All Forum Posts by: Annette Schneider

We are also in the market to get to know private investors to employ the BRRR strategy to find another multifamily property. Also considering SFH, large ones that can be subdivided or homes in need of TLC in great school districts. We have 2 buildings, seven units currently.

@Derek Rocco I think its highly probable you will have economic vacancies for the building. Seems odd that they are selling the building if its still economically sound investment. There may be one pain in the butt tenants that is making life difficult or something else that's a major issue with the building they are not telling you. Is the building in a flood zone? If so, do you have correct cost of flood insurance? The low rents seem suspicious: have they not be raised in a while or is the area not growing or losing value? 

My hunch is that its in an area slowly losing value. If it is only worth 85K now, it's probably not going to be worth much more in 10 years. This is going to be a cash cow that will slowly get milked unless the area successfully undergoes revitalization.  So many areas claim to be the 'new' South Side or Lawrenceville but there is not enough economic demand to revitalize all depressed areas of Pittsburgh.  If this area is going to stay a marginal area, do you know what it will take to deal with your likely tenants? You will need a strict lease and you will need to enforce rules: are you ready for that?  

For your first income property, you might be better served with a duplex or triplex in a better area that can attract better tenants. You can find stable tenants that are paying low rents but it's tricky.   

@David Faulkner re: "Do those sub 100k and sub 50k homes really offer much higher cash flow potential over the long term? What is the rate of rental increases on those homes vs the 400k homes in your area? How does the tenant base stack up? Why don't those renters in PA just buy those properties if the mortgage + expenses are so much lower than rent? And back to your original question, which was a very good one and one I think you ought to seriously give more thought to, why are those homes so cheap?" 

Homes in Pittsburgh are so cheap for a combination of reasons: the steel implosion brought on some tough times for this area, when many people fled to to find work elsewhere. I'm sure there was a housing glut for a while. There are high property taxes here - I think that holds down home values in some areas and even causes faster devaluation of struggling areas with shrinking populations. There are $400,000 and up neighborhoods but their are plenty of $100,000 to 200,000 neighborhoods also that are ok. The under 100K neighborhoods are lower wages working class neighborhoods. Most of those neighborhoods are ok older neighborhoods. The 50k homes are usually fixer uppers or just small homes or row homes, if this is not the case then its just a sign of an undesirable neighborhood (Wilkinsburg, Homewood, etc). I've seen fixer uppers in the $300K and up areas start at 100K. 

I think the reasons so many rent instead of buying is is bad financial management (beyond paying rent and other must pay bills) or the 'I'll never get a head' thinking. There are people that resign themselves to the thought that only 'rich people' can afford their own home. There are some folks that get stuck renting from having bad credit or having homes repossessed but that is the minority. 

There are also a lot of temporary residents in the area for higher education or internships.  The outskirts of the Pittsburgh metro area has a lot of drilling activity, so rental properties are in high demand in areas near drilling hot spots one to two hours from downtown Pittsburgh. There is not a lot of rental housing in the newer suburbs, so displaced folks from outer lying areas are forced into traditional rental markets. I've even seen trucks of drilling workers parked near housing just a few minutes from downtown! Pittsburgh has been rated as a great place to live many times in the last ten years. Companies are relocating to here or adding locations here and new start ups are common. This area will have high demand for rental housing for many years to come. 

Rentometer for our zip code median is $700 now, 80% are between 600 to 800, and 60% between $600 and 750. When I initially set the price for the ad, rentometer had an average of $650 so its gone up slightly. 

We priced it at $625, figured it was low enough to drum up interest, get competition for the unit and pick the best candidate. We've gotten all the wrong kind of interest! Many folks that call about it are assuming its a one bedroom due to the price. Then they back out because its a two bedroom (which tells me they are on a voucher probably, which we don't take). Some folks assume that one of the two bedrooms isn't a 'true' bedroom - they go look at the bedroom sizes first. I heard that Section 8 vouchers were increased to just shy of $900 per month but I don't know if vouchers go by zip code. I highly doubt that pricing it lower will help any -we'll just get even lower leftovers at the bottom of the renter pool.

I think I'm going to take it off the market, buy a washer and dryer for the unit and up the price. Perhaps make it month to month or pay for the water ourselves and up the rent to cover anticipated water usage for a family.  I've also been thinking of staging it with a few scores from craigslist or friends, it would really help for the living room pictures.  The windows are on the large size, so the rooms look smaller in the pictures. I've put room sizes previously and got less calls, so I leave that off now. 

IDK, maybe no pictures and less information to see what happens with next ad! Seems to work for the management companies that handle the large investor's units.  

I've lived in this area for 11 years and a lot of the online buzz does not equate to the reality of the area. Every area has its strengths and weaknesses. There are parts of Wilkinsburg that area considered 'Regent Square' those properties are highly sought after and also highly desired place for grad students or city of Pittsburgh employees to live.  A lot of the areas marketed as the next big thing that aren't going to change anytime soon. These areas also seem to be the areas that Allegheny county and the city of Pittsburgh throw money at with no big changes and no lowering of crime. You might make some money on a flip or a large apartment complex but most small investors will get stuck with the leftovers that are problematic. 

Pittsburgh metro area has a strong rental market. The good rental properties get snapped up quick between the out of town and in town investors. There is still money to be made, but you might have to start in a less competitive area. Since you are moving here, I suggest you wait until you move here to invest.

One note on revitalization: there are a lot of depressed areas within the Pittsburgh Metro area desperate to revitalized. They can't all be saved and most are not ready to be saved. They've been trying to revitalize Homewood, The Hill district and parts of Wilkinsburg for as long as I've lived in the area (11 years). 

Prior to moving here I fixated on moving to a part of town that once I got here, I realized was totally unsuitable. I've never been so wrong!  I lived in four states and two countries prior to here. This is one town that you really need feet on the ground to fully comprehend what you're getting into. 

I think having occupants in a multifamily property helps one get started in this business with less money.  Except for when you plan on being an owner/occupant within the building of course. We are newbies with only two income properties.

In PA, leases do not transfer to new owner, so it's important to get new leases signed quickly. I don't know the specifics but you can request current tenants move out as new owner also.  I'm sure there are some sort of rules for notification and days allowed for tenant to move within PA tenant landlord act. 

Our first property was not marketed so tenants had no knowledge the property was going to be sold, so no time to plan on moving. We used the same lease they had in place and all current tenants had no issues signing new lease with us. The second property we purchased was put on the MLS, so one tenant opted to move to house sit for a friend going abroad. We used a new lease but relied heavily on the old lease. The new lease was written to comply with PAs plain language law for leases. The new lease did take a bit of explaining but was well received.

I think our biggest lesson learned so far was get a very good home inspector. I did some research and found one with great reviews. He saved us from buying a property with too many big ticket problems. It was a great money-making triplex with great bottom line, but after seeing the home inspection report we backed out. In our market the good properties go fast: the one's that don't go under contract within the first 30 days usually have significant problems or are overpriced. 

When we evaluate income properties, I set up a spreadsheet to compare options. It's so easy to get subjective when looking at properties. We put in current rents, projected mortgage, insurance, taxes, utilities, upkeep (usually lawn/driveway) expenses and etc to see how the bottom line works out. It will take a bit of time to raise rents, so use market rents as a growth prospect only. Watch out for flood zones, flood insurance has gotten very expensive. Do your homework and compute what your actual property taxes will be. Don't rely on the estimated or disclosed property tax. Don't be discouraged if all the available properties do not work out as viable options, wait for one that do make sense.   

Chris-

We purchased a four plex a few years back were the owner had passed, when we purchased it all the tenants were current on their rent and we were given the impression they had been screened.  Turns out they had not been screened but were recommended by friends or family type of deal. The price was right and we got into a bit of a bidding war but we won out over a cash bidder because we were promised to not immediately push out current tenants. 

Like others mentioned, we set up new leases, new management style. Attended to deferred maintenance and so forth. 

