All Forum Posts by: Jussi Lundstedt

In Philly, the differences in rent between great and ok areas (not some of the really bad neighborhoods, just not premium/hot neighborhoods) are much smaller than differences in entry price to buy a poor condition house, so I've started to look at some of these transitioning areas to find deals that work as long term rentals. Still looking to buy where numbers make sense.

I've seen ones that do not charge, and some that charge a fee. One GC that I've actually hired charges only if you don't own the property yet (i.e. are using them for deal analysis), and after hiring him to do a $16k job on one house, offered to look at deals for free going forward. The fees I've been quoted were between $400-$700, so $200 doesn't sound that unfair. However, since there are plenty that don't charge fees, you can probably find one.

I would start by hiring a good home inspector to do an evaluation. They will be able to point out if there are structural concerns (e.g. party wall/foundation cracking, bulging exterior walls, etc). If yes, I would follow @David Lodato's suggestion to hire a structural engineering firm to do an evaluation.

If this property is just a standard down to the studs gut job and remodel, any good GC would be able to evaluate what is needed and give you a quote and a scope of work. Get 3 quotes and thoroughly check references for the contractors before hiring anyone, especially since this is your first project and it's pretty big (can be well into the 6 figures to fully gut and rebuild a multi-unit in Philly today) by the sound of it.

Depends on the quantity of yard cleanup, but seems a bit high to me. In Philly, I would expect the guys I use to be closer to $2,500 all in for the heater and sheetrock fixes + a full paint job on a similar house.

In my experience best way to figure out fair prices for contracting is to ask 3 contractors to get you a quote. You get a handle for what's reasonable pretty quickly after that, so you don't need to keep doing it for things you've already done.

If your costs and ARV remain where you say they are, you should be able to actually refi all your $156,300 out, as for 75% LTV you would need to be at about $208k appraised value. The payment at 6.75%-7% is a little north of $1,000, and I've lately gotten better rate quotes than that. You would on the other hand have $1,440 left over after management. You could also self manage to make up the difference.

I don't know what your taxes are, but after ballparking other costs, that seems like what would be left over for you to cover. For those other costs, you could subtract $200/mo for repairs & capex (~1% of home value per year), $100 for insurance (not Arizonan, so I'm not sure if this is right, it is for my market), and another $100 for vacancy, which works out to be ~6% which in a high demand area should be reasonable.

It's rather tight, but at the refi I suggested it would also be a "free house" for you. I think you have 3 reasonable options:

1. Take the $35,000 you just refinanced out, put it in a high yield savings account, rent the house now, and just pay the taxes until you can refinance again to a lower rate, or self manage instead. This is a good option if you believe rents will continue to grow in the area, and if your taxes aren't crazy high. I think risk is fairly limited if you are covering say $200/mo in taxes from that $35k.
2. Assuming you don't already have a long term loan, get one for less, for example $120k, leaving the $35k you spent on the deal in it, and rent for about breakeven. This is a good option if you already have a long term loan that you can just keep until rates improve to avoid double closing costs, believe that rents are likely more stagnant, or just are very intent on having some cash flow or at least breakeven.
3. Sell for likely that $210k, leaving you with $60k minus realtor fees (~$10k?), short term taxes (as high as 40%), etc. I think the only merit to this is if taxes in your area are really high meaning hundreds and hundreds in negative cash flow and a long path to profitability either due to this or rent stagnancy.

Since this house is in Arizona, which from all indications is a fairly strong rental growth market, and you could feasibly have the house for nothing into it with a good chunk of cash in the bank to cover the temporary negative cash flow, I would probably just go option 1 assuming the taxes are reasonable. I would think you will get to breakeven in a few years either through rent growth or a refinance.

My lender at least is still doing 20% down programs for investment properties. However, last I asked, I was quoted 1.75 points more for a 20% down instead of 25%, which makes it kind of redundant... Might as well pony up a little extra cash and put it in the deal instead.

Personally we own a couple of properties in the Manayunk/Roxborough area that we bought and did light work like cosmetic updates and roofing fixes on before renting them out. As the market is softening, you might be able to buy a 4bd/1.5-2ba on a good deal for under 300k, do limited work, and rent it out in the high $2k range to what is a good tenant base.

We're starting to think about doing a more extensive renovation for the next project and for that we're looking at South Philly (Grays Ferry/Point Breeze in southwest or Whitman/Pennsport in southeast). Good luck out there!

If you are looking for tax assessment on a specific property those can be found at atlas.phila.gov.

You could try Hemlane, they basically do this. I personally ended up cancelling my subscription as I was able to get better quotes than they obtained by calling around a couple of local contractors, and prefer to respond to tenants for maintenance issues faster than 1 full business day, but they are an option for this. I think it was $74/mo total for 1 unit, with some part of that being a flat fee for the subscription and an additional per-unit component.

In Philly, we keep water in our name and bill back to tenant. Lease says tenants need to maintain utilities other than water in their name, and gas, electric and internet are set up by the tenants in their name. With PGW and PECO, you can also set up a landlord policy that automatically converts the gas/electric back to your name upon the tenant closing out their account for the property. Thankfully, I have not had to deal with nonpayment by tenant, but I suppose for this scenario you could also keep it in your name and just bill everything back or just check with the utilities if there are any unpaid balances when the lease ends, and keep whatever part of the security deposit covers the unpaid bills.

Second @Alan Y. on ValueGuard. I have used Robert Reilly for both my primary residence as well as a rental, and he always did a quality job. He's also a rental investor himself.