SOLD! 70 Washington St CF featuring Lucy & Luis--a story about buying a Multi Family property & the ups & downs!
This is quite the story & worth the read, there are twists & turns. Lucy & Luis were referred by my past client Eric Tidd (THANK YOU!!) & they contacted me early January. We met at Sin Bakery (in person--remember when we could do that?!) & they had at least 100 questions & really put me through the wringer--it was great! No, really! I loved how prepared they were, the well-informed questions that they had, their clear determination & their plan.
Lucy & Luis have a plan together--they are going to purchase several more multi family properties over the next few years & they wanted to make sure that their Realtor would be able to not only help them through the process but also to help them to understand the market & how the numbers work.
We looked at A LOT of multi family properties. We put in SEVERAL offers (Lucy is super organized & is the Queen of Spreadsheets so she could probably tell me exactly how many offers & which houses). On March 25 we signed a contract for a 2 Family property on Manton Av in Pvd. It did not quite meet their goals but they felt they could make it work & I think that they were getting pretty frustrated by the market--multi's in particular get snatched up really quickly & because prices are so high it's difficult to find ones where the numbers work---PLUS we're competing with a lot of cash buyers right now.
We made it through Inspections, the Appraisal, & the Mortgage Comm----nope, we got an extension for the mortgage commitment. Why? Because in a weird turn of events the seller, who paid off the mortgage 13 years ago, did not have any written records of the mortgage being paid off & the lien was still in place so we could not get clear title which means no mortgage for Lucy & Luis. And we're in the middle of a pandemic so everything is shut down (we're mid-April in the timeline). Here's where it gets crazy. We submitted a Mortgage Extension which the seller signed but as that deadline was rapidly approaching with no sign of Chase Bank being willing to give the seller a letter confirming the mortgage payoff so that the lien could be discharged, Lucy & Luis began to really have doubts about this property. The listing agent wanted another extension. I encouraged a termination of the contract. Superstar Attorney Hugh Barry went directly to the Sellers Attorney & requested that the Seller sign the termination agreement---which he did. Here's where it's crazy---the Sellers Agent did not know that he was signing a termination & would have definitely advised against it & insisted on an extension.
Lo & behold a few days later--Chase Bank sent the letter. So then Lucy & Luis had a choice. But here's the thing--we looked at a 4 unit property that weekend & submitted an offer which we were pretty sure we could get accepted. Could we get out of the Manton Av contract--YES!!! We had a seller signed termination so they could not retain the deposit. Could they have moved forward with Manton Av if they had chosen to? Yes. So it really was the best case scenario by making sure that termination was signed by the buyers & seller.
But wait, this story doesn't end here. Let's move along to 70 Washington St, a four unit property in Central Falls, RI. Listed at $319k we were able to get it under contract at $315k. The property has two 1 bedroom units and two 3 bedroom units. Three units have current tenants & the vacant unit will soon by occupied by Lucy & Luis. It's in good condition but could use some cosmetic improvements in the units---the brown painted cabinets would be so much nicer if they were lighter, it would be smart to install vinyl plank flooring that looks like wood over the the sterile vinyl flooring that's better suited in a doctor's office from the 70's. We negotiated a $10k closing cost credit from the inspection results which frankly was about $5k more than I thought we'd get.
Did it close yet, Jess? This is a long story.........we're almost there. We were supposed to close July 17. Not August 11. And it's not uncommon for closings to get delayed but boy did this one drag on. Again, Superstar Attorney Hugh Barry worked with me to make sure that the Contract included language to make sure that the building is up to current Fire Code & that the inspection report be required for the sale (I didn't mention that the sellers insisted upon drawing up their own contract which did NOT include the standard boiler-plate requirement for Fire Code compliance).
Delay #1: The sellers (an investment company that owns 900+ rental units in RI & MA) scheduled the inspection at the last minute.
Delay #2: The Fire Marshall took longer to write up the report.
Delay #3: The property failed the inspection so the sellers had to make repairs/changes.
Delay #4: They had to schedule the re-inspection.
Delay #5: We had to wait for the report (again).
