risked their lives to create new lives in a new world where they hoped to live free from discrimination. The irony was that when they encountered natives that were different, many of the explorers and settlers discriminated against the natives by persecuting them for their lifestyles and beliefs.

It looks like gentrification and discrimination go back to the days of Columbus and the early settlers.

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Financing for the small landlord

Posted by Rona Fischman October 8, 2010 02:09 PM

AngieNewtown wrote:

My husband and I…are thinking of buying next summer…and are seriously thinking of the owner-occupied 2 or 3 family approach, as Ehwhy suggests…
Can you comment on the financing picture for owner-occupied dwellings like this? Will 25 percent down still be required, or somewhat less (do I remember 10 percent from your post a few days back)?
Also, we still have our rental property back in our old home state. It's on an aggressive repayment schedule (7 years left on a 15 year loan) and is essentially breaking even. Can you speak to how this might affect our financing requirements? A while back folks were talking about needing 6 months PITI in reserve for both the old investment property *and* the new property as well--are those guidelines still in place?

Hi Angie,

About down payment:
Fannie Mae or Freddie Mac guidelines are looking for 20 percent down for 2- or 3-family home loans. The vast majority of lenders will want that, so they can resell on the secondary market.
A portfolio lender can offer more options for someone like Angie. Smaller lenders have the option of holding their loans, instead of selling them to investors on the secondary market. This makes them able to lend with as little as 5 percent down.

FHA will finance with as little as 3.5 percent, but be aware that the mortgage insurance with FHA just increased.

About reserves:
For a 3-family house, FHA requires 3 months of PITI in reserve. Most conforming lenders will want to see 6 months' rent loss insurance on the other property as well, but that shouldn’t be very expensive at all. Portfolio lenders, like Middlesex Savings Bank, require as little as 2-3 months reserves.

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Do you want to be the landlord of a three-family house?

Posted by Rona Fischman October 1, 2010 02:08 PM

Two weeks ago, I wrote about how the numbers don’t work for two-family home ownership around Boston, these days.

Shiplesp commented:

How does the price of a three-family unit compare to two-family? One advantage of a three-family is that you rarely have both units vacant, so you always have some income.
The "rule of thumb" that I followed when I bought my three-family is that the price of the house should be paid for by the rents in 7 years. That was possible 10 years ago, I'm not sure it is now.
Anyway, it works out for me because the rents of the other two units cover my mortgage, taxes, insurance, and common utilities.

Prices of two-family homes and three family homes vary very dramatically across the Commonwealth. When I look at Massachusetts, the median cost of a two-family house is $215,000! The median three-family house is less, $200. But that is, obviously, not a good indicator. Multi-family housing stock varies so much, these numbers are meaningless.

The local figures, for my area* are more real to me: $512,000 for two-family homes and $600,000 for three-family homes. Using the $600,000 median, which does match my experience of the past 6 months, here are the same numbers I did before to show how the additional rental unit changes the picture:

Sale price $600,000. Three-family house with 5 rooms, 2 bedrooms downstairs and 6 rooms, 3 bedrooms upstairs and 6 rooms, 3 bedrooms on the third floor. Downstairs rent about $1300. Upstairs rent about $1400. Third unit rent $1400.
Down payment: 25 percent (required for conforming loan) = $150,000
Principal and interest = $2416 at 5 percent interest
PITI about $2900
Gross income about $4100
Return on the $150,000 investment is approximately $1200 per month.

That is assuming no vacancies and costs do not include all the costs we discussed in the last two weeks. The water bill and normal maintenance are not going to be the killer expenses here. We all know that repair and updating is where the money will go.

Ignoring the expenses, do the gross rents pay for the house in 7 years? $4100 X 12 X 7 = $344,400. Not even close.

So Shiplesp, small property ownership -- even with a three family home -- still doesn’t add up. Just like video killed the radio star, condos killed small property ownership around Boston.

Shall we continue on the topic of landlords and tenants? If so, what do you want to know more about?

*my area: Acton, Arlington, Bedford, Belmont, Brookline, Cambridge, Concord, Lexington, Medford, Natick, Needham, Newton, Somerville, Sudbury, Waltham, Watertown, Wayland, Wellesley, Winchester. Data past 6 months from MLSPIN.

Do you want to be a landlord of a two-family house?

Posted by Rona Fischman September 17, 2010 01:57 PM

In 2007, I sang the praises of two-family home ownership and lamented the dwindling supply and escalated prices of properties of that type. By the late 1990s, the window of opportunity for two-family ownership had pretty much closed. This was mostly due to condo conversion of this type of property.

