All Forum Posts by: Bryan Zayac

Adam Guiffrida Chris K. Thanks for the input guys. This is indeed the same property Adam was talking about. I walked the property with my contractor on Friday, and we're thinking more along the lines of 50K in repairs than 30-40. The foundation doesn't seem to be the issue, more the roof as Adam alluded to. I would definitely plan to rip out all of the shoddy work done by the owner. If I plan to move forward I'll be making an offer around 70. I need to rework some numbers. I'll check back. Thanks again guys.

@Shannon Trivett Thanks for the reply Shannon.

The property is actually in Dunmore. I live in Dunmore myself, and there is no trash tax, I simply had that in there from the disclosure in case there is something I'm unfamiliar with. That should have an * next to it.

The property tax is accurate - of course, if it were 5 blocks over and in Scranton, it would be significantly higher.

I plan to handle the grounds maintenance myself. It's a small lot, thus not much grass, not too many sidewalks, but that's something to consider as well. Thank you.

Tenants pay all utilities.

There seems to be an issue with 2 of the tenants, as I was unable to view one of the 2-1BR units yesterday for the second time. I would almost certainly need to get them out before moving forward.

This is a B- neighborhood in Dunmore, close to the hill section. One of my main reservations is the 3BR unit. I feel that SFH are a riskier investment because it's all or none. And this is not exactly a SFH rental in the standard sense, as it doesn't have much a a backyard and has 2 other properties on the lot. But then again, duplexes may share a yard and space as well.

This rental is in Scranton, PA in NEPA. Any help is appreciated. Thanks.

Bump. Thanks!

Hey guys -- So I'm in the process of searching for my first deal. I've been looking at properties for a few months now. I found one that seems like a possible fit, and I'm going back to look at it this evening, as I was unable to get into one of the buildings on the previous trip. I'll give you the story on it:

Looks like the owner was making renovations to the 3 Bedroom SFH, which has been converted from a 2unit - 2BR & 1BR. Some tools are still on site. Tile hasn't been grouted. Still a good amount of work to be done, which is great, because I'm handy and have the capability to finish this space. One potential major concern is the floor. There are some serious high and low spots, the floor is not level. I plan on getting my contractor in there to take a look this weekend. With that said, the one 2 unit that I was able to see was it good shape. Just refinished. Nice space. Well maintained. Like I said, I'll be seeing the other 2 unit tonight.

The parcel is a 5 unit (used to be 6 unit), made up of 3 separate buildings, listed for $149K, has been on the market for 1.5 years, and has not been marketed well at all. Started at $205K:

Bldg 1 - 3 Bedroom/2 Bath SFH. This used to be a 2 unit.

Bldg 2 - 2 1 Bedroom/1 Bath Apt.

Bldg 3 - 2 1 Bedroom/1 Bath apt.

Bldg 1 needs work.

3 of the 4 1BR are rented, and are getting $600/month.

Here's how I figured the numbers:

Unit 1 - $1,100/month

Units 2-5 - $600/month

Mortgage	$750	12	$9,000
LOC Interest	$400	12	$4,800
Taxes	$3,000	1	$3,000
Insurance	$1,500	1	$1,500
Vacancy	$5,042	1	$5,042
Repairs	$125	12	$1,500
CapEx	$100	12	$1,200
Water/Sewer	$175	12	$2,100
Garbage	$50	12	$600
Management	12	$0

This shows a cash flow of $13,250.

I plan to manage the property myself. I have also included interest on LOC, which, assuming the property appraises out after, would not be included, so about $18,000 cash flow.

I understand this would be a commerical loan 5/1 ARM.

I am expecting to put about 30K into this, would buy for 130K with these calculations for an all in of 160K.

What am I missing?

I understand the likelihood of higher expenses due to multiple buildings. I would imagine my CapEx should be higher, maybe significantly?

Fire away. Thanks in advance.

