State Specific Question About: MASSACHUSETTS (MA)

Wondering if anyone could crunch the numbers for me on a property. The price has not been set yet but I want to be able to jump if it's worth it.

4 units (2BR 1 BA each) - current total monthly rent $5400/mon ($64,800/yr)

Tenant pays - gas heat (all units separately metered

Tenant pays - Electric (all units separately metered

Sewer - private septic (new system 2011)

Water - LL pays (est. $100/month)

Taxes - $6,300/yr

Insurance - $3,000 (est. )

In last 5 years (last time sold) - New septic, windows, roof, smoke detectors

Age - built in 1800's

Lead certified

Can't help you on the value, but wow the rents and taxes are high in MA! LOL That's good income compared to here, but then your taxes are sky high also.

On a house that old, be sure to have it inspected. Structural issues, plaster condition, electrical, plumbing would all be concerns for me. Roofs are expensive so it's great that was done in 2011...same for windows.

Those rents and tax numbers sound very close to the Portland area markets. But our water would cost more. And you might have a hard time finding something built in the 1800s.

On a place built in the 1800's,I'd figure expenses to be close to 50 percent, maybe a little less.

I'd also want a 10 cap or better. 10 if it's in great condition and you don't have to do anything. If repairs are needed,than a better cap number, maybe a 12 cap. Also, it depends on the area. A, B, C??? The lower the area, the higher cap I'd want.

So, if I'm great condition, 64,800 gross x 50% gives 32,400 and a 10 cap gives $324,000 as a max buy price.

I'd be likely to offer somewhat below that since there would invariably be repairs I would want to do. Plus, I don't want to buy at retail.

So, maybe 250K offer if in good condition in an A or B area.

Otherwise, less.

I agree with plenty and Johnny B above.

Have the building inspected before jumping in.

Don't underestimate your upgrades and improvements.

This is a subjective question.

I want all of my properties to return all of the capital I have invested in them in 7 years or less, which leads me to the "2% rule." Roughly, that means the unit(s) must rent for at least 2% of the "all in" costs (purchase, closing, rehab, holding). Rent is net of any land lord paid utilities and any "free" labor you plan to donate for rehab, self-management, and self-maintenance.

So, a quick example is if a unit rents for $1000/month my max "all in" is $50,000, and rehab, maintenance, management is hired out.

In your case, I'd subtract $100 water bill (which is dirt cheap for 4 units, btw....verify that bill with the utility company!). The after-utility rent is $5,300/month.

Using my formula: $5,300 / 2% = $265,000.

In my area north of Boston, 3 family building go for $475,000.00 - $700,000.00 depending the city or town. The rents would be in in the $1,500.00 - $1,800.00 range again depending upon the city or town. Building with 4 units & up in the same are sell for less per unit. Mostly this is due to their being considered commercial properties which result in higher taxes, higher property taxes and stricter fire safety requirements. If you are going to be doing all the improvements you mentioned it most likely would be considered a major rehab & trigger updated code compliance including a sprinkler system.

Even though the septic system was redone in 2011, it's still not very new & might not pass Title 5 requirements. It would be important to find out if there are plans to bring municipal sewer to the area.

Also I'm not sure what you mean by "Lead certified". Is that lead free, deleaded or what?

Based on the information given I personally wouldn't consider offering any more than $50,000.00 to $70,000.00 a unit.

Lots of good info. Thank you. I think the asking price will be $425k. I will DEFINiTELY look into the sprinkler system requirements.

Sid - in Massachusetts (my area) a 1,400 sq ft 3BR 1.2ba ranch is selling for $400k, you can't even buy a building lot under $250k

The last sprinkler system I had done was on a completely gutted 4 unit. It cost $5,300.00 to bring in a new dedicated water line and $6,800.00 for the actual system including piping, back flow valves, sprinkler heads, pressure testing and final inspection by Fire Department. It also cost another $1,200.00 for the stamped drawings.