Early last year Nicholas Vercollone bought his first property: a run-down three-family Victorian in the working-class Boston suburb of Chelsea for $175,000 in cash. The place, which he spotted on Zillow.com, was being sold “as is” by an estate. “There was two feet of snow in the living room, and we were working in raincoats through the spring,” chuckles Vercollone, a 32-year-old carpenter who decided to invest in distressed properties after working on renovations for other investors.
Fourteen months of near-daily labor and $375,000 in home improvement costs later, he put the updated units up for sale: $299,000 apiece for two three-bedroom condos and $270,000 for the two-bedroom third-floor unit. Like many young entrepreneurs, Vercollone financed the deal in part with loans from relatives (see story, p. 126). After they, the Realtors and the tax collectors get paid, he figures that if he gets just 90% of his asking price for the units he’ll net up to $50,000.
Not great for a year’s work (he did odd jobs to support himself) but enough to convince him there’s money to be made in distressed residential real estate. Vercollone and his fiancée just snapped up a two-family house they plan to renovate and hold as a rental–the first of many they hope to own.
Since the housing bubble burst and the foreclosure wave began, nearly 4 million families have been pushed into the rental market. Meanwhile, the supply of habitable rental units has shrunk, what with new housing starts depressed and many foreclosed homes gone to ruin. The result: Rents are rising. The National Association of Realtors projects a 4% average increase in rents nationally this year and 4% in 2013.
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