All Forum Posts by: Cooper Bert

There are many micro-neighborhoods in the Central PA metro market. Those from a retail background know it as the "Graveyard of big box chains" due to decision by statistical demographics instead of the reality of the market. First and foremost is the total misunderstanding of the relatively small river that divides this small populous metro market. This is like a wall that many will not cross unless the amenity they need is on the other side. Note that the Harrisburg market is small and one can travel from the outer suburb to the opposite outer suburb in about 15 minutes. Businesses have come to understand that entry into the market requires a separate presence on BOTH sides of the river when entering the market. The relatively easy access to all areas of the metro make surrounding cities outside the routine of most Harrisburg metro dwellers (York, Shippensburg, Lebanon, Carlisle)

This applies to the Central PA REI market in that everything from gross income, ethnic makeup, willingness to spend disposable income, credit status, average age, average length of employment, stability, family size, and so forth are dramatically different on each side of the river. And many of these factors are not what you would assume when looking at the stats.

Also remember that the city of Harrisburg, where most of the touted "cash flowing" properties and turnkeys are located, went bankrupt a while ago and has never really recovered on a financial or services basis. The property values and taxes to support the bankruptcy and other city financial debacles (google Harrisburg Incinerator) are going in opposite directions and will continue for some time. There is flight from the city by property owners as taxes skyrocket. Most of the larger local REI "value/cash flow" professionals have totally divested from anything within city limits.

The suburbs present their own mine-fields when purchasing REI of either SFR or MF. Several school districts have had MAJOR incidents of facility misconduct (google it, I don't want to get into specifics) and both purchasing and price value have declined and not yet fully recovered. One of the area's most prestigious developments is in this school district and the property values got incredibly wacked. We will not buy or build in this SD at this point. (disclosure - I've lived in this SD for over 20 years but do not have school-age children)

School districts in the Central PA market cross municipal lines and adjoining houses going to different school districts is common. Even the largest school district has an issue with two very large high schools, which drawn from a gerrymandering division of a number of municipalities. The problem is one high school is semi-desirable and the other is one tenants typically want to avoid. There are several such pitfalls with the school districts. This is hugely important for rentals in this market.

And one of the most desirable suburban townships, with a number of newer developments of both SFR and MF, has recently gone, as the zoning/building officer describes it off the record, "Wacko Green" in the new regulations and commissions it has imposed. Example: We recently had a plot of land under contract and while walking the land discovered that a corner portion of the lot was wet from the ground water runoff of a new development above it. We contacted the Twp to obtain plans from the development and found a quick remediation to the problem. However, within two days, a Twp commission told us that this area would be considered a "wet lands" and we couldn't build within 50 feet of the edge of the "wet land'. More to this story but we didn't buy the property, the owner never could sell the property and we don't look at properties in the Twp anymore.

Finally, there are a number of outer towns and cities where you can find "cash flowing" properties that are, IMO, money pits. Examples are Steelton (closed steel mill) and Middletown (very high Section 8 population). Even one of the most desirable areas near Hershey, with a great SD, has one of the world's biggest mobile home lots which kills values and rents.

Point to this long post is beware and do even more than typical due diligence in this area. It's unique. I'd also add that there is a large contingent of low-end flippers that overbid anything in the under $150K SFR market so we don't buy anything that hits MLS. Finally, I'd suggest using a local realtor that specializes in this market AND the SFR/MF/CRE field. And it wouldn't hurt to have a local partner, who has market experience, and has skin in the game.

Hope this helps!

Then there is TMI. Yes, from way back when. There is still this stigma in a large portion of the Southern suburbs after all this time. TMI is scheduled for shut-down soon, if not already...BUT it still sits on the skyline and is a reminder of what happened to properties AND people. There are many values to be found in SFR in this area as it has seen little development and there is a lot of rural vacant land and farm land.

YES, your lender will likely NOT approve your loan IF they know the 3rd unit is not "legal".  This issue usually comes up with additions so you need to check for permits and inspections on the 3rd unit.  If it's permitted and has had final inspection, you should be good.  This is something you can check during your due diligence period. 

IF it's not approved, you need to discuss the issue with the building department NOW.  Tell them you are considering buying the property, you don't know if the 3rd unit is approved (don't say "legal") and ask them what they would do if they were you.  You'd be surprised how frank some of these guys are when you ask for their help. Answers will range from "You have to tear it down" to "Don't worry about it, we can approve and inspect retroactively".

This breaks the rule of "It's easier to ask for forgiveness than permission" but you definitely need to find out if a buyer will have to demolish a third of this property!!

Good Luck!

