All Forum Posts by: Marc Izquierdo

Hi everyone I am looking at a duplex foreclosure. I was talking with a neighbor and he was saying that the property has been vacant for around 6 years. He noticed that from time to time, the windows would be open also. Eventually, the police would come by and close them. Today, while looking at the exterior, the windows were open. There is a birds nest on the outside of one of the closed windows (between the glass and the screen) and we saw a squirrel run into the house from one of the open windows. Besides potential and likely water damage, I'm assuming there are animals living in the house. The property is cheap and in a good area. I am trying to set up a time to walk through it with a realtor. I want to see if anyone else has dealt with a property like this before. How did you handle the animals in the house during the walk through? How did you prepare? Any insight would be great! Thanks in advance

Im in a similar situation, looking for off market 2-4 unit properties. I'm going the route of looking for evictions taking place in areas I want to invest. I'm looking through the courts website where they post all of the Tenant Landlord complaints. I've found a few that I'm interested in. The document usually provides the owners address so I'm getting ready to mail to them. However, I'm interested to hear other people's experience with this as I still have questions. What do your mailers look like? What info/how much info is in them? How does it work buying a property mid-eviction, do you take the eviction process over after closing? I don't want to hijack the post but maybe those answers would add some value too!

Does anyone know a good way to find property owners/landlords mailing addresses in Philadelphia? I've looked at a few sites including property.phila.gov but those addresses come up the same as the property's address. I know of a few properties that are not occupied so the owners mailing address should be different than the property's. I was able to find a site for Bucks county but I can't seem to find one for Philadelphia. Does anyone have any experience with this? I want to be sure I can find the information I need before driving for dollars. These government buildings don't seem to be open outside of a working Joe's hours so it's tough to just go and ask. I'm hoping there is a site for this. Thanks in advance.

@Chris K.

@Chris K.

Thanks for pointing out the market hierarchy. I guess it does make sense a bit more when you think about it like that.

@Percy N.

Thanks. I’ve also been looking in Bucks Co. and have seen similar numbers. The example I gave in the original post (4 plex) was actually in Bucks Co. I’ll be in touch. I’d love to hear more.

@Account Closed

Thanks for the input. You’re the second person who pointed that out. I’ll give some PMs a call to see what they are charging. What fees have you seen in your experience?

@

Great information! Thanks for taking the time to give your input. I am not currently renting. I am living with a relative which is allowing me to save for a down payment. However, I have rented and will eventually have to rent again if I can’t find a property. When that time comes, the benefits to house hacking (even if I’m losing $300 per month) become extremely clear.If I’m put into that position, I’ll likely have to settle for something like that but fortunately I have some time where I’m living rent free now to find a good deal.I ’m definitely considering the other benefits that you’ve listed.

Thank you all for your comments and taking the time to respond.  It’s good to see that others are sort of seeing what I’m seeing.

@Tomer Shani

Yea sweat equity is the exact type of property I am looking for. I’d like to get something that is relatively outdated but livable. However, even the properties that are extremely outdated wont cash flow. I’ll look into that property management number. I haven’t actually called any PMs to get a feel for prices, just used 11% as an estimate. That’ll help a bit if I can reduce that.$200 dollars a door? Wow, I was hoping for $100 and that even seems crazy!

@Mike B.

I absolutely see the benefit of living mortgage free, and even in this hot philly market, for that reason alone it makes sense.One day I'll move out though and I want to make sure that the property cash flows, so that's how I'm looking at it. I suppose after a few years (of tenant mortgage pay down) I could refinance with a lower LTV and possibly see some decent cash flow. I'm also generally concerned about other properties that I plan to purchase that aren't being house hacked. They likely won't cash flow so my entire investment strategy ends up being capitalizing on loan pay down and tax advantages (I don't count on appreciation) instead of cash flow which isn't ideal for my goals. It's definitely tough now. Thanks for the input!

@Richard Jahnle

Yea I think you're right about the MLS.In conjunction with the MLS, I'd like to start dabbling in finding off-market deals.I'm starting to research that a bit more (landlords going through evictions, off-market distressed, out of state owners, etc).I'm just trying to figure out how to get all of that data.

@Sung Park

That's great.Sounds like there is some hope out there!I expected about a 3-6 month search via the MLS for a property.After 2 months, the amount that these properties are overpriced sort of threw a wet blanket on things.

@Kyle McCorkel

Yea I agree.Using comps for 2-4 units doesn’t make sense as they are generally bought to produce income.At least that’s what I thought!

@Paulette Midgette

Wow yea I’ve looked at a few properties in/around Burholme and none of them (2+2 duplexes also) are even close to 100k anymore!Such a shame.It looks like I got in a few years late.That’s good you’re reaping the benefits though.I agree with the idea of first time investors jumping in too eagerly.I’ve had/am having that same feeling and am starting to tell myself all the other benefits besides cashflow.However, on the other hand, I don’t want to buy at these high list prices and perpetuate the cycle.

