All Forum Posts by: Kristy Pedersen

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $110,000
Sale price: $335,000

I bought this home using an FHA 203k renovation loan. I lived in the property for 3 years and was able to sell it for profit AND not pay any taxes! I go into depth about this renovation on my blog, so I will link that here.

Visit https://kphomereno.com/203k/ for more photos!

What made you interested in investing in this type of deal?

Very small down payment- 3.5% down. Ability to finance renovation costs long term - I spent $110k on renovations, which I never would have been able to save up for otherwise. Low holding costs - my mortgage payment was smaller than what I would have been paying in rent.

How did you find this deal and how did you negotiate it?

I used a real estate agent who also is a developer in the neighborhood. He helped negotiate the costs down about 15k from the list price.

How did you finance this deal?

FHA 203k Loan.

How did you add value to the deal?

Complete full gut renovation - updating all the systems HVAC, plumbing, electrical and converted one bedroom into the master bath for a master bedroom.

What was the outcome?

I sold the property after living there for 3 years. The value of the house increased from my original $220k appraisal to $335k in 2 years.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Fifth Realty on the buy side, George Maynes from Berkshire Hathaway on the sell side.

Investment Info:

Single-family residence other investment in Philadelphia.

Purchase price: $107,000
Cash invested: $23,000

Contributors:
Kristine Pedersen

Purchased this home to BRRR, but found the rental market in this neighborhood did not cast great tenants. I decided to drop the home and list it for sale instead.

What made you interested in investing in this type of deal?

I was interested in having monthly cash flow generated through the BRRR strategy.

How did you finance this deal?

Conventional mortgage.

How did you add value to the deal?

I renovated the unit; new LVP flooring, painted kitchen, new countertops, new appliances, new light fixtures, remediated termites, removed dated paneling in the bathrooms, painted all the walls. Visit https://kphomereno.com/rental/ for more photos and details. 

Lessons learned? Challenges?

Knowing the market you will be investing in is key!! Driving through the neighborhood I felt safe and fell in love with the block this house was on. For that personal impression, I overestimated the quality of tenants in the neighborhood. The people visiting the house either did not follow through with the applications, or had very low credit scores. I needed to make a decision, so I ended up flipping it. I lost some money on this deal because of that (to lender fees, taxes, agent fees, ect).

@Neerav Patel   Thanks for the response. Would you mind sharing who you are using as a portfolio lender? I don't have one yet. I've been speaking with FOA who will do a bridge loan. 10% down plus 2 points, will lend 90% of construction costs and can refinance into a conventional 30 yr fixed. The only problem is they require me to have 50k in liquid assets.

@David Ross Yep, I have the HELOC on my Sharswood house. The loan I'm looking for is for a home in Olney section. Can you share who you recommend for a rehab loan? Thanks!

I have a HELOC open on my house which can get me 20% of the purchase plus the repairs. What's the best way to finance for a BRRR where I can take my money out in a few months? The house I'm looking at needs minor cosmetic repairs and will be rent ready in a couple months. I've considered bank financing the purchase and then refinancing again in a few months. The problem with that is I'll have to pay closing costs twice, and they may need the loan to season.

I've also considered hard money, but that just seems expensive for what I'm trying to do. Are there any other low interest bridge loans made for this situation? How do you do a BRRR without all the cash upfront for purchase and rehab?

@Joe P.Completely agreed with you on the student housing. I don't think students are quite willing to go that far and especially not west of Ridge Avenue. The renters would have to be low income until the market in the area picked up. Assuming I could get a rent of $1300 a month for it that would leave me so little for rehab costs. At 99k asking price, plus 20k for a bare minimum rehab cost, plus holding fees, closing costs, ect its a tight BRRR. Comparable properties selling in the area maybe 180k. That's the best case scenario.

I ended up offering below asking price and was immediately shut down by the listing agent. There were people offering above asking in cash for it and they weren't willing to negotiate. I'm assuming these people are investors just willing to sit on it. I wasn't eager to put all my eggs in that basket yet. I don't see a lot of market rate things happening in the north end of Sharswood, particularly knowing PHA owns a ton of land around there.

@Account Closed Thank you so much for your detailed response! This completely makes sense and answers my question. Since there are not many comps in this area, it would more likely be at the micro-market level, like you say. Which when I think about it like that I could buy at a price, but then wait until the surrounding market picks up. I think I may leave this one alone since I can't afford to sit on it. 

@Joe P. Yes, that's my concern too. The area is more C or D. The house was kept well by the previous owner. However.. it hasn't seen an update in quite some time; still lath + plaster walls everywhere, rusted HVAC, the 3 original fireplaces were retrofitted to receive heat. I'm nervous if I don't put up the money now to fix everything then I'm going to have a trickle of problems in the future.  I don't see it renting for more than $1300/month to section 8 right now. 

My first assumption going through the house was that it was 'livable' and maybe needed new floors, a new bathroom, paint and new windows. I just don't know how comfortable I am with leaving all the mechanicals how they are, especially not knowing of there's knob + tube behind the walls. At that point I might as well keep going and it snowballs into a 100k reno. 

@Kevin K.  thanks for the response. yea, I have four that are on the high end that could support it; 2542 turner st @$300k, 1522 n Dover st @ $280k, 3530 Ingersoll @ 298k and 1332 n 26th at $295k. Next question is then if I can get renters at the rental rate I need

@Joe P. Yep, that's where I'm getting caught up. The house is near Cecil B Moore and 23th street. Plenty of houses similar size in Brewerytown are selling easily for $280-$350k. It's a little further east (technically Sharswood), so its not quite there yet, but could be a great property to hold onto until the Sharswood area picks up

@Mary B. Yeah, there are several blocks between this one and the more developed ones where there are lots of empty lots or boarded up houses on the blocks