I'm more familiar with the Scranton area, so I will focus on that, but when talking specifically about "downtown", I think Scranton is definitely in a better position than Wilkes Barre. There are a few developers who have really done wonders for downtown Scranton. Spending significant time in downtown Wilkes Barre, in and around the square much of last spring and summer, it just doesn't seem to be operating at the same level as Scranton currently. I know one of the Scranton developers well, and doesn't have a single vacant unit out of over 120 units in the downtown area. Mostly young professionals.

Scranton is not a very desirable place to own currently, but lots of renter interest. Public school system is fair, taxes are high, city struggles economically due to financial decisions made over the course of the past 10+ years. 

As mentioned, surrounding areas have become extremely desirable for SFH purchases, as well as rentals. Clarks Summit area is very desirable. Dunmore is another desirable location.

Overall, I would agree both have a lot of potential. Scranton is beating WB to the punch in terms of the downtown upgrade. However, as a city, I would be hard pressed to pick Scranton over WB in nearly any instance. 

@Lori Guliano @Chris Engler hey guys -- I'm from the Scranton area, and am actively seeking investment properties in the Scranton area. The University of Scranton, Marywood University, Commonwealth Medical College - these are all pretty high demand areas for rentals.

I'm going to look at a property later today, and hope to make an offer, I'll post details later - going to be a pretty big project.

Be careful with property taxes in Scranton. My father in law is trying to sell his mother's home in one of the nicer sections of Scranton. 2000sf SFH bought in 2006 for $178K, Currently the property has been reduced down to $139K. They'll be lucky to get $125K for it. Property taxes were $6,900 as of a few months ago. They've since been appealed twice, and are now down to around $4,000. Still, very high for the area.

Scranton is on its way back, and there will be some really opportunity around the corner I think. But as it stands currently, Scranton is not a very desirable place to live, specifically starting a family. Taxes are high, and the economy is coming back, but still has some work to do. With some good things on the horizon for the area, I think Scranton could be a good investment area in the coming years.

@Mike Wood The construction loan was for my primary residence. However, I only had to put down 20%, so no different than an investment property, maybe even a little better if not 25%. 

I have a second meeting this afternoon to discuss this topic again and hopefully move forward.

@Berny Petersen Bought for 108K and future value appraised out at 169K. 

I was under the impression that this was not a typical loan when talking with another loan officer at a different local bank. But then asking a few others, I found out it wasn't that all that different from other loans, and that they were available.

Granted, I do have a strong relationship with the loan officer who helped with it, but at the time only had an average credit score, and a fair amount of debt, so I would think the underwriter would have the final say. 

I'll let you all know how this meeting goes shortly, and as I speak with loan officers from other banks regarding this loan availability.

@Chris K. 

I'm referring to a construction mortgage on the future value of an appraised home. In my case, the loan was interest only during the construction phase (9 months), after that was P&I payments began.

What makes you say the investor won't have the ability to do the due diligence? I would expect that when purchasing a fix & flip, or other deals, that there is a thorough understanding of the scope of work and how much the rehab will cost, and the ARV. All of which are necessary for the construction mortgage. Lay out what you are doing, if it appraises out, you're set. The work is already done for the most part when you're planning whether or not you are going to do the deal, correct?

I specifically did not do the FHA 203(k) loan for the purpose of not wasting the time of my loan officer, whom I have a great relationship. In fact, when it was discussed, he suggested I talk to private lender on that.

Thanks for your response.

Last year I bought my first home using a Future Value of Appraised Home - a construction mortgage.

It was a 5 BR/1.5B on 0.4 acres (big lot for the area), in the Scranton, PA area that was quite dated and needed a lot of improvements. I wanted to put about $60K into it. I bought the house for $108K, and $60K to draw from for a total of $168K, which is what the house would appraise out at.

Besides the point, but a comp, not quite as nice home, just sold for $225K, which makes me feel great about my investment.

Getting to my point, I'm wondering why I haven't seen much discussion on BP regarding construction mortgages as a way to use the rehab money with significantly less interest than a HM lender, or other option?

As I'm preparing for my first deal, I met with my loan officer at a local bank and I assumed that this loan was only available on a primary residence, such as my house. He told me that wasn't the case.

Just curious if I missed this, or overlooked it on this site, but wondering why that isn't a more utilized financing method?