24 yo , real estate purchase

[inishowen]

Tom,

I'm in the Boston area as well. My .02 is that this once red hot market has cooled to the point of being stagnant. There are tons of listings, and seemingly no buyers. Listing prices, imo, are still tied to the market of a couple of years ago and on average are still overpriced to reignite the interest in RE you need to flip something (I only hear from people that they think prices are going lower, which I know could be a contrarian indicator). Sellers have been reluctant to drop asking prices which has dramatically increased inventory. I think the theory of supply and demand would point towards an eventual decrease in average sales price in the area.

Being in the market for another investment property myself, I want this decline, if it happens, to be rather dramatic. I would guess that the odds are against you right now to flip something in the greater Boston area (unless you stole something for +15% below current market).

I wouldn't buy a condo by the way. They are usually the first to feel the real hit of a decline and the last to recover. Find a multi in an area that is in demand with the 25-35 yr old renter (Somerville, for example).

Lastly, I think there are 3 major components affecting the local market besides prices: Jobs, interest rates, heating costs. The first two are doing fine, the last is going to be a beeyotch this winter. High heating bills just might be the catalyst to bring sellers back to pricing reality.

[Tomcruise]

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Find a multi in an area that is in demand with the 25-35 yr old renter (Somerville, for example).



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Somerville/Boston Multifamily seem to run 600k plus, little out of my price range....I'm thinking the danvers area a decent two family runs 400k or so, just don't know what kind of tenants to expect there, or the demand.

[Jimbo]

Tom,

Can't you just use an alien mind meld and pick the preserved brain of L. Ron Hubbard?

Jimbo

[inishowen]

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Find a multi in an area that is in demand with the 25-35 yr old renter (Somerville, for example).



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Somerville/Boston Multifamily seem to run 600k plus, little out of my price range....I'm thinking the danvers area a decent two family runs 400k or so, just don't know what kind of tenants to expect there, or the demand.

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You're right about the current average pricing but if you put in the time you'll find a 2 family in the low 5's, high 4's. Belmont, for instance, is primarily a single family town, affluent, but some of the older stock 2's are priced in the low 5 range currently. Downside is it is not nearly the rental market as Somerville or Cambridge, how about Watertown? If it was easy eveybody'd be doing it. I'd much rather pay in the 5's for a property that when an apt comes available there's a long line of potential tenants vs pay in the mid 3's in an outlying area that goes vacant for a couple of months between tenants.

My theory is that once the glut of multis on the market hits critical mass, sellers might start to cut their prices to get a sale, then the next guy undercuts that price and so on. Kind of like a snowball running downhill...but that's the best case scenario for me.

For now, I'd suggest you sign up on a realtors website for automatic emails of listings in the areas you're interested in. It's important to find a site that offers you complete access to MLS, not just that realtors listings. Learn the market you're interested in so that when a deal comes up you will recognize it.

[spex x]

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(unless you stole something for +15% below current market).



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Not even close, IMO. Jesus, I can negotiate a 15% discount on FMV just from making offer on expired MLS listings, and get a property in perfect condition. You can't make money flipping on a 15% spread - the transaction cost alone will erode your profit to nothing. For a flip, I'd look for 25% minimum discount on true FMV - not a 25% discount off someone's inflated price. 15% would be cutting it WAY too close for a flip. For a rental, 15% might work. Not for a flip.

[inishowen]

Good points Spex,

All the more reason I don't flip, but being honest if I could consistently find properties in this area at a 25% discount off FMV, I wouldn't have time to post on the internet. That'd put a $500k FMV property at $375k which, even considering the state of the local market, I don't see happening right now. We can hope though.

I'm curious, what type of anticipated ROI (as a percentage) is your floor to make a flip worth the effort?

How do you file to avoid the regular income tax rate if you hold less than the qualified time for cap gains treatment?

Do you have a buyer lined up before you purchase or do you go the more traditional marketing route after taking ownership, or a combination of the two?

[spex x]

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I'm curious, what type of anticipated ROI (as a percentage) is your floor to make a flip worth the effort?

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I don't flip properties because its too much work. I only have rental property. Right now I'm developing a manufactured home subdivision. I pay for development out of my pocket, sell the home on a seller-carried note, then sell a partial interest in the note to investors. I end up with no money in the deal and a partial note. I guess my ROI is infinite on those projects.

So considering the options that I have available to me, and considering that I don't really want to do the work and have the stress associated with a flip, I probably wouldn't consider a flip for any ROI. I'm an investor to work less, not more. Not that there is anything wrong with flipping or anything, its just not for me.

[inishowen]

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[ QUOTE ]

I'm curious, what type of anticipated ROI (as a percentage) is your floor to make a flip worth the effort?

[/ QUOTE ]

I don't flip properties because its too much work. I only have rental property. Right now I'm developing a manufactured home subdivision. I pay for development out of my pocket, sell the home on a seller-carried note, then sell a partial interest in the note to investors. I end up with no money in the deal and a partial note. I guess my ROI is infinite on those projects.

So considering the options that I have available to me, and considering that I don't really want to do the work and have the stress associated with a flip, I probably wouldn't consider a flip for any ROI. I'm an investor to work less, not more. Not that there is anything wrong with flipping or anything, its just not for me.

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Very impressisve Spex, I had a range of responses I was expecting but yours came in way north of what I'd ever even guess.

You got it handled from every area, well done!