Investment Property

Boston Landlords: 10 Tips for Renting an Apartment that is Still Vacant

September 1st has come and gone. Boston’s prime rental season is over and the number of renters out there has decreased sharply. However, all is not lost. Here are 10 tips to help get that apartment leased:

1.  Make Necessary Repairs.  If something is clearly broken (e.g. cracked windows, doors that do not close, etc.), many prospective renters will see that as a red flag. 

2.  Deep Cleaning.  Has the apartment been cleaned since the last tenant moved out? Prospective tenants this time of year generally have more options and are more likely to scrutinize unclean apartments.    If the apartment windows have not been cleaned (inside and out), that is a must-do to help maximize the natural light.

3.  Freshen Up the Paint and Floors.  Without furniture, scuff marks become focal points.  Not only will a fresh coat of paint help the apartment show better, but now is the best time to get that done since there are no tenants to work around. The same is true with the floors – refinishing hardwood floors and replacing carpet (with new carpet or hardwood flooring) can make a world of difference.

4.  Improve Curb Appeal.  Depending on the type of rental that you own, there may be limits to what you can do to improve the curb appeal.  However, for prospective renters, their evaluation of your apartment begins even before they step into the unit.  Put yourself in their shoes and walk-up to the building – how does the landscaping look, is the mail in boxes or scattered in the foyer, are the common areas clean, are the hallway lights working?

5.  Take New Pictures.  Nearly all renters’ searches begin online, so pictures will make the first impression. If you have been using the same pictures, take new pictures to give a fresh look.

6.  Consider Going Pet-Friendly.  For renters with pets, they will ONLY look at pet-friendly apartments.  If you have been advertising your apartment as not accepting pets, then there is a new audience of tenants that you could reach. However, careful consideration needs to be given here – for instance, some condo associations prohibit pets.

7.  Change the Lease End Date.  Consider entering a lease until June 1st, rather than doing a lease until September 1st. September 1st has tended to be the biggest turnover date in Boston, but June 1st is a popular lease turnover date too. Additionally, if you miss a tenant for June 1, then you still have several months of “prime” rental season to work with.

8.  Maximize Your Listing Exposure.  Working with a real estate broker can help maximize your exposure.  For instance, here at Cabot & Company we utilize a number of listing and advertising platforms in order to reach tenants.  Not only does the tenant typically pay the brokerage fee, but we provide a credit check and manage the lease signing and collection of upfront payments.

9.  Offer Incentives.  Agreeing to pay all or half of the broker’s fee can help alleviate a renter’s upfront moving costs.  If the renter needs to come up with the first month’s rent, last month’s rent, month security deposit and a broker fee, that can work out to a sizable amount. Foregoing the requirement for the last month’s rent and/or accepting a lower security deposit can also help.

10.  Consider a Rent Reduction.  This is the last tip, but probably the most important.  If you have already tried some/all of the tips above, then the market is saying that you are asking too much.  It is also important to consider the impact of missing an additional month’s rent as opposed to reducing your asking rent – generally, you find that the numbers work out that you are better off agreeing to a lower rent for a sooner move-in date than missing out on a few months of rent while chasing a higher rent.

 

 

Back Bay Brownstone Return on Investment: A Case Study

In 1992, Shelagh Brennan of Cabot & Company and Paul Gleason of Fairfield Realty sold 4 unrenovated Back Bay buildings located at 47, 49, 51 & 53 Hereford Street for $1,020,000 (equal to $255,000 per building) to The Glynn Companies. The package included a parking area in the rear of the 4 buildings that accomodated 10 cars. That same year, the developer was granted an easement on the adjacent corner building at 45 Hereford Street to allow access to the parking lot. The developer later purchased the building at 45 Hereford Street in 1999 for $1,100,000 - now owning the entire block.


September 25, 1992 - Globe Staff Photo/Pam Berry
 

The properties were renovated and rented as apartments, and for the last 27 years experienced a robust rental income.


From Boston Globe, September 25, 1992
 

In 2017, The Glynn Companies began the renovation of 53 Hereford Street (building on the corner of Newbury Street) and added the parking area. Noted architect Guy Grassi designed 16,000 square feet of new construction office space. The building is completed and now known as 321 Newbury Street.

 

The present day estimated value of these properties is $37 million. Back Bay has outperformed the majority of neighborhoods in Boston and we do know owners that purchased their buildings in the Back Bay for $100,000-200,000 that are now worth $6-8 million (and more). The long-term return on investment for these buildings is huge, but it is also not uncommon for us to see some of these long-held buildings be under-rented or under-utilized. Depending on owners' goals, there may be opportunities to improve the property to boost returns and/or sell the property and invest the proceeds in properties that would generate higher annual returns, such as through a 1031 deferred tax exchange. This case study is a great example of how landlords can hold choice assets, renovate, develop and generate higher rental income, and hold for generations to come.

