Where the smart money is - Public

WHERE THE SMART MONEY IS?

Investing in rental properties Building Wealth and Income through Real Estate

www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352

Agenda Market data

Whats happening in real estate? What is driving up prices? Does it still make sense to buy?

Investment terminology NOI (Net Operating Income) Debt service Cash on cash return Cap rate

Real Examples


U.S. Homeownership Rate Falls to 20-Year Low Why?

Student Debt Income Savings Access to credit

More renters than homeowners make it a favorable environment for investors


Student debt growth 25 year olds with student debt grew from 25% in 2003 to 43% in 2012

Homeownership rate among 30 year olds w/student debt fell 10 percentage points and those w/o student debt fell 5 percentage points


2015 the most indebted class ever The average class of 2015 graduate with student-loan debt? $35K

Money towards paying student loans means less toward savings for a down payment on a home


Student Loans & Homeownership Freddie Mac Insight & Outlook Sept 2015


Lack of meaningful wage growth Lower highs Lower Lows

Impacting savings for homeownership, if these individuals arent buying they are renting or living at home


Lower US Personal Savings rate

Put downward pressure on future homeownership rates


Source: U.S. Bureau of Economic Analysis

Poor access to credit Mortgage Loan Amounts Depend on Your Debt-to-Income Ratio

Lack of income growth impacting borrowers

Levels of debt Cars Student loans Credit cards

Amount of Savings

Is a challenge that remains and continues to be a barrier to home ownership


Home values are rising attributed to

High demand, low interest rates and low inventory www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty |

[email protected] | 617-276-5352

Source: Zillow.com

A Growing City Bostons population grew by 4.8%

between 2000 and 2010, marking the first time since 1970 that Bostons population exceeded 600,000 people

A Diverse City

The foreign-born population has accounted for much of the citys population growth for the last five decades, making immigration a key driver of Bostons population growth

What are the trends in Boston


An Educated City Boston has one of the most highly-

educated populations in the country, ranking 8th among a set of 25 comparable cities

A Youthful City The 20-34 population increased from a

low of 21% in 1960 to 34% in 2013, while the 35-64 population increased to a lesser extent from a low of 27% in 1980 to 33% in 2010

Source: Boston Redevelopment Authority

Increasing population, aging demographic and delayed household formation in Greater Boston

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1990 2000 2009-2013

0-24

25-44

45-64

65+

3,500,000

3,600,000

3,700,000

3,800,000

3,900,000

4,000,000

4,100,000

4,200,000

4,300,000

1990 2000 2009-2013

Population

Population

Will lead to trends toward smaller households and more people living alone shifting away from single family toward smaller units as rentals or condos

Source: Greater Boston Housing Report

Rising Rents in Boston

Driven by low vacancy and low unemployment, average rents for 2BR apartments increased by 22% and 3BR increased by 19% since 2012


1700

1900

2100

2300

2500

2700

2900

2010

-02

2010

-05

2010

-08

2010

-11

2011

-02

2011

-05

2011

-08

2011

-11

2012

-02

2012

-05

2012

-08

2012

-11

2013

-02

2013

-05

2013

-08

2013

-11

2014

-02

2014

-05

2014

-08

2014

-11

2015

-02

2015

-05

Boston, MA 3 bedroom rentals Boston, MA 2 bedroom rentals

2,344.63 2,576.50 2,647.92

2,792.14

1,918.50 2,133.92 2,220.00

2,341.43

0

500

1000

1500

2000

2500

3000

2012 2013 2014 2015

Boston, MA Avg 3BR Boston, MA Avg 2BR

Source: Zillow.com

Rents will stabilize at vacancy rates at 5.5%...

However the vacancy rate hasnt been at 5.5% since 2010 resulting in the continued rise in rents


Unemployment is at record lows

Indicates there is a larger pool of potential tenants with jobs


0

50,000

100,000

150,000

200,000

250,000

300,000

Employment 2022

Employment 2012

Source: State of MA Department of Labor and Workforce Development

Expected employment growth high income occupations


Where is the multifamily market headed? US Multifamily Outlook Freddie Mac 2H 2015


Follow the smart money The apartment market has

been a boon for developers and investors so far this decade. Vacancies are hovering near 15-year lows at 4.2%, according to market-research firm Reis Inc., as young adults stay in rentals longer than earlier generations did

The flow of renters into the market has been robust.