Delay #6: the lender is required to wait three days following clear to close.
Delay #7: we could have closed last Friday but the attorney's were both booked solid.
Delay #8: Monday was a holiday.
Needless to say, Lucy & Luis were pretty frustrated by the end. We didn't have any control over this timeline & so none of us (their Attorney, Lender, or Agent) couldn't really give them an idea of when this issue would be resolved. We were all very confident that it would be resolved--they were minor issues on the report--but the sellers weren't really in a rush, what with soooo many other properties to deal with. But today, after all of that craziness, we closed!
Did you make it to the end? Well I did & so did Lucy & Luis so CONGRATULATIONS! I'm looking forward to working on the next one with these two!
Single Family Market Report:
1359 Active Listings (this is 52% lower than this time last year!!)
296 New Listings as of Wednesday, July 29
176 Under Contract (Inspection Period)
What should you take away from this? Last week inventory was down 50% over last year, this week it's down 52%....So it's just getting more difficult for buyers to find a home & that means they just have to be as patient as possible (yes, I'm talking to you!!), hang in there (don't give up--we'll get one to stick), & be willing to put in competitive bids.
If you're holding onto a home that you've considered selling-----CALL ME!!!! I've been able to find buyers for two homes that we didn't put on MLS. If that's the best option for you I'll do it. There are pros & cons that we'll discuss but I don't advise that you wait! Let's chat!
Have people told you that being a landlord is awful or just too much work? I'm going to tell you 5 Reasons I think owning a multi family is a great idea!
I'm not a big time investor by any stretch but, I’ve learned enough over the past years to understand how the numbers work, the pros & cons of different types of properties, & what to look for when it comes to multi family properties. I got started by devouring as many books as I could on the topic & then through actually owning properties.
The first thing I love is that buying a multi family property as an owner-occupied investment can allow you to purchase in a neighborhood that you otherwise may be priced out of. For example, on the West End of Providence, single family properties are hard to find Unicorns & that means they're priced pretty high--simple supply & demand. In a single family I'd likely have a steep mortgage to pay on my own, but a property with rental income from a rental unit can allow me to either entirely cover the mortgage from the rental, or to have help covering the mortgage. That may give me an option to move to an area that I otherwise couldn't afford. In fact, that's how I was about to buy three properties on the West End of Providence.
I love that Multi family properties add income to reduce the burden of your monthly mortgage payments! Ideally, a three or four unit property that you live in will provide you with enough income to pay your entire monthly mortgage & escrows--if you're in a high rent area you may even net a little after your expenses! But a two unit property may provide you with more living space--many two unit properties in Rhode Island have one unit that is on one level & the second unit will have two floors of living space-- while the unit you decide to rent out may not cover the entire mortgage it should at least cut it down significantly.
On the other hand, If I’m buying an investment property that I’m not planning to live in, I’m looking for at least a net positive cash flow after all expenses of at least $1000 a month---some investors may expect a higher return but depending on the market & how much cash you have available to put down those numbers will change. You need to learn how to do the math to figure out how to meet your goals--I can help you with that! I’m more interested in specific numbers to set as a goal that I can help people who are getting started understand than cap rates & percentages--if you’re looking for that kind of talk go over to biggerpockets.com Super useful info over there by the way!
Another aspect I love is that you have an opportunity to provide safe & clean housing for people in your community. We all know that there are scumbag & absentee landlords who don’t care about their tenants much less the neighborhood. And believe it or not it can be really hard for people to find housing that is clean, safe, & affordable. You have an opportunity to invest in your community, make a smart financial decision, as well as make a difference in people’s lives.
Want to create your own micro-community? Buying a multi family property gives you an opportunity to buy a property with your friends or family members! Multi-generational living is gaining popularity & multi family properties suit these needs often much better than a single family property with in-law suite in the basement. Millennial buyers & their Boomer parents are pooling their resources to meet their needs while also keeping some individual space. Or close friends are forming business relationships to buy multi family properties together--especially three unit properties where one unit adds income to reduce expenses. The opportunities are only as limited as your creativity.