In 2007, owning a two-family home for rental investment just didn’t add up in my area.* Sale prices were too high compared to the rental potential:

August 2007:
Sale price $625,000. Two-family house with 5 rooms, 2 bedrooms downstairs and 6 rooms, 3 bedrooms upstairs. Downstairs rent about $1300. Upstairs rent about $2000.
Down payment: 25 percent (that’s what’s needed now) = $157,500
Principal and interest = $2962 at 6.5 percent interest
PITI about $3640
Gross income about $3300
Return on the $157,500 investment is approximately -$340 per month.

(At 20 percent down, your return would be -$540 per month. If you put 10 percent down, your return would be -$930 per month. I used the 25 percent figure so we could compare apples and apples… To finance a two-family house as an investor, you need that 25 percent equity in 2010.)

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A conversation with a speculator

Posted by Rona Fischman August 24, 2010 02:37 PM

I had a phone interview with someone who was considering hiring me. I hope I talked him out of real estate, at least for now.
He wanted to buy an investment property. He wanted to buy cheap, clean it up, and sell high. He had an agent who was terrible, he said. He didn’t get anywhere. Can I help him?

ME: OK, how much capital do you have and what is the return rate you want to achieve?
HE: I have about $300,000 that I’ll be borrowing and I don’t know how much I can make.

I smelled trouble. There is no business plan there.

Once I established that he was looking in towns I know, I started fishing around for some examples of successful strategies here. I mentioned the economy of buying a two-family and converting to condos. He didn’t want to do that because it involved lawyers and condo docs. Instead, he wanted to buy a single family house. I gave him a handful of examples of unrehabbed properties for sale and the sale prices of rehabbed properties like them. I pointed out that there wasn’t much profit to be had. I don’t think it is worth it, given the risk.

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Don't like Greater Boston's high prices? Blame it on the density wimps

Posted by Scott Van Voorhis August 16, 2010 10:30 AM

Here's one tired excuse for Greater Boston's chronically high housing prices that needs to be run out of town once and for all - "they just aren't making land anymore."

Sure, we are not Texas with lots of wide open spaces to build in. But the Hub - from downtown Boston to the bucolic suburbs that ring Rt. 128 - suffers from a very American aversion to density.

Instead, it's not a lack of land that continues to keep home prices around here artificially inflated, even as we head into the second leg of a double dip housing downturn.

Rather, it's a frankly NIMBY mindset that automatically rejects tall buildings downtown and densely built housing in the suburbs.

I recently got back from two weeks in the Netherlands where Karen and I and the kids did a housing exchange with a Dutch family.

There density isn't as matter of debate - rather it's an inescapable fact of everyday life in a country reclaimed over generations from the sea and soggy marshland.

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Tower shadows - real issue or debating point?

Posted by Scott Van Voorhis August 5, 2010 07:00 AM

I live in suburban Natick, so there are not any tower shadows around here to darken my day.

But I have done a heck of a lot of reporting over the years on downtown Boston development, enough to know the shadows cast by a new tower can be a make or break issue.

In fact, the state Legislature back in 1990 even put a law into place decreeing no new building shadows were to be cast on the Boston Common and the Public Garden.

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McMansions making a comeback - or did they ever really go away?

Posted by Scott Van Voorhis July 30, 2010 07:00 AM

I did a piece a few months ago for the Globe West on builders downsizing to meet new demand for smaller and cheaper homes below the $500,000 mark.

Yet apparently that has not meant the end of the McMansion.

According to this recent Boston Sunday Globe Magazine piece, the number of suburban tear downs is actually on the rise again.

However, one thing that gets lost in the never ending McMansion story is the demographic and economic changes it heralds.

It seems pretty obvious to me, but I have had a running debate on this blog over this issue.

Basically, we are saying goodbye to a whole generation of modest capes and ranches built after World War II for middle and working class families.

And they are being replaced by hulking monstrosities built to house relatively wealthy executives working in the financial services, biotech and high-tech fields.

But this is far more than just a change in housing tastes - it represents a demographic shift as well.

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New rental tower planned for Pru

Posted by Scott Van Voorhis July 23, 2010 11:00 AM

Here’s another sign that rental living is making a comeback in downtown Boston.

Condo developers did most of the building over the past few years, putting up the Mandarin Oriental with its $12 million penthouses and the now bankrupt W Hotel and condo tower.

Now builders of deluxe apartment towers are taking center stage downtown.

AvalonBay Communities is reviving plans, shelved during the downturn, to build a new 28-story apartment tower at the Prudential Center campus, the Boston Courant reports. (In the interest of disclosure, I wrote the story.)

The new, 311-foot high-rise will take shape on Exeter Street, right by Lord & Taylor.

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What price green?

Posted by Scott Van Voorhis July 21, 2010 07:00 AM

I am a bit of a caveman, so I can't say I am the best one to judge the whole green home phenomenon.

I threw out my TV in the late 1980s and skipped out on a decade of brain numbing entertainment. I didn't start using email regularly until say, 2005 or 2006.