One tenant was ready to move already, so we let that one go and remodeled that unit. Having one remodeled unit with three other not so good units isn't working out as well as we hoped. We do get much better prospects and do collect much more rent. There is quite an income gap between the nice unit tenants and the current tenants. It's almost a cultural gap! 

Two tenants have stayed in place. Initially, their rents were significantly below market value so we have been slowing bring them up to market value. We kind of hoped they would move on so we could renovate but no such luck. One unit, they can barely afford their rent and utility bills lately. We see the writing on the wall with them. 

The other unit keeps popping open when we least expect it and already have a big ticket improvement or renovation going on elsewhere. We have done the spit and polish but not a new kitchen, though its in good shape it holds the unit value down. Therefore, I would recommend setting up your financing for a little more breathing room. 

We do work with the tenants if they tell us before hand about rent not going to be on time. We are very flexible in that regards for damn good reasons: job slowdowns, significant illness/injuries or death in the family. That willingness to work with them has reaped some rewards when we need to ask them to follow the rules or when we need to raise the rent. We get no push back. 

 Funny, its the renovated unit, with well screened good reference tenants that we've had to give notice to and have had to chase down rent for or have other drama with. I think that's where the 'cultural gap' between tenants plays in. They get a lot more indignant and argumentative about payments, following rules and etc. One even stated, well I'm not like those white trash neighbors I have to put up with. Currently, we seem to have a good fit for the renovated unit: someone from the neighborhood who has lifted themselves up a notch with education and a better job that doesn't look down on the neighbors. 

We have one rental unit that is just not attracting qualified tenants. Does anyone have any pointers for lower end apartments? 

Our other units are fully renovated and attract young professionals that can follow directions and have good credit/clean background. We have been inundated with interest but that hasn't resulted in a qualified tenant. We are attracting the desperate to move, bad credit, criminal history and won't someone give us a break - we're not bad people crowd. I'm ready to pull my hair out because its been so much hand holding and nagging to get people to follow through. Is this a normal phenomenon with the lower priced housing? 

We have one set of roommates that I thought would work out but one roommate is not getting around to providing us all we need and finishing credit/background check. The other roommate has excellent credit, passed background check, given us proof of income, follows directions and has been prompt. It looks like this set of roommates if falling apart before they ever could pass the finish line. 

We have just two rental properties of less value than our actual home. We have all of our insurance policies bundled and an umbrella liability policy. The discounts really add up with just the two rental properties added to our home and vehicles, it made the umbrella policy quite affordable. I'm sure really good credit has also helped. 

I don't think we will go the LLC route anytime soon, but we do plan to put our properties into a trust as we approach retirement age. Having our properties under our own name, gives us a huge tax relief on income taxes since we are funneling our profits into upgrades and large item repairs that are considered upgrades on taxes (stucco redo on outside of apartment building). Our tax bill has been lowered between 1/3 to 3/4ths thanks mostly to improvements.

I've been using Tenant Verification Services (TVS) for over 4 years. They updated their screening services to be a tenant initiated service where the tenant or landlord can pay. They have better reports with more detail now, especially the credit screening report. In the past TVS only gave a grade score, not detailed report -now you can see late payments, debts that went into collection and paid debts. I like to see the detail - lets me know if someone is responsible and if there statements match their reality (report).  I also use the local court system to double check or get more detail. 

I can't tell you the number of times, we have had people with bad credit or criminal history apply to lease our apartment without mentioning credit or criminal issues.  We even advertise that we do background checks, yet they will tell you there should be no problems whatsoever with their background check. We value honesty - it's a huge factor in deciding who we trust. We also value people who are responsible - bad credit and lack of personal responsibility go hand in hand.  We've rented to people with bad credit who had a good story line that we were suckers for believing. Even speeding tickets can be an indicator of problems with being an adult - especially their attitude towards getting the ticket - IE was it the cops fault or theirs that they got the ticket. All the tenants we've had who also had speeding, parking or other minor violations are also the tenants that give us the most drama, late with rent and tell us some pretty tall tales. 

We will need to find two new tenants this summer, so I will be updating our application and using some sort of service this summer. So far, I'm fine with continuing to use TVS but I might switch to a site that offers rental payment and management software also.