 

 

Micro Housing in Boston

Good news for developers: Boston recently initiated a "Compact Living" pilot.  It's a two-year program that will allow developers to build so-called micro housing units in the City (though the preferred term is "compact unit" instead of "micro unit").  Boston has been considering such a policy for a while, and this two-year experiment will let the City determine how well it works.  

In order to build micro housing units in Boston, developers need to meet a number of standards.  This includes complying with design standards, inclusionary housing requirements and following specific processes and procedures for approval.

Micro housing is often a hotly debated topic.  Opponents typically raise concerns about density and displacing families (who need larger units to accommodate all family members).  On the other side, micro units help promote affordability by creating more units and they help fill an underserved area of housing demand (according to Boston, the number of single people and couples is 2/3 of the City's population, but the number of studio and one-bedroom units is only 1/3 of the City's housing stock).

For more details on the pilot specifics, click here for Boston's webpage on the Compact Living Pilot.  If you are a developer looking for micro housing opportunities in Boston, contact Eric Shabshelowitz to help with your search.

 

 

 

Comments

  1. Peter Parkar on

    Hey Eric, Micro Housing a great idea and it will work well definitely. Good post with good idea.

    Update on Boston Business Trends

    One economic indicator that many businesses and real estate investors monitor is employment.  The Boston Planning & Development Agency recently published a report titled “Trends in Boston Business Establishments & Payroll Employment”, which provides some useful data.  Here are some highlights:

    • In 2016, Boston’s total payroll and non-payroll jobs increased to 794,038, up from 669,423 in 2010.  Total jobs are forecasted to reach 829,000 by 2030.
       
    • In terms of job density, the commercial core of Boston has the highest density.  Downtown/North End had 163,845 jobs per square mile in 2015; Mattapan, by contrast, had 981 jobs per square mile.
       
    • The “Health Care and Social Assistance” industry has the most payroll jobs in Boston, with over 140,000 in 2016.  The second highest is the “Professional, Scientific and Technical Services” industry at 80,524.

    As it is based on census data, some of the analysis is a little stale (most of the data is from 2015-2016).  However, it does support that Boston continues to add jobs and is expected to do so for the foreseeable future.  Continued job growth is good for real estate investors, as those employees will need places to live.  It is also good for businesses, as those employees could be consumers of their goods and services.

    There are a number of strategies investors can employ when deciding what opportunities they want to pursue.  Contact one of our investment property experts to formulate a plan and begin executing on it. 

    Or, dive right into your search!  Whether you are looking for multifamily or commercial, you can start your search for investment property in Boston here.  

     

     

    Where in Boston Have Rents Increased the Most?

    For multi-family investors, it is important to know what areas in and around Boston are seeing the highest rent increases.  Whether it is due to an increase in renter demand or a shortage of supply (or a combination of the two), these are generally areas worth exploring.


    Data Source:  MLS Property Information Network, Inc.

    The chart above shows the areas that have seen the greatest average percent increases in rent since 2015.  The Seaport District is somewhat unique; it is a relatively new market, so much of the increase is likely due to the fact that there were not many options in the Seaport 2015 compared to the new, luxury apartments that have recently been built.

    Many of the other top performers – Mission Hill, Hyde Park, Roslindale and Watertown – abut prime areas that are continuing to get more expensive.  As renters continue to get priced out, we expect that this trend will continue – particularly near transit hubs, such as MBTA subway and commuter rail stations. 

    For additional market data on Boston investment property or for help finding the right opportunity for you, contact Eric Shabshelowitz.  

    Interested in exploring what is currently on the market?  Check these quick searches: "Core" Multi-Family Search and "Emerging Neighborhood" Multi-Family Search.

     

     

    Update on Boston's Multi-Family Market - 2015 Year-End

    What area of Boston is best to invest in?  That is a question we get asked a lot.  We are still compiling and analyzing data for our annual investment property report, which provides a comprehensive multi-family analysis.  If you would like to receive that report once it is available, please email Eric Shabshelowitz, our VP of Commercial RE.  In the meantime, here are some initial observations:

    Multi-family prices in Boston have gone up substantially in the past 4 years. In the chart below, the low in April 2012 was $131 and the high in September 2015 was $259. Put another way, the average sale price per square foot in Boston has essentially DOUBLED in the past 48 months.
     

    Boston Multi-Family Sale Price per Square Foot (over last 4 years)

    The inventory chart below is also interesting. It shows that total multi-family inventory in Boston has not drastically changed in the past 4 years. While some areas (such as the Back Bay and the Fenway) have seen very few purchase opportunities, inventory in other neighborhoods has clearly risen. This will be discussed in our annual investment property report.
     

    Boston Multi-Family Inventory (over last 4 years)

    Contact Eric Shabshelowitz, our Vice President of Commercial Real Estate, if you have questions about Boston's multi-family market.
     

    West Roxbury Market Snapshot

    West Roxbury is turning into one of Boston's most active neighborhoods. Our Vice President of Commercial Real Estate, Eric Shabshelowitz, has personally been active there and was the #1 agent for multi-families in 2015 based on MLS.

    Here's a quick snapshot showing why West Roxbury is so popular:

    Multi-family prices have trended upwards over the past 5 years (above chart shows price per square foot since January 2011). The average sale price per SF in 2011 was $162. In 2015, West Roxbury multi-family sales were at $239/SF (a 47.5% increase from 2011).

    One of the drivers behind this increase is rent rates. The chart below shows average rents over the past 5 years. While not a drastic increase, the rents are progressing upwards. With rents in downtown Boston continuing to rise, this trend in West Roxbury should continue. The Days on Market chart, which is also below, shows that demand for West Roxbury apartments is growing (dropping from 95 DOM in 2011 to under 60 DOM now).

    If you have questions about West Roxbury, or investing in any other emerging Boston neighborhood, contact Eric Shabshelowitz.

     

    Cabot and Company Finds Cafe Quattro a New Space

    Cabot and Company finds Café Quattro a new space

    Vice President and lead Commercial Real Estate broker, Eric Shabshelowitz, recently helped find a new space for the beloved Café Quattro in the South End! Previously located on Somerset Street downtown, Café Quattro thought the South End would be a great landing spot for the new location.

    Now situated at 817 Harrsion Avenue near Boston Medical Center, Café Quattro has become a staple for many of the city's medical professionals and South End residents. The Italian-based restaurant boasts a full menu of classics and new takes, garnering the attention of Zagat.

    "The menu spotlights hand-tossed thing-crust pizzas, including its signature quattro formaggi and unique variations like pear and parmigiana, plus housemade pastas, panini, salads, soups, and a full espresso menu for a caffeine fix on the go. The menu spotlights hand-tossed thin-crust pizzas, including its signature quattro formaggi and unique variations like pear and parmigiana, plus housemade pastas, panini, salads, soups and a full espresso menu for a caffeine fix on the go." - Zagat

    Cabot would give Café Quattro two thumbs up, but we have a slice of the quattro formaggi in our other hand! 

    Stop into Café Quattro and tell owner, Evan, that Cabot sent you!

    Contact Eric Shabshelowitz for a free market analysis of your property and for his expertise on the Boston commercial real estate market.

     

    Ten Ways to Increase the Value of Your Investment Property

    1. Set a Budget
    Setting a budget and managing expenses is very important when trying to make a profit off of an income property. Budget for future capital improvements - heating systems, hot water tanks, the roof and other big ticket items.

    2. Raise the Rents
    Raising rents can have a huge impact on your property's value. A higher rent roll means increased annual income, which boosts the value of the property. As leases expire, ask a professional to price the units.

    3. Give the Property a Makeover
    Whether fully renovating the kitchens and bathrooms or simply adding a fresh coat of paint, sprucing up your property will help increase demand from tenants. Higher demand means higher rents

    4. Change the Property's Use
    The way a property is currently used may not be the most valuable use for the property. As an example, in the Boston area, the residential market is incredibly strong. Converting a commercial/industrial building may allow you to substantially increase the property's rent roll. Check what local zoning allows.

    5. Upgrade Fixtures and Appliances
    Replacing old light fixtures and swapping old appliances with modern ones can be great selling points. Adding washers and dryers to the building are also a plus and can be an additional source of revenue if they are coin-operated.

    6. Lower your Taxes
    If your property includes retail or office space, your commercial tenants should be paying their fair share of real estate taxes. Additionally, and while it is uncommon right now in the Boston market, if you buy a property for less than the tax assessed value, file for a tax abatement.

    7. Separate Utilities
    Depending on the system, a building's heating expenses can be one of the largest expenses for a landlord. If they are not already, consider ways to separate out utilities so that tenants pay those costs directly.

    8. Renegotiate the Leases
    Renegotiating a lease gives the landlord the opportunity to raise rents and pass through expenses, but also to encourage improvements to the property. In commercial leases, for instance, the landlord may give free rent and construction allowances so that the tenant can make improvements to the space, including redoing the façade of the building, updating signage, replacing carpet and repainting. The tenant should pay a higher rent in return for those concessions, and your property will be improved - it is a win-win.

    9. Hire a Professional Property Manager
    A professional property manager can provide a number of valuable services to landlords, including handling maintenance issues and emergencies promptly, responding to tenant issues, negotiating better pricing from vendors and contractors and paying bills in a timely manner.

    10. Divide the Building
    In very general terms, the smaller the unit, the higher the rent on a dollar per square foot basis. Reconfiguring the property to increase the number of units can translate into a higher rent roll. Check local zoning.

    For a free consultation on how to increase the value of your investment property, eric@cabotandcompany.com.