Two of the largest U.S. home builders are redoubling their push into the rental-apartment market


Investment Terminology NOI (Net Operating Income) income less expenses

(does not include mortgage payments)

Debt Service principle plus interest on loan

Cash on Cash Return NOI less debt service/ [down payment + capital improvements]

Cap Rate = NOI (Rents expenses) / asking price (cost basis), boston 5%


Investment Terminology NOI (Net Operating Income) income less expenses

Net Operating Income - Potential gross income is simply what you

expect the building to realistically generate based on 100% occupancy and before taking out any expenses. Be sure to add in income from all sources including laundry machines, parking, or any other additional income that will be generated from the property.

Expenses Property Taxes, Insurance, Maintenance, Property Management, Advertising, Utilities, Snow removal, vacancy


Investment Strategies Buy & Hold (Investors)

Buy a property that needs work Add value by rehabbing(cash buyers) LC buy for cash, rehab & refinance

Buy & convert to condos

Requires assistance of a real estate attorney Must comply with laws & regulations to determine use,

maintenance, common areas, etc.

Retail investors (owner occupied) Top dollar for pretty houses


Randolph Savings Bank - Financing Financing programs available for owner occupied multi

family home purchases Down-payment options PMI Terms & conditions

Financing programs for investor

Down-payment options Terms & conditions


Live Analysis & Evaluation Review active multi family homes currently on the market

Apply investment terminology to determine value of NOI,

debt service, cash on cash return, cap rate

Determine if the multi family homes make sense from an investment standpoint


Malden Ma Rents

2 Bedroom Average: $1,643 3 Bedroom Average: $2,092


36 Echo St Malden Ma List Price:$450,000 2 Family Unit 1 2BR,

Unit 2 3BR Sq Ft: 2,193 Rent: $1,050 Tax: $5,621.9/yr Insurance: $1,550/yr Maintenance: $1,200/yr Property Mgmt: 6-8% Advertising: $0 (CL) Utilities:$220/mo Snow Removal: $1,500/yr Vacancy: 1 Months rent


152 Bryant St Malden Ma List Price:$429,900 2 Family Unit 1 2BR,

Unit 2 3BR Sq Ft: 1,941 Rent: $1,050 Tax: $4,643/yr Insurance: $1,550/yr Maintenance: $1,200/yr Property Mgmt: 6-8% Advertising: $0 (CL) Utilities:$220/mo Snow Removal: $1,500/yr Vacancy: 1 Months rent


Evaluate and Analyze previous two examples Use current rent rates 2 Investment types

Pure investor (both units rented) 20% downpayment Retail investor (2BR unit occupied/3BR unit rented) 3.5%

downpayment 2 Scenarios

Property Management Fee (8%) included Property is self managed (0%)

Calculate: Annual Operating Income, Annual Operating Expenses, Net

Operating Income (NOI), debt service, Annual cash flow, Cap Rate, Cash on Cash return


Current Multi-families for sale in Malden

17 currently for sale 14 - 2 families 2 - 3 families 1 4 family Avg Sq Ft: 2,433 Avg List Price: $511K Avg List/Sq Ft: $213 Avg DOM: 55


Multi families that have sold in last 3M 57 Sold 51 2 Family 6 3 Family Avg Sq Ft: 2,497 Avg List Price: $483K Avg List/Sq Ft: $198 Avg DOM: 34 Avg Sale Price: $487K Avg. Sale$/SqFt: $200


Questions?

Peter Vuong Email: [email protected] Cell: 617-276-5352 Facebook: https://www.facebook.com/petervuongrealestate Website: www.petervuong.com


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Where the smart money is?AgendaU.S. Homeownership Rate Falls to 20-Year LowStudent debt growth2015 the most indebted class ever Student Loans & Homeownership Freddie Mac Insight & Outlook Sept 2015Lack of meaningful wage growthLower US Personal Savings ratePoor access to credit Home values are rising attributed to What are the trends in BostonIncreasing population, aging demographic and delayed household formation in Greater BostonRising Rents in Boston Rents will stabilize at vacancy rates at 5.5%...Unemployment is at record lows Expected employment growth high income occupationsWhere is the multifamily market headed?US Multifamily Outlook Freddie Mac 2H 2015Follow the smart money Investment TerminologyInvestment TerminologyInvestment StrategiesRandolph Savings Bank - FinancingLive Analysis & EvaluationMalden Ma Rents36 Echo St Malden Ma152 Bryant St Malden MaEvaluate and Analyze previous two examplesCurrent Multi-families for sale in MaldenMulti families that have sold in last 3MQuestions?

Where the smart money is - Public

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