This Week’s Property- Another Three Family in Everett
Though I typically like to mix things up with the investment opportunities, this week we are staying in Everett due to a brand new property that just came on the market. Though we’ll get into the details below, this property can be perfect for the retail investor who wants to jump into a fantastic part of Everett without too many headaches!
Grading the Investment Opportunity
If you are new to this blog series, take a quick look at this section to see how I grade the properties.
For the investor, grading begins with NOT overpaying (as is clearly the norm today!). Now, I should say that investment goals can DRASTICALLY differ between one person to another. Some people are going to look for significant cash flow, while others who don’t need that want to park their money in a high quality location.
Now I should tell you guys, I am kind of in between; I look for cash flows and am not a speculator, but I also have an appreciation (pun not intended) for what it means to buy in a market like Boston versus other US markets (like Cleveland, where one million could buy you 15 units). But, because there are different types of investors, I’ve tried to come up with a grading system that works across different investment types. Finally, if you are interested, in the last section of this post I’ll add a section to show you how I analyze rents and numbers.
32 School Street Everett MA –Priced at $799K, Three Unit Building
Overall Investment Grade: A
Let’s jump right into this three family with 3 bedroom units!
Similar to the property we looked at on Water Avenue a few weeks ago, the location of this property is fantastic. You’re in South/West Everett, very close to Night Shift Brewing and the major shopping complexes with Target, Costco, and Best Buy etc. Additionally, I know that School Street has been the site of a few luxury condo conversion projects and has seen an influx of millennial condo buyers (one of my personal friends lives on that street who works in tech in Cambridge; the trend is beginning!). This area is clearly changing very rapidly, for reasons such as proximity to Boston and transportation options.
The other major positive with this property is that it is completely stabilized with market rent leases. You have a monthly gross income of $6400, and thus don’t need to deal with tenants at will or below-market tenants who may need negotiating or evictions. The units seem to be in good shape, and of course I love the bedroom mix of 3 bedrooms per unit!
There are no major negatives with this property, though the slight “issue” here is the lack of parking. It’s not a killer for me, as those units rent out just fine with out it, but it would have certainly been a cherry on top.
If this is your first time reading this blog series, check out the last section to see the assumptions of how I run numbers.
For calculating numbers, we’ll run numbers based on the current pro forma of rents, as the property is already stabilized with market rents for 3 bedroom units.
If we look at purchasing this with our standard assumptions, then our monthly cash flows (the cash in the wallet) on day one with current tenants will be: $1,175 per month.
This comes out to be almost $400 of cash flow per unit per month, which is a really good number for rentals around the area! There is no need to go into a “stabilized” scenario, as the property is already running in peak operation (at least on paper!).
For someone who does not want to deal with the pain of stabilizing a building, which typically involves some combination of renovating the property and kicking out or negotiating with below-market tenants, this is a great buy. I love this location, as you’ll be buying into an area that already has had luxury condo development literally across the street and is still very close to the major development projects going on in the Everett market.
As long as there are no major surprises with building mechanicals, this looks to be like a great purchase!
Supplement: How I “Run My Numbers”
I don’t want to get all up in the numbers here, but there are a few key things I should point out when talking about these cash flow numbers. Here are my key assumptions: