55 Beacon Street, Hartford

55 Beacon, Hartford

Great condition and income on this well maintained 3-family.

First floor unit has 3 bedrooms, living room with natural woodwork and built-ins, remodeled bathroom, kitchen with pantry and all new appliances, large back deck, central air, gas heat and hot water.

Second floor has 3 bedrooms, living room with access to a porch, kitchen with pantry, full bathroom, oil heat (with newer oil tank) and gas hot water.

Third floor has 2 bedrooms, a living room, large kitchen, full bathroom and two oversized storage rooms, gas heat and hot water.

All units are freshly painted, have refinished hardwood floors and laundry hookups. Individual furnaces and hot water heaters for each unit. Tenants pay all utilities except water.

55 Beacon is offered at $315,000. If you’d like to see this property, please have your agent arrange a showing or call me at 860-655-2125 to schedule a visit. More details and a photo tour are available.

Reading Gen Y Tea Leaves

Multi-Family homes in HartfordThe attitudes and habits of Generation Y will determine the future of the American real estate market (and most other areas of our economy). They have different feelings and priorities when it comes to housing than previous generations. Members of Gen Y have been particularly hard hit by the choppy economic conditions that have dominated since the early 2000s.

The Atlantic recently published a piece called The Cheapest Generation and the subtitle “Why Millennials aren’t buying cars or houses, and what that means for the economy.”

One of the readers left a comment that summarized the setup for the article in two sentences. “Millennials have low job prospects and no money and therefore can’t afford to buy anything. And oh yeah, there’s that whole thing about crushing student debt since we all need a higher education to get a job but higher education is obscenely expensive.”

Which leads to the big question … if the financial position of Gen Y improves, will that group of Americans show more interest in buying homes (and other stuff)?

Amy’s Take

My opinion on Gen Y is that they are just being pushed to do things later in life when compared to earlier generations. I’m on the Gen X/Gen Y cusp, although I probably relate more to the Gen X generation. I, and many of my friends and work peers, got married and purchased a home in my late 20s. Then we had kids. For Gen Y I see these “life events” happening in their early to mid-30s. Some of it is the economy, some of it is their desire to travel and settle down later in life. I don’t think people give up the desire to “nest” in most cases, so eventually they will buy houses. Maybe a little later in life and maybe they favor smaller houses.

And maybe what we define as a house changes. I recently had someone ask me why people don’t buy multi-families in the West End and turn each unit into a condo, much like they would in Boston. I didn’t have a good answer for them. That seems like it would have appeal, even in the current market. As the Gen Y generation decides to buy, maybe we need to create a different product for them.

Kyle’s Take

Suppose the article’s hypothesis is correct, that there will be a permanent shift in buying attitudes and trends. What would that mean for the Greater Hartford real estate market?

The article notes Gen Y’s preference for walkable, mixed use, environments over traditional auto-dependent suburbs. We’ve observed those preferences in our business too. So when Millenials are able to get their own place (rent or own), they seem likely to be more attracted to somewhere like West Hartford, or even Hartford, than to the region’s more rural suburbs.

Owner occupied multi-family homes may be a nice fit for the Gen-Y buyer who isn’t opposed to owning and maintaining a property. Two and three family homes are widely available in Hartford and other urban towns. But they require cash for a downpayment and repairs/upgrades so once again it’s going to be difficult for a Millenial to get into the market right now.

Renting makes a lot more sense in a falling home price environment than a rising price environment. If home prices and rents are rising, then a homeowner has locked in the majority of their monthly payment while a renter sees their monthly payment rise each year as their landlord increases to the new market rental rate. Millenials are smart, and I think they’ll be more interested in buying if the recent house price trend isn’t an extended decline.

That’s what we think – essentially that members of Gen Y are likely to buy if the economic environment changes, and that they’re more attracted to mixed use environments than older generations. What do all of you think? What are you seeing among the Millenials that you know?

Interest in Landlording

Landlords are required to follow rules while handling the money of their tenants. One of them relates to the security deposits that they collect when someone first moves in. Tenants are supposed to earn interest on their deposits at a rate defined by the state.

Not for Sale - But a Nice Looking Multi-FamilyFor many years (since 2002) the state held the required security deposit interest rate at 1.5%. This page on the CT Department of Banking site shows the historical interest rates for a wide variety of deposits held in the state of Connecticut. As most everyone knows, it’s been really tough to find a 1.5% interest rate for deposits over the past few years. So landlords have been out of pocket each year to make up the difference. It’s not like it’s a huge amount, the entire 1.5% on a $3,000 security deposit would be $45, but still.

The state reduced the rate dramatically in 2012 to 0.16%. This is more in line with the current interest rate environment, so in that sense it’s long overdue. That same $3,000 security deposit will now only earn $4.80 per year.

But the bigger question is whether or not your landlord is actually paying interest. We would hope that the larger, professional organizations know about the law and comply with it. But the mom-and-pop landlords may not actually know what they’re supposed to be doing. We’re frequently surprised at how fast and loose some landlords seem to run their businesses.

Keeping up with the various rules regarding landlording was one of the main reasons we exited the business after only two years. It really is a commitment to do it right, and for us to be renting a single unit just didn’t make sense. We could see how it would be different if we made that our full-time job, or hired out the management to professionals, but neither of those options were right for us.

It’s actually a good time to be a multi-family property buyer right now. Prices are down overall, and in the more urban towns there are plenty of opportunities for distressed buildings. Many need a cash investment to bring them up to rentable condition, but that’s part of the reason they’re so cheap. People with cash to invest (and who want to earn more than the 0.1% the banks offer) may want to consider real estate. But keep in mind that it’s a tough business that will require time and attention.

Zoning & Density in Hartford's West End

OxfordStreetMultiFamiliesOn Thursday, October 29th, the West End Civic Association (WECA) Planning & Zoning Committee met to begin a conversation about many of the zoning-related issues that the neighborhood found contentious during the past year. The agenda listed density as the main topic, with specific mention of converting existing properties to include more approved units, new condo and multi-unit developments, fairness issues around illegal rentals, accessory dwelling units, the financial impact of zoning decisions on homeowners, and finally the fairness of zoning decisions on homeowners.

John Gale, committee chairman, kicked off the meeting with a brief history of zoning in Hartford and the current zoning in the neighborhood. Most of the area north of Farmington Avenue is zoned for single family, though there are a few blocks that allow more density. South of Farmington Avenue is zoned for higher density residential buildings. From there he transitioned to a quick survey of recent WECA Planning & Zoning Committee topics and positions. The stated goal of the meeting was to start a conversation, and to begin the process of working towards a WECA policy on common zoning issues in the neighborhood.

A Wide Open Discussion, Or Not
Once the floor was opened to the attendees, the discussion quickly narrowed to “problem properties,” which were all multi-family homes. The group seemed most concerned about nuisance issues (noise, traffic, parking, …), and discussed the appropriateness of using zoning laws as a primary strategy for fighting back. Although the zoning laws are clear about what is allowed, they are implemented inconsistently. Ambiguities seem to arise from bureaucratic issues like the Assessor and Zoning departments classifying properties differently, and the policy of zoning enforcement on an “as needed” basis. As a result, owners currently have the flexibility to use their properties in ways that conflict with zoning laws as long as they do not upset their neighbors and get reported to the city.

Overall, the group seemed to like that the zoning laws were inconsistent. Multiple attendees noted that the nuisance neighbors were more often than not living in multifamily properties owned by absentee landlords and configured in ways that conflicted with zoning. Others spoke about the limited success that they have had in working with the police department to address “quality of life” issues. Reporting the properties for zoning violations was an effective way to get the attention of the owners, and ultimately address problems caused by the residents.

A minority of the group spoke out against the zoning ambiguity, primarily on the grounds that it was bad business. One attendee described the ordeal he has been through after purchasing a multifamily property. His good-faith efforts to bring it into zoning compliance and improve the property have been halted by confusion within the city about what is allowed. The property in question is categorized differently by the Assessor and Zoning departments, and research by his attorney has uncovered evidence that a third use may predate the city’s 1968 implementation of zoning laws. Other attendees also described their challenging experiences in securing permits.

As a real estate agent trying to sell homes in the West End, it is very important to accurately describe, and advertise, a property so that potential buyers and other real estate agents know exactly what uses are permitted. This is obviously a challenge if the official policy is that many current uses are technically illegal, though allowed through non-enforcement.

But What About Density?
The question of density was not truly the focus of the meeting, though it surfaced periodically and again divided the group. Those supporting increased density generally advocated recognizing existing 3-families and allowing both 3rd-floor rentals and accessory dwelling units. They argued that density is good for local businesses, property values, expanding public transit, and energy efficiency. Those opposed to increased density focused on the traffic and parking issues that already exist in some areas of the neighborhood. The majority seemed to support increased density in theory, though the link to absentee landlords and nuisance neighbors seemed to make many feel it would not be right in practice.