I'd suggest the following in this order:

MANDATORY

• Repair anything that doesn't work - Plumbing, Electric, HVAC, windows, doors, cabinets, drawers, appliances, etc. Example - Drawers that won't stay on track.
• Get rid of any "smells" in the property.  Find out what smells and remediate it.  This is too often overlooked and is one of the biggest turn-offs to potential tenants. Example - Mildew shower curtain.
• Replace anything that looks worn & used.  Example - laminate counter edge that is peeling or bubbling. 
• Clean everything that you haven't replaced.  If you can't make something look clean, replace it.  Example - yellowing light switch covers.
• Clean-up your curb appeal.  Clean-up the landscaping, powerwash everything on the exterior.

OPTIONAL but Recommended

• Paint all walls & ceilings unless it already looks like it's new paint.
• Replace any carpet that isn't new with decent laminate flooring. Your property will look better, smell better and your long term CapEx will be lower.
• Check your CapEx replacement schedule and get it up to date. Example - replace the 20 year old brown refrigerator with the rounded corners!

DISCRETIONARY and Worth it

• Update your appliances to the same level as your local competition.  If they have stainless, get stainless.  If they have a side-by-side refrig, get one.
• Increase kitchen counter space if possible.  As stated previously, add an island if possible.  Worst case, add a portable island cart to the center of the kitchen IF it doesn't crowd the space.
• Update your cabinets if they look old.  Replace the cabinet pulls, paint the cabinets and/or replace the doors.
• Update your countertops to the same level as your local competition.  Get 2cm prefab granite if they have granite or quartz.  Get the faux granite Formica or polished concrete overlay if you can't justify real solid stone.
• Update your bathroom fixtures.  If you have any fixtures that are not bright white, replace them.
• Add more lighting, use LED, and make it all the same color (Soft, Daylight, etc.).  More light makes everything less dreary. Don't forget outside lighting, landscape lighting & security lighting.

GO "ALL IN"

If you feel especially confident in the long term returns from your property AND your numbers make sense:

• Consider changing your floorplan to make it more open.  The smaller the unit, the more open it needs to be.
• Upgrade the things that will save on utilities.  Upgrade windows, doors, HVAC units, low-flow toilets, shower heads, light bulbs & fixtures to LED, and appliances.
• Brighten the outside.  Seal all asphalt, resurface all concrete, tuck-point masonry, patch & skim coat all stucko, bleach all siding, paint the trim and add fertilizer to make the grass greener.

Establish a budget for your renewal project and keep going till you are out of budget.

Good luck!

I don't think you've given us enough information about the flip.  When you say "rehab work" what do you mean?  You want to do a "clean-out" at the front end, not a "clean-up" which happens at a rudementiary level at the end of demo and then at a fine level the end of punch-out.

My advice would be to first detemine your level of renovation:

• Gut to studs and then determine what to do
• Move a wall or two for an Open Floorplan
• Keep floorplan, replace flooring, fixtures, bath & kithchen
• Keep everything and apply lipstick

My experience is that if its anything other than the last bullet point, don't bother with initial cleaning, even at a base level.  You cannot imagine the amount of dust and dirt created by demo if you've never done it before.  Especially if the house was built in the golden age of plaster walls & ceilings!!  And then there is the dust from tile, and cement board, and granite ... oh my! 

Our initial steps after securing the property:

1. Remove all the tenants/owners stuff that is left behind.
2. Remove any appliances you don't want to keep (OfferUp.com)
3. Remove any debris and trash.
4. Optional - Broom clean to see flooring and feel better about your new wreck of an investment

Now you are ready to start the demo/rehab. We do everything in-house but I'd have my crew do this even if we didn't.  The clean-out process allows us to get to know the property and evaluate our renovation plans as we peel away the "layers" of our newly purchased distressed onion.  

All the gurus may tell you to start with a list or plan but that is always subject to change once you get into the project.  We do detailed preliminary planning for budget purposes but the actual rehab plan almost always changes once we get into a job. (Life hack tip - "Change is inevitable, change is good, embrace chance!")  Keep this in mind the next time you find black mold or carpenter ants.

Final thought on the owner not doing routine maintenance ... if the house if older than about 20 years then you need to check all the mechanicals (plumbing, electric, HVAC, low voltage) for code, quality and function.  You'd be surprised the amount of demo needed to fix minor mechanical problems.  It's not that unusual for a floorplan to change or open-up if walls need to be gutted or installed to repair/replace mechanicals.

Good luck with your flip!!

Fixr.com is great but it can be off in some things like every other site.  Following are similar sites.  I like to get an average from two or three to get a confident estimate.

http://www.costowl.com/home-improvement/ - This gives you categories of building/renovation like Fixr.com.

http://www.costowl.com/b2b/ - This gives you info on everything from backhoe rentals to marketing services. 

http://www.homeadvisor.com/cost/ - This is the Homeadvisor True Cost Guide.  Go to the bottom of the page for the links to "True Cost Project Categories" for pretty good cost info on residential renovation.  It's a lot more accurate & detailed than I was expecting from HA.

https://www.homewyse.com/ - This has tons of calculators for all aspects of construction.  It's great for detail because it separates labor from materials.

