All Forum Posts by: Janine Covello

I am a new investor looking at buying my third property, second property in Philadelphia. I viewed the property and met with the current owner yesterday, and the property is in very good condition and is currently being rented out through a state run program (So similar to section 8 but at a state level). He has been participating in the program for about four years, and mentions that he has had a really good experience since he doesn't have to chase rent, gets paid directly from the program, and the program has also provided him security deposits that he would transfer to the buyer. He cannot choose his tenants though, the tenants he has right now seem to keep the place in good condition. His property undergoes an annual inspection by the state and so far he has remained compliant (The property is in very good condition although I do plan to do an inspection anyway)

I read Brandon Turner's book so aware of the general advantages vs disadvantages but would love a more personal perspective. A few questions for my more experienced landlords out here-

1. Can any of you share your experience working with these types of programs?

2. Are there any specific questions I should ask before getting myself into this?

3. Are there any suggestions on the purchase side you guys could make as far as things I should either include in my contract or make sure I look into during due diligence phase?

Thanks so much for the information everyone :) 

 I am also looking to invest in Philadelphia although slightly different part than you, and going through the same exact thing! One of my friends mentioned bringing a contractor in to inspection, which I was thinking I'd definitely be doing in the future, but Elizabeth's idea about paying a contractor for his time to come to a showing on a property you think is especially helpful sounds EVEN BETTER, and definitely worth it.

Some of these houses are so old...so many built in 1920... It is really hard to tell the difference between what has good bones and just needs some plaster and floors and what is going to need to be completely remodeled.  I've been spending more time taking notes about what I see when I go into the basement, as this helps me make an itemized list of construction issues I'll likely need to confront- IE exposed wires, moisture, pipes that don't connect, panels that aren't set up right. I figure the better my notes, the more questions I can subsequently discuss with contractors. Another thing I have been spending more time taking note on is the condition of the door and interior/exterior windows and window frames. 

Everyone- I am very appreciative of all of the advice and input you have given me on this situation. It was helpful and I took a bit of everything!

Right now- it is looking like we are going to be able to get these tenants out before closing, and things are moving along. Closing in aprox 10 days. 

So hoping for the best- but definitely going to see 5 more properties tomorrow- in case this doesn't work out and we need to exercise our right to last minute terminate contract. (Thank God for that addendum!)  

That cash on cash return is just where I'm stuck... 4%? I didn't even have to look at anything else with that being so low.

I mean I know that isn't your main goal here but I feel like cash on cash return can help flag a good deal. You want that around 12%

@Elizabeth- you can definitely add this as a contingency in your offer, but as Patrice mentioned the seller may not  accept...

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In my case, my seller wouldn't accept this, or even meet me halfway  however during due diligence I was able to receive a copy of their last U&O inspection report (Which they failed) luckily the report had very specific items to fix, and when I matched that up with my standard inspection report (Who I did through Pillar to Post in Philly) my inspector had more or less caught and called out all of the things in the U&O report. 

The U&O report I was given in due diligence enabled me to then budget for the renovations accordingly - which I don't anticipate being too bad (Many of the changes were building code related, smoke alarms, etc) I know it would depend on the property however!

I definitely have used both Craig's List and Rentomer, in addition not sure if you are working with a realtor but my real estate agent also provided me reports on similar properties that were listed in the area for rent as there is a division of her company that handles both rentals and new sales, these were really helpful because a bunch of these listings weren't on Craig's list, and they contained pictures so I could compare them to my rental.  (Plus she did all the work!) 

@Jeff Ronningen I was at the property last week, and both of the tenants appeared to be packing up to leave at the time. So obviously something must have changed btwn now and then. Regardless- despite the fact I'm sure I am going to face an eviction at some point, I don't want to spend my first few quarters of doing this managing an eviction that can be avoided so if they can't get their act together, best bet will just be to walk away :( I guess I could always let the seller know that when she figures this out she may still have a cash buyer interested and to give my realtor a call? 

I can't help but to be so disappointed because I was really excited about this deal, but I have lined up other properties to see this weekend and hopefully I'll find something new soon!

@Nicholas Hamblen that is exactly my gut inclination, that at this point we don't have anything to loose by waiting, and also searching for new deals. If and when we find another deal, we can choose to walk away from this one, but since we haven't put in any other offers yet might as well wait and see what happens before making any rash decisions. 

Right and just to be clear- if the tenants aren't gone we DEFINITELY walk but I guess my major question is if I walk away RIGHT NOW given the dishonesty so far, or wait another week or so to see how it plays out. Also, there is nothing I can really do here correct? 

Hi All!

Not sure if there is anything I can do to save this- but being new to REI would love some opinions.

Me: New investor here, found a great deal on a two family in the greater philadelphia area, shortly after seeing it my husband and I put in a cash offer which was subsequently accepted. Love this property for a few reasons-

1. Cash on cash return around 14.8%

2. Extremely high potential cash flow 

3. While the place needs a bit of work, it's nothing major, some electrical/plumbing upgrades + Plaster, floor in only one room, baseboards, window frames, but really not a huge amount- Inspection was conducted and went well overall 

4. Comps and area rents all checked out

We ran into a few issues when we went under contract. The first red flag, the seller misrepresented the current tenant status saying she had two leases in place, when actually she had no leases in place.  To mediate I requested that we add an addendum giving us an out if the tenants did not vacate the property prior to close, the seller signed the contract and maintained the tenants would be out. 

Last week, we conducted inspection, sent a response to inspection asking for some updates on a few safety issues. Honestly, even if they don't make any of the updates I am still comfortable moving forward with the deal because I am buying it enough under value to just do it myself when I do the renovations. 

Response to inspection was due on Tuesday, they did not comply, or respond. On Wednesday night, they responded they won't do anything (Fine) but also they are "Not sure if the tenants will move out after all" *Obviously a deal breaker.

My realtor recommended we walk away from the deal now, and that the seller and listing agent have both been pretty unresponsive and dishonest about the status of everything, which doesn't bode well.

My inclination is I don't walk away unless they can confirm in fact that the tenants will NOT move out (That is a deal breaker, these are not quality tenants that I want to inherit)- and despite we were planning to close Feb 6, we could give it a bit more time.  I feel like my realtor is being a little quick to give up, and i have nothing to loose contractually to give this a little more time to see how it plays out (My deposits are still refundable at this stage and  it's only $2500)

Any advice?