Number five on my list of things that I love about owning a multi family property is that you can leverage your property for more purchasing power to build financial stability & wealth. My first multi family property was a three unit that I lived in. The apartments were small but the math worked in my favor so that the total mortgage was paid for as well as my utilities. A year and a half later I was able to leverage that property in order to buy a two unit property---say what?
The only reason I was able to buy a second multi family was because I owned the first one. I was able to count the rental income from my current property towards my income plus the potential income of the property I was buying which gave me purchase power I wouldn’t otherwise have had given my meager income--this was when I worked for a non profit with a great mission but very low pay. My first property was obtained through a conventional loan and my second property, which I was going to move into, I was able to buy with a low down payment through an FHA loan. Between the two properties & the rental income from the units both of my mortgages, escrows, & property taxes were paid for. I was able to move from that tiny apartment into a property that was a lot nicer, had a lot more space for me & my kiddos--and it had a yard for the dog they wanted (a year later we got our second Husky!). Two years ago, I was able to purchase a third multi family with three units as an investment property. I had a plan & put those stepping stones in place.
So that's what I love: being able to buy in a neighborhood I'd be priced out of, having rental income to pay or offset my mortgage, having an opportunity to invest in my community & provide safe & affordable housing, creating an opportunity to invest in a property with my friends or family members, & creating an opportunity that builds wealth!
Stay tuned next week for part two: 5 Things I Hate about owning a multi family property! Spoiler alert--I don't really hate anything about it but there are definitely things I wish I had known when I started! Looking for a multi family to buy--let's get started! Reach out--I'm always here to help!
When it comes to figuring out the current market value of a property we want to make sure we’re comparing apples to apples & not just pulling a number out of our...um...thin air. The term "comps" refers to comparable properties that are used to figure out the current market value of a particular property.
For starters, Your real estate agent will look at similar homes to figure out how much a buyer is likely to want to pay for it. The homes your agent will look at will be:
Homes currently on the market including those that are pending or under contract; Homes that were on the market but never sold, so the owners took them off the market; & Homes that recently sold.
Generally speaking, your real estate agent will look at several factors to determine whether a home is similar to yours, including:
Location, Size, current condition,
Number of bedrooms and bathrooms,
Recent sale prices within the area,
Style and other important details.
Location is the highest priority. When it comes to location your agent isn’t going to compare your home in North Providence to a home on the East Side of Providence – it just doesn’t make sense because they’re two different markets. Likewise, even within the same city, prices can vary greatly. She will look at your home’s location and find homes within a short radius to compare it to.
Your home’s square footage has a lot to do with how much it’s worth, so your agent will look at similarly sized homes to help her arrive at a price. Likewise only homes with a similar number of bedrooms & bathrooms should be compared. The condition of your home & the age of your major systems will also carry a lot of weight. Is your roof 25 years old? Is the heating system, hot water tank, & AC compressor aging out? Is your kitchen 15 years old or more? Any buyer is going to have to take that into consideration & that can drastically affect your market value.
Often, the best comps are homes that are currently “pending.” Why? Because a pending home is a piece of live market data. A pending home means that a buyer and seller made a deal, and that deal will reflect the most up-to-the-minute stats on the market.
A good local real estate agent, leveraging her network, can get a fairly accurate idea what the ultimate sale price or range is for a pending deal. Try to stick with sales in the past three months, and never go more than six months, because older data is not reflective of the current market.
When you’re deciding to sell your home you need an agent who can provide you with a Comparative Market Analysis---a comp report that will give you the best price range to get your home sold quickly. You want to make sure that the comps are strong to make sure that there are no hang ups when it comes to your buyer financing the property--if the lenders appraiser does not think the price is fair market value then the buyer will not be able to secure financing & you could end up having to start over.
Likewise, if you’re a buyer & you’re considering putting an offer on a property you should expect your agent to help you to determine the best price by providing you with neighborhood comps to either support the price, tell you how high over asking the market supports, or whether the property is overpriced & by how much. You also want to be confident that the bank appraisal is going to support the purchase price.