@Philip Pape We have the same percentage of basements in Central PA.  Note that basements are considered a plus in most areas where the water table and other issue present challenges for constructing a basement.

We do our own construction and use very few subs so i know the pros & cons of basements firsthand.  I'm assuming you are talking about a poured basement with proper waterproofing, ventalation, etc.

• The foundation/basement is the most expensive part of the build. 
• The foundation/basement is the least sexy part of the build.
• The foundation/baseent is the most important part of the build. Get this wrong and you are screwed.
• Basements do not increase the appraisal value much because they are not considered above ground living space for obvious reasons.
• The basement does provide a cheap space for utility units and storage.  These must be provided in what could be higer cost finished living space otherwise.
• My guys HATE to build or rehab with any type of crawlspace ... due to the crawling invovled ... and the lack of space.  Plumbing, HVAC ducting and electrical are a pain with a crawlspace.  We don't buy slab homes for rehab period. Subs may charge more to work in tight crawlspaces (they don't look tight on the plans but they ARE tight).
• We minimize the foundation cost with home designs that go vertical for two stories. Same foudation cost with twice the livable square footage.
• We maximize the foundation basement cost by adding slab rooms to the sides of the basement foundation.  Examples - breezeway between garage and house, office to side of the front entrance, media room on back of house, etc.  Anything without plumbing can be easily installed on a slab as long as there is an adjoining basement foundation wall and overhead access. It's possible to add 50% or more to the main floor SF with the use of slab wings. 
• A modern, poured basement can easily be finished and waterproofed IF constructed correctly.  Don't think of the musty, damp block basements of old. 
• You can create very cool living spaces in finished basements BUT don't put bedrooms down there or you get into all kinds of restriction & regulations (by state of course so YMMV). 
• A finished basement WILL increase the sale appeal of the house.
• A finished basement CAN be advertised as "square footage" for rent.
• A finished basement CANNOT be used as above ground living space for appraisals.
• A finished basement SHOULD NOT but sometimes IS used as "square footage" in MLS listings.

I hate the cost of foundations but we determined early on to bite the bullet and always build with basement foundations. We build them correctly to avoid future CapEx, always build them to finish quality or so they could be finished later and maximize the cost with vertical and horizontal expansion of the build.

Hope this helps.  Good luck with your build!

@Trent Honea Great advice above.

• Advise insurance carrier and let them handle it.
• Sleep well knowing that this will be handled (see #1 above).
• @Malcolm Boston is correct, screws into studs & fasten cabinets to each other.  Since you'd experienced this problem, add additional screws until you are comfortable with the install (see #2 "sleeping well" above).
• Heavy stoneware is not unreasonable for a tenant to put in a cabinet.  Even a bowling ball might be considered "reasonable" from a legal perspective.  A large anvil, probably not.
• Avoid litigation at all cost.  Having said that, always get legal advice if you're not sure about the potential of litigation.
• Assume the worst, as in this case of heavy stuff.  "Tenant-Proof" everything.
• Make sure the cabinet construction itself did not contribute to the failure.  If so, you may need to add bracing and/or layered shelving.  This is one of the downsides to cheaper cabinets.
• If you are still concerned about liability in the future, add a clause to your home guide or lease stating the max weight that tenant may put into each cabinet.  (see #2 "sleeping well" above)

I think the most interesting thing is that those of us who live in South Central PA are surprised that we’re even in the top 50! I say that with sarcasm … well, a little sarcasm … actually, total sarcasm.

I still remember when the city of Harrisburg was selected as the nation’s TOP place to live by USA Today when that poll first started. Yep, numero uno, the big enchilada, top of the heap, the happiest place on earth (isn’t that taken?), the best of the best.

That was a huge deal, with national reporters scouting around to figure out the city’s secret to perennial happiness and success. Of course they never found it and the city of Harrisburg eventually went bankrupt due to the massive expenditure of placing the official USA Today “#1 City in the USA” graphic on every police car, ambulance, uniform, fire truck, building, park bench, police dog, memorial statue, lamppost, street light, crossing guard, trash truck… you get the point. (True story, google “CNBC Harrisburg City Bankruptcy” for the footage).

In reality, South Central PA, not to be confused with plain ole South Central, is not a bad place to live. Just to make this post BP worthy I’ll add that it’s also a pretty good place for RE investment. We live within a very short drive to Phila, Balt, NY, DC and Pitt is a little longer. We have a very diversified group of pro sport team fans as a result. The biggest controversy here is that the NFL considers the Ravens our TV “home” team instead of the Steelers!! Of course, Penn State adorns everything & everyone so no diversity of college fans … except for a few weeks several years ago, sadly.

