Rental Property as an Investment?

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joer1212
Posts: 418
Joined: Sun Feb 17, 2013 1:55 pm

Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 12:29 pm

I saw this listing yesterday for a rental property in Massachusetts. I'm considering cashing out some of my stocks from my taxable account and dumping it into this house. The potential ROI is phenomenal. But, it sounds too good to be true:

https://www.zillow.com/homedetails/35-3 ... 9139_zpid/

What's the catch? Why would a landlord sell such a [goldmine?] at this price? Is it hard to rent? Is he moving to a different state, and doesn't want to be bothered with long-distance real estate? Are there hidden problems with the property?

Thoughts?

FYI:

- I live in Brooklyn, NY

- My brother owns 2 homes nearby in Massachusetts. He can manage this property for me for a piece of the rentals

- If I decide to take the plunge, would I qualify for some kind of tax incentive, or other benefit, because I'm a first-time home buyer? I want to mitigate my tax bill when I cash out my stocks
Last edited by joer1212 on Sat Aug 11, 2018 12:07 pm, edited 1 time in total.

arsenalfan
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Re: Rental Property as an Investment?

Post by arsenalfan » Fri Aug 10, 2018 12:37 pm

Best guess: Looks like someone's rehab ran into structural issues.
I'd definitely pay $2-3k for a strucutral engineer and general contractor to examine the entire place, before investing.
Great location in North Adams next to Mass MoCA and maybe MCLA, but property has a steep grade.
Last edited by arsenalfan on Fri Aug 10, 2018 12:53 pm, edited 1 time in total.

Jack FFR1846
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Re: Rental Property as an Investment?

Post by Jack FFR1846 » Fri Aug 10, 2018 12:39 pm

If nothing else, take a drive out there. North Adams is not Newton, MA. What do people do for work in North Adams? What's the unemployment rate? What's the average rent? What needs to be done to get the house up to par? Yah, the price is really low. But who will be renting there? If the current landlord was able to pull in $5k a month, why aren't they?

If it's too good to be true.......
Bogle: Smart Beta is stupid

Flyer24
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Re: Rental Property as an Investment?

Post by Flyer24 » Fri Aug 10, 2018 12:45 pm

It looks like a money pit. 😯

Hypersion
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Re: Rental Property as an Investment?

Post by Hypersion » Fri Aug 10, 2018 1:20 pm

Do you want to deal with 8 "working class" families? That is almost a job unto its self.

renue74
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Re: Rental Property as an Investment?

Post by renue74 » Fri Aug 10, 2018 1:40 pm

It's been listed since May, 2018. How many real estate investors have looked at the property and taken a pass at it since then....my guess is for good reason.

If it were a deal, it would had been swept up by now in this hot market.

joer1212
Posts: 418
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Re: Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 1:46 pm

renue74 wrote:
Fri Aug 10, 2018 1:40 pm
It's been listed since May, 2018. How many real estate investors have looked at the property and taken a pass at it since then....my guess is for good reason.

If it were a deal, it would had been swept up by now in this hot market.
Yeah, that's exactly what I was thinking. A 'whale' would have swept up this property long ago. He wouldn't allow a guy like me to ponder whether I want it or not.

joer1212
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Re: Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 1:48 pm

Hypersion wrote:
Fri Aug 10, 2018 1:20 pm
Do you want to deal with 8 "working class" families? That is almost a job unto its self.
Well, I was thinking to either hand off the responsibility to my brother (who has properties in the area), or hire a management company to deal with it.

joer1212
Posts: 418
Joined: Sun Feb 17, 2013 1:55 pm

Re: Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 1:49 pm

Flyer24 wrote:
Fri Aug 10, 2018 12:45 pm
It looks like a money pit. 😯
LOL, why? Does it look like it needs a lot of renovations?

joer1212
Posts: 418
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Re: Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 1:50 pm

Jack FFR1846 wrote:
Fri Aug 10, 2018 12:39 pm
If nothing else, take a drive out there. North Adams is not Newton, MA. What do people do for work in North Adams? What's the unemployment rate? What's the average rent? What needs to be done to get the house up to par? Yah, the price is really low. But who will be renting there? If the current landlord was able to pull in $5k a month, why aren't they?

If it's too good to be true.......
Where can I find these stats from an unbiased source? I certainly don't want to ask the realtor or seller.

BradJ
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Re: Rental Property as an Investment?

Post by BradJ » Fri Aug 10, 2018 1:55 pm

I'm just surprised the appliances are still in the building. I would tread carefully on this one, definitely if it is your first rodeo.

joer1212
Posts: 418
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Re: Rental Property as an Investment?

Post by joer1212 » Fri Aug 10, 2018 1:55 pm

arsenalfan wrote:
Fri Aug 10, 2018 12:37 pm
Best guess: Looks like someone's rehab ran into structural issues.
I'd definitely pay $2-3k for a strucutral engineer and general contractor to examine the entire place, before investing.
Great location in North Adams next to Mass MoCA and maybe MCLA, but property has a steep grade.
What got me excited about this property, aside from the fact that it's a cheap 8-family, is its location not far from Mass Moca. This may be an up-and-coming town. Good things may happen in this artsy area in 5-10 years.

Of course, were I to purchase this home, it would be contingent upon a successful professional inspection. Would I also need a structural engineer in addition to an inspector?

Ruger
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Re: Rental Property as an Investment?