I guess you can call me a late adopter.

Now here comes the green revolution, and once again, I am kicking like a mule.

Yet as state and federal officials push green housing and green energy, there's something inherently irksome and quite definitely elitist about all this preaching.

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Best and highest use

Posted by Rona Fischman June 18, 2010 02:27 PM

Investment and residential real estate meet when I work with buyers who are looking to buy land or a tear-down house so they can reconstruct their choice of single family home. Or, when I work with someone buying a two-family home, either to live in or to rent out (but not to flip for condos.) When the listing agent starts talking about “best and highest use” I know I am about to hear why the inflated price is justified. In my opinion, the price others have paid for properties like this one is still a stronger indicator than some pie-in-the-sky “best and highest use” price.

The “highest and best use” of a property is a financial term. The “highest and best” is price, not necessarily use. Here’s an example: If a lot can hold three ugly condos which sell for $300,000 each, this is a better and higher use than if the lot holds one beautiful single family house worth $700,000.

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Coming down from that tax credit high

Posted by Scott Van Voorhis May 18, 2010 09:26 AM

The real estate market is pretty quickly returning to reality with the expiration of the home buyer tax credit on April 30th.

Recently released mortgage stats and building numbers offer additional signs that buyer demand is already starting to come back down from its artificially high, government subsidized peak in April.

Building permits, just released by the federal government this morning, point to a big drop in housing construction in the coming months.

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Fed up with Greater Boston's still loony home prices? Hug a developer

Posted by Scott Van Voorhis April 22, 2010 07:00 AM

Home prices around here remain stubbornly high.

First the real estate market goes into a tailspin and then we get hit with the worst downturn since the Great Depression. And what happens?

Prices fall by maybe 15 percent from their peak in Greater Boston, enough to present the illusion of affordability while still being out of reach for many.

It's all too easy to blame deluded sellers holding out for crazy numbers.

But the real problem is a dearth of homes for sale, whether new or old, a chronic scarcity that has haunted the Boston area through boom and bust.

Take a look at this policy brief by Harvard's Rappaport Institute from 2006 - it makes for compelling reading in light of our problems now.

We might have dodged the real estate price bubble in the first place had not housing construction all but shut down in Greater Boston after 1990, the study argues.

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Fed up with Greater Boston's still loony home prices? Hug a developer

Posted by Scott Van Voorhis April 22, 2010 07:00 AM

Home prices around here remain stubbornly high.

First the real estate market goes into a tailspin and then we get hit with the worst downturn since the Great Depression. And what happens?

Prices fall by maybe 15 percent from their peak in Greater Boston, enough to present the veneer of affordability while still being out of reach for many.

It's all too easy to blame deluded sellers holding out for crazy numbers.

But the real problem is a dearth of homes for sale, whether new or old, a chronic scarcity that has haunted the Boston area through boom and bust.

Take a look at this policy brief by Harvard's Rappaport Institute from 2006 - it makes for compelling reading in light of our problems now.

We might have dodged the real estate price bubble in the first place had not housing construction all but shut down in Greater Boston after 1990, the study argues.

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Picking the next book

Posted by Rona Fischman April 9, 2010 02:03 PM

Below are some of the book titles mentioned by readers as our next Boston.com Real Estate now book group discussion. They fall into two categories. Please choose both a book and a category. Choosing the category is the question of the day.

Is it more important to understand yourself, your motives, and your goals or is it more important to understand the economic and social history of the economy you are buying in?

The first group of books focuses mainly on how to invest and what human characteristics help and hinder rational investment. As someone here said, “Economic literacy begins in the home.”

The second group of books focuses on economic history, especially current economic history. Is it more important to understand the economy before buying?

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Note from a Greater Boston housing market refugee

Posted by Scott Van Voorhis April 5, 2010 10:47 AM

It's a much different world when you get outside I-495 beyond our little ring of civilization and light.

In the outer darkness in places like Houston, they are still doing such retrograde things like building new homes.

Poor primitives, they haven't figured out yet the Greater Boston secret to keeping home prices artificially high.

Don't build and run any developer out of town who tries!

Anyway, I just got a note from "Don," who sold a condo in Ashland a few years ago and now lives in a single-family down in Houston.

He still follows the blog, but argues that he sees an incomprehension in the comments of how far the Boston area lags other parts of the country when it comes to new home construction.

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If you want a nice new home in the suburbs that won't break the bank, get ready to drive

Posted by Scott Van Voorhis March 26, 2010 10:17 AM

That's one of things I found working on a story on new home construction for the Globe West.

I discovered a modest uptick in new home construction in some towns along and just beyond the 1-495 beltway - think Stow and Groton. More interestingly, builders are shrinking their basic models to keep the price down - below $500,000 - to appeal the more active, tax-credit-driven end of the market.