I ran into a very similar problem recently. You might be able to use the FHA 203k loan (still 3.5% down) and have the rehab costs lumped into your loan. I'd like someone else to confirm what I'm saying but from my research you need to have at least 5k in repairs. These repairs can't be done yourself and will require an FHA appraiser to assess the work and an FHA inspector to check the work when it's done. For me, I want to do the work myself so I thought that maybe I can use the 203k to "rehab" the property up to minimum FHA standards then say it was complete. At that point, FHA is satisfied and you can either work on the property yourself or hire whatever contractor you want. I didn't implement this strategy (I didn't end up buying the property) but this is sort of how I would speculate using it. I'm in the same boat as you, conventional financing makes it too tight. Good luck. I hope some others answer. I'm interested myself.

Hi everyone,

Over the last two months, I've been working with a realtor and looking at 2-4 unit multi-family properties in Northeast Philadelphia on the MLS. I plan to house hack (live in one unit, rent the other(s)) but always look at the property as an investment first (not owner occupied). I've been using the income method to value the properties but after analysis, I would end up needing to offer almost 30-40% less than the list price just to break even or make even $50 per door per month. That is even with old out of date properties!

I recently had a 4-plex I was looking at that was listed at $389k.  After analysis, I would have to offer around $200k just to only lose $100 per month (very low rents plus a lot of landlord expenses).  After playing around with the numbers to try to understand where the $389k list price came from, I believe the owner is basing that price on an income stream with no budgeting (maintenance, vacancy, cap ex, property management, etc) and purchased in all cash (which reflects their situation - fully paid off).  This is just one example (and the most extreme I've encountered), but I'm starting to think that that's how all of these 2-4 units are priced.

So now I'm starting rethink my investment strategy because it seems extremely difficult to try to have a 2-4 unit cash flow.  I've done some research and learned that 2-4 units are more heavily valued on comps versus income.  What do you think?  Should I be looking at these properties as homes based on comps (like single families)?  Who buys a 2-4 unit property that doesn't cash flow?  I thought that was the point of them?  You're paying for an income stream but the income stream doesn't seem to exist.  I'm very confused with these properties and am looking for any advice from other Philadelphia investors, or even investors in other areas having the same issue.

For information:

My analysis has used the following inputs:

10% vacancy

11% property management

5% maintenance

10% cap ex

0.5% collection loss

Thanks in advance for the advice        

I recently looked at a duplex that is a HUD foreclosure. My initial plan was to get a 203b FHA loan on the property. The property needs some renovation (new floor coverings, kitchen, bathrooms, etc) but it is completely habitable from day one. However, there is a small section of ceiling and wall drywall that was removed (I think to repair a water leak) and was never re-installed so there are exposed water lines and studs. Right when I saw that, I thought to myself, "well there goes any hopes of FHA financing".

I started poking around looking at the 203k option, specifically the streamline 203k option. Since I don't think the property would qualify for 203b financing, am I able to get a 203k loan and finance whatever work is required to bring the property up to FHA minimum standards (drywall, spackle, sanding, painting and small area requiring less than a sheet of drywall)? I would note that that is all I want to do under the loan, then begin renovating the property with my own cash (I want to do the work myself).

Just wondering if anyone has had any experience using the 203k in a situation where 203b wouldn't work.  Any insight would be great.

Thanks in advance!   

This is how I would look at it

Income:

(A) Annual total income from rents = $14,400

(B) Annual Additional Income (laundry) = $240 (estimated)

(C) Total Annual Income = $14,640

Expenses:

(D) Annual Taxes = $2,520

(E) Annual Electricity = $0

(F) Annual Gas = $0

(G) Annual Sewer = Unknown (do you have this info?)

(H) Annual Water = $1,500 (Depends - should check sellers previous water bills)

The following expenses depend on what you want to budget for/what has been previously seen by the seller over their ownership history.  Based on that information, the percentages can change.  I just put in what I typically use (except for property management which is known)

(I) Property Management = $1,008 (7% x A)

(J) Maintenance = $720 (5% x A)

(K) Vacancy = $1,464 (10% x C)

(L) Collection Loss = $72 (0.5% x A)

(M) Capital Expenditures = $720 (5% x A)

(N) Total Expenses: $8,004

NOI = $14,640 - $8,004 = $6,636

Value = NOI/Cap Rate

Depending on the area, you'll have a different cap rate

I use this rule of thumb for estimating cap rate based on property "class":

A = 6-8

B = 8-10

C = 10-12

D = 12+

So the value at 8% cap rate for example would be

Value = $6,636/.08 = $82,950

With smaller multi-families, looking at comps is appropriate too I think.  So you could probably see prices from 80k to 100k for similar properties.  The rest comes down to what works for you and what you want.

I'm interested to see other responses also.