Any Recommendations for a first house-hack in Pittsburgh, PA?

Question

Hi everyone,

I realize there may not be a "better or worse" answer to this question - all recommendations are greatly appreciated!

I graduate college in May and will be working an entry level position in Pittsburgh. I will only have about $10-12k in savings of which I plan to use to buy my first multi-family (FHA): live in one unit and rent the other(s). Should I focus my attention towards any specific type of property like turnkeys, or minimal rehab properties? Should I focus on occupied properties to limit the risk of vacancy costs? I am wondering if there are any critical tips to keep in mind when purchasing a first property with probably only a few entry-level paychecks in reserve.

Thank you all!

Jim K. · Answer

@John Steffen

I am an independent investor and have nothing to gain by recommending people on @Alex Deacon's property team, but I think you should get in contact with them. Get them looking for a small brick-veneer duplex (nothing larger) in reasonably good condition just as near to your work as possible. When I say "reasonably," I mean far from turnkey, but without major structural problems. Stay away from knob-and-tube wiring, galvanized water supply pipes, ancient gravity-fed hydronics converted coal-burning boiler arrangements, foundation issues.

Why a duplex and not a more profitable triplex or quadplex? Since you're investing here in this area, I would also advise you to start learning the single-family DIY game with this property, and a small brick-veneer duplex is the easiest small MF to do that in. Once you get into the triplexes and quadplexes, you're going to need crews to work on larger aspects of renovation, and right now, that's not going to be helpful for you. It's commonly said that real estate takes time, money, and effort. You don't have a lot of money, so I think you should be investing your spare time and effort in learning DIY skills to fix your small multifamily up. Learn the basics of electrical, plumbing, HVAC, interior cosmetic rehab skills, window and doors, roofs, working with brick and concrete. Those are very-high-value skills to any investor starting from scratch in this area. When (not if) you feel overwhelmed, call on us in the Bigger Pockets DIY forum and other DIY forums across the web. Buy lots of books from Amazon, watch a lot of YouTube videos, start assembling a large and diverse tool collection in gasket-sealed toolboxes and bins.

If you play your cards right, that duplex could be a learning experience that springboards you into self-managed action across a wide range of area properties. This area is defined by a glut of housing built to relatively high standards back in the day that needs rehab, very high new-construction costs, and a shrinking population culturally unashamed of thrift that isn't willing to pay the big bucks for premium housing because they know they can do better. The investor who knows rehab will always be able to see through a rehab contractor's pay-maximizing and work-saving baloney. This is an absolutely essential skill in our area. All of Western PA but Pittsburgh in particular is sadly full of small grifter contractors who barely know what they're doing but really, really think the way to wealth and a positive self-image is ripping off any retiree or younger person with an office job that they possibly can -- it's a structural problem helped along by how home improvement contractors are registered, not licensed, in most of this state.

In addition to learning rehab, you should use this duplex to first learn how to landlord, then worry about learning how to manage property managers. Once again, the investment you make to learn how to landlord will pay huge dividends for you down the line.

That's my advice to you, John, and you can feel free to take it or leave it for exactly what you paid for it.

Jim K. · Answer

@John Steffen

You're welcome, John, but get multiple opinions from people with different viewpoints. I'm a DIY investor working in not-so-nice areas. What I'm going to be able to tell you about is how to do what I do, and how it works here in Pittsburgh. That may not be what you want or need.

Andy Madden · Answer

@ John Steffen

Congratulations on taking your first step in real estate! I was in a nearly identical position when I graduated 7 years ago. It's great you're taking the time to think about the type of property to buy, because the criteria you use now will be helpful in expanding your portfolio in the future. Here are the criteria I used when buying my first triplex:

1. I completely agree with @ Jim K. about building a building without structural issues. The last thing you want to do is dig yourself into a financial hole by buying a property that requires a new roof, new wiring, new plumbing, etc.

2. Buy a building in which one unit is vacant (live in that one) and one or both of the other units (depending on duplex or triplex) are already rented. I know some people don't like buying buildings where tenants are already in place, but I believe cash flow is king in real estate, especially when starting out. If you're able to collect rent from another unit to help pay for the mortgage and renovation costs starting on Day 1, not only will this help to fund your renovations , but it will also teach you to be a landlord.

3. As @ Jim K. said, do some of the renovation work yourself. It took me about 10 months to renovate a 1,000 sq. ft. 1BR/1BA property because I did much of the work myself, but I don't regret that. Since then, I've been able to re-use my knowledge from that renovation to buy the right materials for my other four multi-units, communicate with and manage contractors confidently, and take care of routine maintenance issues when they arise.

I repeated this pattern for my next four properties (with the exception of living in one of units), and it has worked pretty well. Pittsburgh is definitely a market that makes this strategy feasible.

Best of luck!

John Steffen · Answer

@Jim K.

Wow!! That message right there is worth a million bucks to me. I am sure I will be referring back to this for months or even years to come. Thank you! This will certainly help me get the ball rolling in the right direction. And I will not hesitate to continue reaching out to the BP community. Thank you again.

Brian Smith · Answer

John: The Regent Square neighborhood of Pittsburgh (zip code15221) is a great neighborhood with several cash positive house hacks. Just go to Zillow. My first house hack investment was there and it's a great place to live, particularly if you're young.

Amalia Auge · Answer

Hi Jim, Zach, Bonani, Dan, Andy and Jeremy:  I fully agree with you. I'm not doing that at the moment bus I did in the past and it helps. You may lose privacy but the upsides will compensate this temporary situation.

By the way, and changing the topic quite a lot:  I'm looking to buy single units in Munhall but rents look a bit low for stand alone houses of 3 bd, any thoughts? I have seen some very decent properties at around 100 K which may rent for 900 +-.

Any thoughts?

Best regards,

A

Jeremy Taggart · Answer

@John Steffen My first house hack I focused on buying in a cash flowing C class area that had upside potential in the future. Being right out college my thoughts were on where that area would be 10-15 years down the road rather than right now as far as appreciation goes. I bought a triplex and after about half a year I was making $200 over my mortgage from the other 2 units simply by making a few cosmetic updates and getting the units to actual market rents. Also utilized the 6% seller assist to buy the place for less than $6,000 out of pocket. From the time I moved out I have been updating the units solely off the cash flow of the building which is an ideal scenario to be in and an advantage in buying in higher cash flow areas especially when you don't have a ton of out of pocket cash to improve the property or pay for capex items.

I'd try to find one that is currently rented so you have your mortgage covered right away but has some room for cosmetic updates to increase the rents. Also look for one that might be mismanaged. For example one that might be currently at below market rents so a lot of investors overlook it. That is where researching market rents in certain areas comes in handy. I also like 2+ bedroom units because you can stretch the rents more with the cosmetic updates. If looking at one with tenants already in place though, just be careful and aware of how the previous owner might have screened them because you don't want to get stuck with crappy inherited tenants.

In my opinion there is a ton of value to be had in nice "pocket neighborhoods" of C class areas. You can attract good tenants and still take advantage of the good cash flow numbers as a result of the lower home prices of the area overall.

Dan Mason · Answer

If you don't mind having roommates you can also look into buying a single family home and renting out your extra bedrooms.

John Steffen · Answer

Thanks for the warm welcome and words of wisdom @Bomani Howze , I will certainly keep that in mind.

Any Recommendations for a first house-hack in Pittsburgh, PA?

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