I looked hard for a similar trend closer to Boston - in the Dover, Wellesley, Natick area - but couldn't find an exact match up.

It's a trend that is doubly interesting given the recent study on commuting costs and overall housing affordability that I blogged about earlier this week.

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Four toed salamanders and SLAPP suits

Posted by Rona Fischman March 10, 2010 02:00 PM

Attorney Richard D. Vetstein. writes about where developer's rights, citizen's rights and salamanders collide!

The recent case of Brice Estates v. Smith where an abutter trespassed on a developer’s land to photograph endangered female four toed salamanders got me thinking about the frequent convergence of developer’s rights vs. citizen’s free speech rights in real estate disputes. In the case, the abutter sought refuge under the pro-free speech anti-SLAPP law, but the court said that he was still trespassing.

A SLAPP is an acronym for Strategic Litigation Against Public Participation. Before being legislatively outlawed, real estate developers would often use SLAPP lawsuits to muzzle abutters who would organize and complain during town meetings and sue to stop real estate projects. The abutters couldn’t afford to defend against the SLAPP suits, so they would back down.

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Tax credit boomlet spurs unlikely speculators - home builders

Posted by Scott Van Voorhis February 10, 2010 09:25 AM

If nothing else, this looks like a pretty big gamble.

Banks are preparing to dump millions of already foreclosed homes on the market while new mortgage defaults are still soaring.

Yet builders are rushing to build new homes on spec to meet an expected spring rush by tax-credit-armed, FHA-backed home buyers.

It's intriguing news from an industry just recovering from a near death experience in the wake of Great Recession and the global financial crisis.

Nor is this just some Sun Belt phenomenon. As I've reported previously, there has been a modest uptick in new construction in some towns along I-495.

As always in real estate though, how big a gamble we are talking about depends on the market.

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Brown's win could reshuffle local housing market as well

Posted by Scott Van Voorhis January 20, 2010 09:53 AM

Housing activists should be running scared this morning.

Republican Scott Brown's stunning underdog win in the U.S. Senate race casts a spotlight on one pretty angry and restless suburban electorate.

Brown certainly proved adept at tapping into populist anger in towns and cities on both sides of the I-495 beltway.

Let's just say he's had a lot of practice.

Long before Brown seized upon the Obama's Administration's increasingly controversial health care fix, our proud, pickup-driving state senator from Wrentham was railing against a favorite target of NIMBY suburbanites, Chapter 40B.

The decades-old affordable housing law has long been a political lightning rod in the suburbs. It gives developers pushing housing projects that include a substantial number of affordable units a powerful ally when dealing with obstructionist local officials and zoning regulations meant to screen out anything but upscale colonials and McMansions.

Well a showdown is now looming over the old bill, one that Brown certainly played a role in bringing on. Angry over what they contend are an explosion of large housing developments pushed through by developers with help from 40B, the law's irate suburban opponents have succeeded in getting a proposed repeal of the old law on next November's ballot.

Let's take a look at the record here.

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Zoning kids out and driving home prices up

Posted by Scott Van Voorhis January 14, 2010 09:00 AM

If being outbid by the DINKS were not bad enough, couples with one income and kids in tow have another barrier to overcome when trying to buy a home in Greater Boston - penny pinching town officials.

As Rona noted in her excellent post the other day, the DINKS - Double Income No Kids - rule the market when it comes to buying power.

That's bad enough for young couples, who may have been DINKS at one point, but now are trying to swing it on one income as mom or dad stays home with the under-six crowd.

But a growing number of towns are actively zoning out kids as well, encouraging age-restricted, over-55 developments or new condo projects that are limited to one or two bedrooms to attract the young professional (read childless) couples.

Check out this story in the Globe West, in which town officials lay out in detail their efforts to keep down school costs by discouraging development that might attract families.

Sorry, but there is something rotten here.

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Nimbyism on steroids here in Greater Boston

Posted by Scott Van Voorhis January 8, 2010 07:00 AM

It may come as a shock to some people around here who have taken up the cause of "preserving" the historic character and beauty of the Boston area.

But even though the Hub and its suburbs are chock full of history, we don't live in a museum designed for the pleasure of few who can afford to build a McMansion out in Wellesley or pony up for a Back Bay townhouse.

That brings me to two new manifestations of the kind of loopy Nimbyism that has helped make Greater Boston one of the more expensive places on the planet to buy a home or rent an apartment.

Exhibit A is a bill making its way through the State House that could torpedo plans by developers to build new towers anywhere near a series of well known public parks.

And Exhibit B is campaign by disgruntled suburbanites to ban at the ballot box next fall a 41-year old law responsible for most of what little affordable housing developers have built outside of Boston - and a good chunk of the market rate condos and town homes as well.

Which one is more irksome is a matter of personal taste, I guess, but let's take a look.