It's cheap to live here, you can drive from any suburb to Downtown in 10 minutes (really), the Metro area has almost 2 million people and 1.9 live in the burbs. It's the capital with lots of state jobs and state, ahem, "supporting" jobs and companies so everything is mean reverting including unemployment (good), property values (bad for REI), economic busts (good), economic booms (bad), cost of living (good).

In fact, maybe the greatest feature of SC PA is that it’s Metropolitan but still mostly suburban and the COL is low enough that you can escape a dozen weeks a year to other places like Hilton Head, Vail and Wailea. Wait a minute…

Lots of good information already. Here's a few factors to consider:

You're looking for a good agent primarily, don't be too concerned about the brokerage. I know plenty of great agents that work in crappy brokerages for various reasons. Note - a crappy brokerage is not a shady brokerage which must be avoided at all costs.

I only use full-time, experienced agents. Yes, it's biased but I'm allowed that as a consumer. The full-time guys who "eat what they kill" and are available during the biz day and off hours are indispensable in my view.

The agent must "fit" the property. Considerations are price point and neighborhood. The agent should have a track record with both. The "Best" agent can't help you if he sells kabillion dollar homes on the other side of town and doesn't know bupkis about your neighborhood. ("bupkis" is a technical RE term meaning "A real estate professional that doesn't know the MLS metrics, analytical analysis or micro-market metrics in a specific trade area")

Reputation is paramount for this type of "once and done" transaction if there is no previous personal relationship. You'll have to rely on someone else's judgement of their personal relationship with the agent.

Here's how I'd go about finding agents with the above criteria:

1. Create talking points from the above. "I need an experienced, full-time agent who typically deals with homes in the $???,??? range in the XYZ area."
2. Talk to anyone you know that might deal with RE transactions: Lawyers, Accountants and Bankers are the best.
3. I wouldn't solicit the opinion of previous single transaction residential homeowners. Their review of their agent is typically very binary (great or horrible) and much of their review of the agent is really a review of the process and their perception of a full-value property sale or not.
4. Once I identify the professionals that have some connection with RE, I ask them a simple question: "I need an experienced, full-time agent who typically deals with homes in the $???,??? range in the XYZ area. Do you know of anyone like that?" Note that I didn't ask for a reference or recommendation .... yet. That allows the respondent to be unencumbered from responsibility for their suggestion. We humans tend to remember the best & worst first so the first suggestion if probably the best.
5. After you ask the question, shut-up. Let the references come forth (those of you with sales training will understand this concept).
6. Allow the questionee time to provide multiple references as they peruse the recesses of their memory. Your silence will give them the incentive to continue. The more names the better.
7. Continue to restrain your urge to talk (see a trend here?). Let the questionee pontificate about the reference(s) as long as possible, you may be surprised what they say. Many times, they will actually rule out references as they continue to remember the circumstances where they dealt with the reference. Don't be surprised if the questionee goes full circle and comes back to say their first reference would be the best one.
8. I just put #8 in as an intermission. I didn't realize this post would be so long.
9. After the blathering of multiple references, relationship circumstances and business parables has stopped, ask your questionee another simple question: "If you were me, which would you use?" Again, shut-up. (life hack note - you can use this question for just about anything in life)
10. Now that the interrogating, er, questioning is done, you should have a potential list of epic proportions ... possibly two or three good candidates.
11. I would only use social media & review sites to vette candidates. I totally disregard the glowing social reviews and only look for negative reviews of substance. This has been discussed at length in previous posts so I won't go into detail on my opinions and use of SM.
12. The result of a true vetting is that you are looking for anything unsavory, unethical and/or deceptive so you can rule out a candidate. If you have an otherwise great candidate but you find something unsavory, especially on SM, ASK him/her about it.  Don't just rule out an otherwise great candidate just because some random internet trigger-troll decided to Yelp-bomb an innocent RE agent because their grammy's house didn't sell due to the massive dog poo stains on their carpet & ceiling. 
13. This brings us to the point where you have a vetted agent that fits the sale, which was your initial question. I'll leave the further RE agent interview, seller's agent contract, pre-listing DD, listing contract responsibilities, showing responsibilities, negotiation parameters, pre-closing duties, closing performance and communication for a future post.

I hope this helps your friend. Main point is that I wouldn't rely on a review/site/ranking or anything on SM to rate a RE agent that makes a living based on personal relationships (a.k.a. reality).

@Brenton Way - Welcome to BP.  

If you want to connect, see the post immediately before yours for a great analysis from @David Krulac on meet-ups in our area (thanks David!).

@Amit G. - Sorry again about the hijack, hope the meet-up info helps you as well.

And now back to our regularly scheduled thread topic..... The Avenues investing in York....