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Transcript of Where the smart money is - Public
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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
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Student Loans & Homeownership Freddie Mac Insight & Outlook Sept 2015
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Lower US Personal Savings rate
Put downward pressure on future homeownership rates
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
Source: U.S. Bureau of Economic Analysis
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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
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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
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Unemployment is at record lows
Indicates there is a larger pool of potential tenants with jobs
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Where is the multifamily market headed? US Multifamily Outlook Freddie Mac 2H 2015
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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%
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Malden Ma Rents
2 Bedroom Average: $1,643 3 Bedroom Average: $2,092
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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Questions?
Peter Vuong Email: [email protected] Cell: 617-276-5352 Facebook: https://www.facebook.com/petervuongrealestate Website: www.petervuong.com
www.petervuong.com | Peter Vuong, Agent | Keller Williams Realty | [email protected] | 617-276-5352
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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?