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Trend toward smaller homes in Hub 'burbs?

Posted by Scott Van Voorhis December 28, 2009 07:00 AM

Single-family home construction inside the I-495 beltway practically ground to a halt in 2009.

But as we head into the New Year, a couple interesting trends are starting to emerge.

The last couple months have seen a surprising uptick in construction and permitting activity by home builders in some of the outer suburbs along I-495.

And the homes being built are significantly smaller than the ugly and outsized McMansions that were all the rage during the boom.

Hard economic times, and the triumph, even if temporary, of the value of frugality over that of excess are likely playing a role here.

Both trends also owe at least something to the extension of the federal home buyer tax credit, though its impact, as we have seen, can be fickle. (Just witness the recent, albeit temporary, drop off nationally in the sale of new homes as buyers took a breather after Washington extended the tax credit in early November.)

First let's take a look at the numbers.

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Reality check as new home sales plunge

Posted by Scott Van Voorhis December 24, 2009 07:00 AM

The market for new homes seemed finally to be on the rebound.

Then there was Wednesday's report that new home sales plunged more than 11 percent in November.

Worse, the decline reinforces concerns about the real estate market's increasingly heavy reliance on the home buyer tax credit to fuel demand in a down economy.

Apparently, a whole bunch of would-be new home buyers had been looking to line something up before the tax credit expired at the end of November. Instead, after Congress voted to extend the tax credit through April, these buyers decided to kick back and take a few months off.

This was enough to push new homes sales down nearly 10 percent compared to last November, when sales of new homes - as did sales of just about everything - froze up in the wake of the global financial crisis.

It certainly does not inspire confidence that the overall uptick in new home sales will last past April, when the tax credit expires.

It also raises questions as to whether a modest uptick in new home construction in Boston's outer suburbs can also survive the eventual phase out of the tax credit.

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Selling by the “list it and hope” method

Posted by Rona Fischman November 19, 2009 01:50 PM

Friday was a lousy day for me. It ended with the flooded house I'll tell you about someday. It started with yet another house that is on the market, but not really.

This one is not a foreclosure or a short sale. It is merely a house where the absentee landlord is sick of being a landlord. It’s fully occupied. The agent gave me the lockbox code and confirmed the showing. She told me to knock on the doors. She didn’t call the tenants.

My client and I met some lovely tenants. They were polite and the apartments were clean. They spoke only Spanish. They didn’t laugh at my accent, but then again, I am not sure they understood what I was saying, either.

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Four more years for big development in downtown Boston

Posted by Scott Van Voorhis November 5, 2009 09:50 AM


If you like the direction downtown Boston has taken over the past decade or so, Tuesday was your day.

A wave of sleek, new glass-and-steel condo high-rises has sprouted up on seemingly every street corner, from the Ritz-Carlton Towers off once woe-begotten lower Washington Street to the Mandarin Oriental next to the Prudential Tower.

And the big win by Mayor Thomas M. Menino ensures we will see more of the same as the economy starts to pick up steam.

Under the mayor’s tenure, City Hall's development arm has given a green light to a flood of new condo and apartment units downtown, most of them of the luxury stripe.

And a recent zoning proposal from the Boston Redevelopment Authority, which surfaced just a couple weeks before the mayor’s big victory, sets the stage for more such development.

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More skepticism on starter homes

Posted by Scott Van Voorhis September 23, 2009 10:48 AM

I guess my post on starter homes inspired Rona to revisit the issue.

Well her great post on Tuesday has got me worked up again on the issue of starter homes.

In theory, starter homes are great. You buy a say, a small ranch, and then as your family grows, you sell it for a modest gain and move to something larger.

But in practice, especially in the Boston area, there are some huge problems with this.

For starters, you may have noticed, builders are just not cranking out those beginner Capes and ranches as they were, say, in the decades after World War II.

Times have changed and so has the Boston real estate market.

The region’s economy has changed dramatically in the past three decades, with the growth of elite industries like high tech, finance and biotech.

High-paying jobs in these fields have drawn in a new and wealthier class of home buyers, helping bid up prices even as lower income and middle class folks have fled to less expensive areas of New England and the country.

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Commercial buildings going green

Posted by Rona Fischman September 11, 2009 03:36 PM

Since the discussion about appraisal last week turned into a discussion of the value of “green,” here are a few tidbits about green commercial buildings to chew on:

The Fireman’s Fund made a statement this week saying that for commercial buildings, being not green will be a liability in the future. They offer a 5 percent reduction in insurance for green buildings.

Green buildings can boost real estate owners’ bottom line by protecting and building net operating income, attracting and retaining quality tenants and improving the environment. Simply put, green buildings create a triple net effect, benefitting [sic] the owners’ bottom line, its tenants and the environment,” said David Cohen, senior director of real estate, Commercial Insurance at Fireman’s Fund.