#whatarerealestatecomps #whatarecomps #jesspowers #jesspowersrealtor #rirealestate #rhodeisland
Single Family Market Report:
1347 Active Listings (this is 50% lower than this time last year!!)
273 New Listings as of Wednesday, July 22
235 Under Contract (Inspection Period)
The market statistics are continuing to show that this is a Sellers Market:
Inventory is down 50% from this time last year---making it hard for buyers to find homes!
New Listings are down 31% from this time last year---leading to multiple offer situations!
Year to date sales are down 10% for the first half of this year
It's a wild world out there in the real estate market! I submitted a few offers this week & in every situation there were at least 10 or more additional offers. My clients are bidding 10-25k over the list price to try & get their offer accepted. One thing that's really important in this market for buyers to pay attention to is whether or not there is value that can be added to the house once they buy it---can the basement be finished, can the kitchen be improved without an expensive renovation, what can they do to the property to ensure that they can add value because they're buying in a market where the prices are high.
Talk about a hot property! This cottage, located a few blocks from historic Hope St, went under contract after the first weekend. I received 13 offers & we're under contract quite a bit over list price. The appraisal came in at purchase price & we've satisfied the home inspection period. I helped my client buy this property a few years ago & helped her to identify the smart improvements that would maximize the list price. What a treat it is to help someone through the process of buying a property & then to turn around a few years later & help them to sell it! I'd like to have 10 more listings just like this property---ones that I can help clients to make quick, easy upgrade & maximize what they can get during this Sellers Market!
Thinking about buying a home? You're in the right place! Here's an easy overview of the steps that you need to take.
Subscribe to my YouTube Channel to see videos posted every Wednesday! Here's a short video I made to talk about credit repair & how to fix it!
If you've spent any amount of time window shopping for homes then you know that there are a lot of homes that are listed with TERRIBLE photos. It's so common that there are multiple websites dedicated to this topic (here, here, & here). I often wonder if home owners just don't look at the photos that have been taken of their property??
It's easy to make light of it but when it comes to your home there are a few things that you need to make sure that you understand & discuss with your Realtor. If you click on the links above you'll see photos that are very over the top & it's easy to assume that it's not really a problem. But the photos below were easy to find & are from properties that are currently listed in RI right now: I spent LITERALLY three minutes in a search & found these examples of terrible photos:
Any day of the week I can skim through MLS & find examples that are identical to these photos. This is primarily true for listings priced under $200,000 but at the same time I can find other listings in that price range with photos that have been taken by a professional photographer & there is a stark difference. Likewise, there's a difference in quality between professionals---an agent needs to know what he/she is doing & have the best resources available to you. I have a current listing in Rehoboth & the first set of professional photos just didn't cut it for me so I hired a different company--yes, that meant that I had to pay for a second set of photos but I have an extremely high standard that I simply will not lower.
Here's my two cents:
All Realtors should offer free, professional photography. Period. Certainly some agents have taken courses & have learned how to take photos that would be considered professional quality, but Sellers should look at previous examples and decide if they are high quality.
It is a Realtor's job to help a Seller understand the current condition of the home & the impact that will have on the listing price. This takes experience & first-hand knowledge.
Photos should be an accurate representation of the home-- you do not want photos that "make the house look bigger" or gloss over an obvious issue. I recently showed a house to a client & the kitchen was under construction but that was not shown in the photos or in the listing remarks/details about the house. And when I say "under construction" I mean that it's obvious the work was started months (or years) ago & that's as far as the work was going to go....No one likes to walk into a house & feel like someone isn't being forth-right, it makes people wonder what else is being hidden or not disclosed. Fish-eye lenses or wide angle lenses, for example, should not be used.
Your Realtor should have industry partners that can assist you to maximize the value of your home.
Your Realtor is your home selling partner not a Wizard! There's work that Sellers must do to get their home ready if they want to maximize the value. I have a Pre-Shoot Checklist that I offer all of my Listing partners so that they have a plan in place to help get ready for great listing photos. Send me a message, I'd be happy to share it with you!