All Forum Posts by: Joe Colasuonno

i always put in 10% in allentown. The biggest factor in this city is picking the right tenant. We require a landlord reference, 3x the monthly rent in monthly income and we search the district judge website for previous evictions. If any come up we dont allow the tenant to move in.

Brian,

What are you looking for in an investment? That property on the west end may get 1100-1250 in rent, but for the money there are much better things to buy. Not sure how passive of an investor you are or what your goals are. That would help me answer your question a bit better

Joe

I own and self manage about 300 units in Allentown. Our units are in all different areas, from center city, to the east side, west end, and south Allentown.

If you are going to self manage from NY, I would highly recommend paying a little more for a turnkey property in very good condition, and to be very picky with your tenant choice. Make sure to only move in a tenant with 3-4x the monthly rent in monthly income and make sure you get a very good landlord reference from anyone you move into your property. Generally Allentown is very management intensive, especially in Center City where the turnover is high and the tenants are of the lower income variety.  I just had a good property for you for sale at 739 N 5th but its under contract now. Look up the photos online. You should pick up something with this level of finish for your first property if you ask me.

it depends on your budget, the condition of the units now, and what you are looking to garnish in terms of rent. To be in the middle of the road for the area, you just need to be clean and liveable. Vinyl in kitchens and baths, carpet , vinyl, or vct in living rooms and bedrooms unless you're lucky enough to have hardwood in those areas. We use pedestal sinks in bathrooms because they  are difficult to damage and  easy to clean or replace.   We manage our rentals ourselves, but give a shout to advanced realty services, they are pretty good managers. 

Also, depending on your finishes, those rents may be a little higher than market and more difficult to maintain. Assuming regular middle of the road type finishes, you're closer to 525-550 for the studio, 650-675 for the 2 bed and 800-850 for the 3 bed. Will depend on block of Linden St, also, but taking into the fact that you're buying for 50k, I will assume it is east of 12th street.

What block of Linden? You're buying right for center city. What is the unit mix? We invest heavily in downtown Allentown. Can answer any of your questions.

Jon Klaus I agree, but I can’t seem to get my local bank to do it. Right now I have a 2500 sqft row home that I picked up at auction for $15,500, that was rented when I purchased it for $1,100 (that was just luck to be honest), I have the one I previously described that I am into for $16k rented for 925/month Section 8, I have another I bought at auction for $13,500 that I am currently working on and when all is said and done, I will be in for about 19k that will rent for about 875/month. I have one I bought for 10k that I am all into for 18k that is rented for 900, I am closing on one Friday for 22k that is already fixed up, that I will rent for $1100/month, and I bought a third at auction for 5k that only needed cosmetics and a water heater, that I am all into for about 7k that is rented for 850 per month.

Total monthly gross income on the 6 properties $5,750 (69,000/year). Total investment is $97,500.

Taxes on each property range between 900-1400/year. Trash is 375 per property per year. City rental fee is 75 per property per year. Insurance is on average 360 per property per year. Tenants pay all utilities plus water and sewer. Only other thing you need to factor in is vacancy and maintenance, however, I have learned that the tenants that are attracted to single fam rentals as opposed to apartments are less transient and more family oriented. Not as much damage on average as for my multifamily holdings in the same neighborhoods.

Some quick math, and you'll realize I am at around 2000 in expenses per property per year for the expenses listed above. Add about 1000 in maintenance, and another 1000 in vacancy (~10%), and the NOI comes in around $45,000 per year on a $97,500 investment.

Not too shabby. Why wouldnt a bank finance this? Even at 100k blanket loan over all 6 @ 5% interest, its only 500/month or 6k/year. DSCR is like 7.5x!

I got into real estate investing in 2008-2009 after selling a business I had started in college for about 50k. My father was a builder for 20 years, so I've always been around real estate, but up until then neither he nor I had really acted as a landlord full time. We pooled our money and our first property was a 30 unit foreclosure in a depressed area, about 50% occupied. We closed on it using hard money at around 12% interest. A year later we took in a partner with good banking relationships and was able to refinance the property at 4.8% and cash out our entire initial investment plus some extra cash. Over the past 3 years we have grown our portfolio to just under 300 units, with about 260 of them located in Allentown, and the rest scattered around NJ.

I'm a numbers guy, and recently we purchased a few single family homes in the area for between 10-15k each. The first one we bought for 11k, put 5k into it, and it is currently rented at 925/month by a Section 8 tenant who pays all utilities. My NOI is around 650/month, placing the investment at a 48% Cap Rate, which is essentially unheard of in most places. The model is replicable in this area specifically, and I have since purchased an additional 5 single family homes. I have noticed that I make more money per unit per month than I do with my multifamily investments in the same area, while spending approximately the same per unit to purchase and fix up.

The model I have formed to stick to is as follows: Total investment under 25k per home (including closing costs, purchase price, and renovations), NOI over 500/month. If the property fits that model, it is a 24% cap, if it either costs less or makes more per month, the cap rate increases accordingly.

My issue is that I am having trouble finding banks or lenders who are willing to lend money on these properties. The combination of the size of the loan with the fact that a lot of lenders steer away from lending on single family rental property put me in a difficult situation. Does anyone have any advice as to how I can refinance these properties once they are preforming so that i can purchase and replicate the model more frequently?