The Fireman’s Fund states these risks for non-green buildings:

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On 40-B, I guess I don't feel your pain

Posted by Scott Van Voorhis August 20, 2009 09:00 AM

OK, I really don’t get the whole 40-B thing.

That’s the 1960s era law that enables developers to override local zoning restrictions in towns where less than 10 percent of the housing is deemed affordable.

The developers, in turn, can them come in and build big new housing complexes that include a significant number of relatively “affordable ‘’ units.

Supporters say it has created nearly 30,000 units of affordable housing over the past few decades.

But there are critics – and there are lots of them – don’t like the law one little bit.

They’ve collected the tens of thousands of signatures to put a repeal of 40B on the state ballot in November 2010.

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John rakes in his dough

Posted by Rona Fischman April 29, 2009 03:20 PM

The landlord-tenant series is on hold while I find a reliable attorney source for you. Keep the questions coming; write me....

***
Remember John Dough? For those who are new to the blog, John bought a bank-owned condo to flip in Boston. I introduced him in November, last year. He told you about how he chose his this project, and his financing. He began the rehab in December.

Readers have been asking me how he fared. Most assumed his silence meant he was in trouble. Not so, readers! He is just a superstitious guy who didn’t want to post until the deal was signed sealed and delivered. John closed a while back. He's already looking for the next project. Now that the dust has settled, he sent me the story of his successfully completed first project…

Now, the rest of John’s story:


I wanted to give an update on our success. Budget-wise we did fine. We were way over in electrical, but were way under in painting and cabinets. The snag in the electrical work was that we didn’t properly budget for arc fault breakers and for the number of recessed lights (there were tons.) We saved on the cabinets and painting by doing the painting ourselves and going with a different brand of cabinet than what we’re used to (same quality and look, though). We ran into extra expenses with improving the common area. (We may still get those back from the other unit owners.)

By the end of 2008, refinancing was basically impossible. There are many factors why, but it’s amazing how much things have changed since 2007. It was sell or bust.

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Seller financing with Sam

Posted by Rona Fischman April 20, 2009 03:25 PM

Sam Schneiderman, Broker-owner of Greater Boston Home Team continues his Monday series:

As I learned more about real estate and investing, I learned that sometimes a seller will participate in financing the sale of a property if they have sufficient equity. Some will finance the entire sale after the buyer pays an acceptable deposit. Some will give the buyer a second mortgage with favorable terms. When sellers offer financing, a savvy seller or listing broker can use seller financing as a negotiating tool to get a higher price.
Seller financing is most commonly used with investment property and in sales between family members. It can be used in any transaction, provided that it is disclosed to the lender up front. Some banks will provide financing on a short sale or a foreclosed property that they are selling, while others refuse to finance that property ever again.

In a low interest rate environment, some sellers find it attractive to collect a higher rate of interest on a second mortgage than they could collect with a CD or bank account. In a high interest rate environment, some sellers offer low rate financing to make their properties more competitive and attract more buyers. When financing can be tough to get or a property needs significant work before it can be occupied or rented, long or short-term seller financing can keep a deal together.

Personally, I have used seller financing to purchase investment properties with little or no down payment. Since most lenders require PMI (Private Mortgage Insurance) for financing above 80% of the purchase price, I negotiated seller financing to make up the difference between my down payment and the amount needed to avoid PMI or meet loan program requirements. I favor seller financing with deferred payments that don’t start for a year or more.

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The Town Building Inspector Is Your Friend

Posted by Rona Fischman April 13, 2009 02:21 PM

Sam Schneiderman, Broker-owner of Greater Boston Home team continues his weekly series:

Last week, I discussed renovating my first single family with my fiancé. Like many renovators, we did most work without permits except the kitchen installation, which we understated on the permit to save a few dollars on fees.

I was still a real estate dummy and thought that permits were a formality that allowed the city to track improvements and increase my taxes based on those improvements. Now, after 25 years of brokerage and appraisal experience, I have a very different perspective:


Over the years I’ve seen numerous sales either that cost sellers money or fell apart due to lack of permits. More than a few wood stoves were removed due to hazardous installations. Countless decks have separated from buildings because they were attached with nails instead of bolts. Water damage is common when flashing is not used properly. (In one case, the entire corner of a building, including porches and walls suffered extensive structural damage because flashing was poorly installed.)

Another seller had to cut two feet off a deck before the town inspector would sign off on the permit so they could sell. The worst situations occur when bedrooms are added without adequate emergency exits and there is a fire later or when improperly installed heating systems leak deadly exhaust fumes into living spaces.

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The debate over supposed suburban decline

Posted by Scott Van Voorhis April 13, 2009 09:00 AM

So are the outer suburbs doomed to become the slums of future decades?