Post by Ruger » Fri Aug 10, 2018 1:57 pm

renue74 wrote:
Fri Aug 10, 2018 1:40 pm
It's been listed since May, 2018. How many real estate investors have looked at the property and taken a pass at it since then....my guess is for good reason.

If it were a deal, it would had been swept up by now in this hot market.
Not only that, but it had two sales that fell through in less than a month. I'd be really leery about this one.

Hypersion
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Re: Rental Property as an Investment?

Post by Hypersion » Fri Aug 10, 2018 2:04 pm

joer1212 wrote:
Fri Aug 10, 2018 1:48 pm
Hypersion wrote:
Fri Aug 10, 2018 1:20 pm
Do you want to deal with 8 "working class" families? That is almost a job unto its self.
Well, I was thinking to either hand off the responsibility to my brother (who has properties in the area), or hire a management company to deal with it.
Does your brother want to deal with that, does he have the experience to tell the difference between a working-class family and professional tenants. A management company is not going to care if your tenants trash the unit. Look at city data this isn't a war zone but it's a working-class area and you have to realize that.

http://www.city-data.com/crime/crime-No ... setts.html
This is the high crime area. Maybe it's up and coming or maybe all the criminals are being pushed out of the neighboring area and moving here.

arsenalfan
Posts: 613
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Re: Rental Property as an Investment?

Post by arsenalfan » Fri Aug 10, 2018 2:28 pm

Call selling realtor
Find out why deals fell through and inspections.
Price of a phone call

panhead
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Re: Rental Property as an Investment?

Post by panhead » Fri Aug 10, 2018 2:38 pm

joer1212 wrote:
Fri Aug 10, 2018 1:49 pm
Flyer24 wrote:
Fri Aug 10, 2018 12:45 pm
It looks like a money pit. 😯
LOL, why? Does it look like it needs a lot of renovations?
You are kidding here right?
In case not, it appears most, if not all of the kitchens are gutted. Some new cabinets have been purchased. Drywall needs to be put up. It's a complete rehab. Not to mention lots of horsehair lathe and plaster. BX wiring with rotting cloth covering and bad grounds due to rusted steel BX. Knob and tube which isn't really a problem until your insurance company finds out its there. This thing will take a LOT of work and a LOT of money to get into condition to rent. If you are not local and not doing or at least overseeing it yourself, I don't see this ending well.

Had to chime in, just in case your comment about it not needing a lot of renovations was serious.....

dpm321
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Re: Rental Property as an Investment?

Post by dpm321 » Fri Aug 10, 2018 4:30 pm

One additional caution. Massachusetts is one of, if not the most, landlord unfriendly states with respect to tenant/landlord considerations.

protagonist
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Re: Rental Property as an Investment?

Post by protagonist » Fri Aug 10, 2018 4:50 pm

I live in W MA.

N Adams is an interesting community. Not long ago it was a dead old mill town like much of the northern corridor along Rte 2 west of Worcester.

MassMOCA came along and it is experiencing a minor renaissance...galleries, great brew pub, stuff like that. Artists are moving in. But I stress minor....it is still quite depressed, but now it is depressed and interesting. The surrounding countryside is beautiful and you are only a few miles from Williamstown (Williams College, museums, restaurants etc.). Like most of the towns in the Berkshires, there is still high unemployment but there are also many artsy types living in these places, and the summer comes alive with theatre, music festivals, dance. etc (Tanglewood, Jacob's Pillow, Shakespeare and Company, many more.....). Lots of opportunities for hiking, kayaking, cycling, swimming, etc nearby.

I agree that there is probably a glitch if it is so cheap and has been on the market for months. Are the units rented? You really need to travel up and see for yourself...if you are still interested you should go through the place with an expert and a fine tooth comb to figure out what is the catch. There is bound to be a catch. Perhaps it needs a few hundred thousand dollars in repairs. Or even needs to be torn down.
It's not such a long drive from Brooklyn. You should be there in 3 hours or less if you avoid NY rush hour.

adamthesmythe
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Re: Rental Property as an Investment?

Post by adamthesmythe » Fri Aug 10, 2018 4:58 pm

Even the listing has multiple red flags

> earning potential to bring in north of $5,000 a month

Is it earning anything now?

> Some owner financing may be available

Definitely means that this property is hard to sell.

> Property recently cleaned out

Maybe totally vacant?

> a brand new 9 meter electric service ($10,000) has already been installed

Maybe condemned in part because of unsafe electric?

> We have also purchased appliances for 4 kitchens and 2 brand new kitchen cabinet layouts

There are 8 units mentioned, what about the rest?

> to get your (sic) started

I read this to mean that total renovation will be required, the 2 kitchens just the beginning.

Call me cynical.

joer1212
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Re: Rental Property as an Investment?

Post by joer1212 » Sat Aug 11, 2018 12:02 pm

Thanks for all the enlightening feedback, guys. It sounds like real estate investing (at least in this property) is a mine field, and potentially a money pit, rather than a goldmine.
As you've probably surmised, I'm not well versed in this field. I've spent years becoming proficient in stocks/bonds investing, and I'm guessing that real estate requires the same due diligence in order to becoming successful.

(note: I am skilled in sheetrocking, tiling, flooring, electrical, some plumbing, and construction in general. I was hoping to leverage these skills on this property. I didn't intend to hire contractors to do this work)

gmaynardkrebs
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Re: Rental Property as an Investment?

Post by gmaynardkrebs » Sat Aug 11, 2018 12:20 pm

Isn't 8-family property commercial lending only? If so, different ballgame.

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