Day 9 - Properties. Finances.
It's been 10 days since my last post here is my progress thus far.
I took a look a 2 places in my hunting area in with my realtor, who is also a contractor/investor. here's the lo-down:
House #1 - 3/2, 1250 sqft. Asking $155k, 380 days on market. needs $25k rental/ $40-50 rehab for flip. 90 year old ARV $210-227K. Potential rent $1500. Potential offer 126,000
This is an old house that needs a totally new kitchen and both bathrooms redone. That includes moving swapping the locations of the powder/laundry room and the kitchen if flipped. If rented, painted kitchen cabinets, granite tops, updated fixtures in the powder room. No matter what. he main bathroom needs to bee blown out and extended a little into the master bedroom to attract the kind of tenant I'm looking for. Oh, and the master bedroom floor ifs tilted slightly (what's up with that?).
House #2 - 3/1, 980 sqft. Asking $130k, 16 days on market. Needs $10-15k rental/$25 for flip. 30 years old ARV $180k. Potential rent $1300. Potential offer $118K
Newer house. For rental - needs a kitchen refresh, painted cabinets, granite, and blown out kitchen, and maybe some flooring. Other than that its good for for a tenant. For sale, kitchen/bathroom blowout and floors.
I want to put an offer on both but my realtor is saying I need a pre-approval from my bank. I wasn't aware I needed that to put an offer is. (is that normal?). SO this week I'm going to banks asking for financing and approvals. I have my first rental that I can hopefully refi or obtain a line of credit. Moving forward i guess I will need these pre approvals to out offers on the MLS. So we'll see how this goes.... Until next time.
Comments (2)
Angie,
Thanks a bunch for sharing. There was a ton of info in your post. Lets start with the questions you asked me then I have a few questions for you. Capisce?
I'm curious why you don't look at lower property prices seeing the potential to buy more then one investment and make around the same rent as we would?
Convenience and comfort. My wife and I have pretty demanding work schedules and two kids under the age of 3. We've been in our local area for close to 10 years and have a pretty good understanding of the market here and the surrounding boroughs. Also, in our area is highly desirable and growing everyday. There are "hot" neighborhoods all around us but the Manayunk/Roxborough/East Falls area has been a steady mover for 10+ years. The tenants are good and vacancies are low. Furthermore. With the kids we like the convenience of visiting properties within a 10 minute drive. That's just the way we think, at least for now, that we are going to approach investing. It may change later, but for now this is where we feel comfortable.
I noticed for house #1 your profit if you sold could be as low as $10,000.
You are correct. My calculation was on the $126,000 Asking price. Which by my calculations on the low end including closing costs and transfer taxes was approximately $13k. The sell price was more of a safety net. The reasoning I factored it was that if the construction cost are on the low end and the sell price was on the high end, at best the profits would be $37K. If we felt we could realize those numbers I would just sell the property and not hold it. By my calculations with a 5% interest rate the potential cash flow would be $425/mo to $650 if I manage it myself. The Long term hold is our first aim on the property.
And thanks for the financing tip. I was able to find a bank to pre-qualify me for the offers which were not accepted. I also found a hard money broker through some networking.
My question to you is on the $20000 house you purchased, did you have to rehab it and if you don't mind how much?
How are the tenants that you are acquiring?
Greg Bishop, over 8 years ago
Hey Greg,
I just came across your blog and think it is great what you and your wife are doing. My husband and I are from NY, and have invested in four properties (rehabs) in the past year right outside Center City. We sold two, just listed one last week, and renting the forth one starting July 1st. We also own real estate in NY that we have solely for rental income, but with the sky rocketing prices of the homes here in the 5 boroughs we heard about the prices in PA and decided to try it out.
I noticed the prices of the homes you mentioned and can only assume I may know some of the areas you are looking into. We sorta did it the opposite way. We obviously first did our homework research, research, research, asked around, spoke to locals, and visited many areas to find the next up and coming towns and ran all of the comps. The only difference was we went for the areas where the comps were good not amazing but defiantly worth a buy. We figured we will profit from rent now and profit from a hopeful market rise if we were to sell in the future. We bought our third home for $20,000. We rehabbed the entire home top to bottom and found tenants that are renting for $1,000 a month starting July 1st.
I'm curious why you don't look at lower property prices seeing the potential to buy more then one investment and make around the same rent as we would? I noticed for house #1 your profit if you sold could be as low as $10,000. I'm only asking because believe me we aren't perfect our first home we bought at auction turned into a true nightmare, it wasn't till investing in north Philly did I really realize squatters have more rights then the home owner. It took 7 months to remove a 23 yr old heroin addict and her 3 children and thousands of dollars with filing fees. The best part was we also had to pay for her moving truck and a storage facility for her belongings. This home wasn't worth the flip or the rent at all! We actually almost broke even and washed our hands of this property. Thankfully we lived and learned the laws and how Philly operates after that and the last three turned out a success. Sorry for the rant, just curious as to how other people are investing in PA. Have you looked into foreclosures and short sales?
Also, as an agent you generally always need a bank pre-approval to put in an offer. The agent and the seller may accept offers from people who don't have a chance at getting a mortgage and it being a total waste of time.
Angie Williams, over 8 years ago