Larger questions about density went unaddressed because no one raised them as issues. The Committee has held meetings to discuss proposals for a vacant lot on Kenyon, the former Medical Society building on Scarborough, and the University of Hartford Asylum campus. Each meeting drew numerous West Enders with a direct interest. And each meeting ended with the neighbors in attendance against aspects of, or all of, the proposed project.

An Important Conversation
Working together as a neighborhood to find agreement on zoning and development issues is challenging, but important, work. Previous meetings have demonstrated that there is not a single consensus among all interested parties. Taking the time to find common ground will allow WECA’s representatives to head off unacceptable projects on the neighborhood’s behalf, which will hopefully reduce the number of emergency zoning meetings. Perhaps the conversation will also help identify uses to encourage for specific properties.

This meeting was the first to allow a forum for the West End to be proactive in addressing a subject about which many have very strong feelings. We encourage everyone to get involved in the discussion by participating in the next meeting and raising issues that are important to them. Ideally, the effort will be able to identify policies that represent the neighborhood’s collective opinion so that owners and potential owners know what to expect when looking to change the use of their property.

No Longer Landlords

The first sign of fall - orange leaves on a tree in the West EndA little over two years ago, Kyle and I thought it would be a good idea to become investment property owners. My career was in real estate and we wanted to talk knowledgeably to clients about being landlords, in addition to diversifying our investment portfolio. Our property search began and we identified a tiny condo in West Hartford that appeared to be a cash flow positive investment and took the plunge.

Today, as of 11:30am, we are no longer investment property owners and I can say that we are both very happy about that. Ironically we never had any issues with our tenants; they always paid their rent on time and were respectful of the property. Every month we netted about a $100 in profit – nothing huge but enough to cover unexpected expenses beyond the mortgage, condo fees, taxes, and insurance.

Looking back, we learned some things through this process…

First, finding good tenants is a lot of work. We only went through the process twice, but in each case it required at least two weeks of concentrated effort. We would post the ad on CraigsList and then try to answer as many questions as possible via phone or email. Kyle or I would meet potential tenants at the condo to show them around, answering any remaining questions. The paperwork aspect was less burdensome, but still required time and effort. It would have been possible to fill the unit much more quickly had we lowered our asking rent, but we were very focused on finding good tenants and making sure our investment was cash flow positive.

Because the unit was a condo, once we decided to sell we had to choose whether or not to sell it as an investment property with a tenant in place or as a vacant unit. We were confident that a vacant unit would be more attractive to the buying public. However, we had a good tenant in place who was interested in extending her lease, so we decided to try to sell to investors first. There was some interest in the property over the four months we were advertising, though informal discussions with potential bidders made it clear that investors valued the unit far lower than we believed an owner-occupant would. We listed the vacant unit for sale and quickly saw the asking price, which was so outrageous to investors, was very attractive to traditional buyers. Agents showed the unit early and often, and it went under contract in about a month.

Part of the due diligence process we used during our initial search was modeling the expected financial return of the property. Kyle put together a spreadsheet to take into account all of the expenses that investment properties require. It was interesting to see how the model rated different opportunities. Nearly all of listings we considered were cash flow negative at the asking prices – many dramatically so. It was difficult for us to understand how buyers were expecting to make money on their investments. Having gone through the landlording process with a property that was cash flow positive, it seems to us that the buyers must have been counting on continued price appreciation. There were no hidden revenue sources or profits.

Property ownership is one of the oldest businesses in the world. It is a specialization unto itself and should not be thought of as “easy money.” After a dipping our toes into that world, we have a good understanding of how it all works, and have concluded that it’s not for us right now. We have other priorities, and don’t want to feel responsible for maintaining additional properties.

That said, we wouldn’t rule it out as a future business activity. There are definite advantages to being a property owner and a landlord. We would have to be involved at a larger scale than one rental unit, and we would be much more opportunistic about our entry point so that there was a better chance for price appreciation in addition to the regular cash flow. At this stage in the market, the two main opportunities we see are for contractors to buy, repair, and operate distressed properties, and as a place to park excess cash (buy with no mortgage) that will generate a better return than money markets, CDs, or government bonds.