Or is this just more propaganda from the anti-sprawl folks who want us all to live in overpriced condo projects next to the local commuter rail or subway station?

Here are two interesting, but very different takes.

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Sam's money pit

Posted by Rona Fischman April 6, 2009 02:45 PM

Sam Schneiderman, Broker-owner of Greater Boston Home team continues his weekly series:
Last week, I explained how my fiancé and I bought a single family after our three family purchase fell apart: a decision based heavily on emotion. We were desperate for a home and liked the idea of renovating and living in an “affordable” single family. We bought an ugly duckling that had nothing but upside potential. It was 1984; we were young, naïve and had “vision”.

There were no home inspectors yet, so we hired a pest inspector. The rest was up to us. The house obviously needed a kitchen, bath and “heavy cosmetics”. Every interior inch needed serious help.

During the hot, humid “dog days” of summer, the smell of cigarettes and the seller’s filthy dog would haunt us, hastening our desire to get the walls and floors refinished faster to seal out odors. Over the next few years, we methodically finished one room at a time when we weren’t working to earn money to put back into the house.

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Logic vs. emotion

Posted by Rona Fischman March 30, 2009 03:00 PM

Last Monday , Sam Schneiderman, Broker-owner of Greater Boston Home team discussed how his ideal three family purchase came to an abrupt end. His weekly series continues:

Last week, I described how the seller cancelled my three family purchase because my lender would not commit to financing without having the exterior painted before closing. The seller’s agents weren’t happy that the lender was moving so slowly, and the seller wouldn’t extend the mortgage contingency so that we could explore other financing options. She put the house back on the market and sold the property within days for an extra $10,000.

Fortunately, I gave proper notice and got my deposit back. Unfortunately, it was a month to moving day.
My landlord rented my apartment and my fiancé and I were about to become homeless.

A friend told me about a single family right around the corner from him. We looked and got seduced by the low price and the idea of renovating. Without looking at another house, we made an offer on the spot. We were feeling kind of desperate and thought it would be nice to live so close to my friend.

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The educated dummy loses the deal

Posted by Rona Fischman March 23, 2009 03:20 PM

Continuing his Monday series, Sam Schneiderman (Broker-owner of Greater Boston Home Team) returns to the story of his journey from a real estate dummy to real estate professional:

Around 1984 my fiancé and I were living in a rental while renting out my recently renovated studio that was too small for us. I was getting used to the concept of collecting rent that covered my expenses and mortgage. I figured that if I could do that for 28 more years, I would own the place outright and create some nice income.

We wanted to buy a three family to live in while the rents would cover our PITI (Principal, Interest, Taxes and Insurance). The numbers actually worked back then because prices were not driven by condo conversion potential.

Interest rates were down to 14% from their 18% high, creating a surge of buying activity causing three families to sell quickly at top dollar. Each property that came onto the market came on at a higher price.
We found a solid three family with good apartments, but the outside had peeling paint. We considered that when we made our offer and figured that we could get the outside painted once we moved in.

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Math Monday; the numbers then and now

Posted by Rona Fischman March 2, 2009 03:35 PM

I welcome back Sam Schneiderman from Greater Boston Home Team.
Today, he is looking back at his first condo, calculator in hand.
In the first two posts of my Monday series describing my journey from a real estate dummy that overpaid for a run down bachelor pad to an experienced broker and investor that bought a family home 28 years later, I reviewed the 1981 purchase and renovation of a studio condo in Cleveland Circle.

Let’s wrap it up with a comparison of the cost to own that condo then and now. The results surprised me.

In 1981 the monthly rent was around $365. The condo finally cost me $31,600 (around 7.2 times the annual rent).

A 90 percent, 30 year fixed rate mortgage at 16 percent was around $382 per month and I estimate taxes and condo fee at around $75 a month. I’m not sure if PMI (Private Mortgage Insurance) existed then, but I didn’t pay it. The bottom line is that the total cost to own the condo in ’81 was around $457 per month.

Today, the neighborhood has gentrified. Monthly rent is $1175. Estimated value is $165,000 (11.7 times annual rent.)

A 90 percent fixed rate mortgage for 30 years at 5.25% plus PMI is $858/month. Taxes and condo fee add another $269 per month with a residential exemption. Today’s cost to own that condo would be $1127 per month.

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Sam's first renovation, 1981

Posted by Rona Fischman February 23, 2009 03:11 PM

I welcome back Sam Schneiderman. Sam is a colleague and native Bostonian who will share his experiences and lessons learned during his journey from first-time buyer to home owner, renovator, landlord/investor and successful broker. He is president & principal broker of Greater Boston Home Team. And now, Sam's story, part 2:

When we concluded last week it was 1981 and I had just closed on my first condo in Cleveland Circle, a well-worn student ghetto with weekly apartment break-ins. I bought an unrenovated 1929 studio with the original bath and kitchen that featured oversized orange, green and white flowers on the kitchen wallpaper. Every inch of the place needed serious help!
Sure that I had just made a huge mistake; I started removing layers of wallpaper. My vision of converting that dark studio into a bright open plan kitchen/living area with a breakfast bar, double bed sleeping alcove (stolen from part of the kitchen) and foyer/dressing area with a 7’ closet began to invigorate me.

With six weeks of free rent in another apartment before starting to pay rent PLUS mortgage payments, I was focused on sticking to my five-week rehab plan. When the developer learned that I was removing five feet of wall, he made me hire a structural engineer that took a week to write a one-page report before I could proceed. Kitchen cabinets arrived late, installers rescheduled and flooring finishers never showed up.

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Why I Bought My First Condo: Inside Sam’s Head – Part 1

Posted by Rona Fischman February 16, 2009 03:07 PM

Today, I would like to introduce Sam Schneiderman.Sam is a colleague and native Bostonian who will share his experiences and lessons learned during his journey from first-time buyer to home owner, renovator, landlord/investor and successful broker. He is president & principal broker of Greater Boston Home Team, an established boutique brokerage and consulting firm serving buyers, sellers and homeowners in all price ranges throughout urban and suburban Boston. Sam brings us over 28 years of perspective on the Boston real estate scene. He will be blogging here on Mondays.


Since this is my first post, it seems that you should know a bit about what contributes to my outlook on real estate. By sharing some of my experiences, I hope to provide a longer term perspective of the market to our younger readers and bring transparency to my comments to everyone else.

I bought my first condo in the 1981. As a real estate dummy, I paid the asking price of $30,000 for a studio condo with parking in one of Brighton’s first condo conversions because I liked the building. Luckily, I was able to get a below market 16 percent mortgage for 90 percent of the purchase price, while market rates hovered around 18 percent. I would have happily paid 18 paid if the numbers worked for me.

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Johnny gets his hammer

Posted by Rona Fischman January 15, 2009 03:00 PM

Remember John Dough? You met him on November 6. He bought a bank-owned property with the intention of finishing the renovation and selling it for profit. You heard about his private financing on November 18th. Now, John has a loan, he has a deed, he has a budget. He's picking up his hammer and getting to work.Here’s John in his own words:

Getting to Closing in One Piece: It’s been awhile since I last commented on our progress so here is an update. After we secured our financing we had about three weeks until closing. It was pretty uneventful. Title was clear, taxes were owed, and the water/sewer bill had to be paid. The bank owning the unit agreed to pay the taxes, but would only pay a 1/3 of the water/sewer. So we had to pay the balance, which wasn’t much ($400 or so) and we also had to insure the property which meant that we’d be paying for the share of the other condos in the building that were bank owned. That cost was about $1200 for a half year master insurance policy. We plan to recoup 2/3 of that cost when the banks try to sell their units. With all that going on, we closed about a week later than expected but we weren’t subject to the usual fees that banks invoke when you don’t close on time. We now owned the condo.

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How John Dough got his dough

Posted by Rona Fischman November 18, 2008 03:28 PM

“John Dough" has a condo redevelopment project in Boston. You met him here on November 6th. Below, John tells us about how he got his capital in the current finance market:


Before I started this project, a colleague and I were able to obtain financing from a local bank for a different condo “shell” (gutted to the studs.) In that case, they agreed to financing the purchase price including our full construction budget, with us putting down 30% and paying a couple of points.

So, we figured that with this newly found property the same bank would be willing to give us the same deal. No such luck. The financial crisis of 2008 was in full swing and the same deal was off the table. In fact, we contacted several local banks and they either said “no way” or didn’t even bother to respond.

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Meet John Dough

Posted by Rona Fischman November 6, 2008 02:56 PM

I am pleased to introduce “John Dough.” He volunteered to tell his tale of flipping a property when the chips are down. Crazy? We’ll see!

Here’s John, in his own words:

I’m looking to find out if a property can be flipped in the next few months. My name is John Dough and over the next few weeks, I will chronicle my progress as I -- along with two other investors -- acquire a property, renovate it, refinance it, and then try to sell it. My personally feeling is that if you buy in a good location, at a price point that works with the comps, and you produce a quality product that is superior to your competition, you can flip in just about any market. Time will tell if I’m right.

How I found the right place:
My favorite search on MLSPIN is by “price per square foot”. I have been looking through that over the past few months and have found some gems. Problem is that the search usually results in a list of properties with street names I’ve never heard of. So I use the interactive map search on the Zip Realty website. I know all the good parts of Boston; I just don’t know all the street names. So, I can zoom into the locations I prefer and can see if anything good pops up. That is how I found this property. It is located in what I would consider an emerging area, as far as desirability goes.

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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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