All Forum Posts by: Nick Michaels

Also very good to ask what the company's service area is - some only operate in certain places.

@Bryen Blankenship I recently reached out to a few different companies in the Pittsburgh area for the property that I am closing on in the next few weeks. I sent you a message and can speak about what I learned there.

Here are the questions that I used -

1. What methods of rent collection do you use?
2. What property management software do you use? 
3. What is your process for tenant screening? 
4. How many units does your company manage? On the same note - what is the size of your staff? 
5. How do you handle maintenance requests? Do you have an in house staff or just a list of trusted contractors? Do you keep an expense reserve amount for each unit? 
6. How do you handle evictions? What costs surrounding these are passed on to an owner? 
7. What is your monthly management fee? Is there a minimum charge per unit? 
8. What is your initial leasing fee and lease renewal fee? 
9. What is the minimum term for your contract with an owner?

Good luck in your search!

With 130 municipalities just in Allegheny County that are all mostly different in terms in culture and folks living there, not to mention the 90 neighborhoods within one of those municipalities (City of Pittsburgh) I think it would be nuts to be an out of state investor investing here, but hey that's just me.

I'm sure many other midwestern cities are very much the same in terms of having varying neighborhoods

@Amalia Auge

15235 is Penn Hills and transfer taxes are 3% there, so the buyer pays half - you can check here - http://www.anytimeestimate.com/PA_REAL_ESTATE_TAX/... So the closing costs might be a a bit higher, but not much (assuming that this is a cash purchase) Also, from the way I understand Penn Hills has various sub-neighborhoods and it can vary from street to street the kind of tenants / value that you are gonna get.

Your numbers don't account for home owner's insurance. Figure likely between $600-800 per year.

Your numbers don't account for property management so I assume you are self-managing?

5% for repairs and CapEx respectively really depends on the individual house and the age. If that's relatively new construction, maybe. $1,500 for initial repairs is barely a fresh coat of paint for the house. I assume $10,000 of repairs on everything now no matter how it looks.

Good luck!

I honestly had to look up where Rankin was on Google Maps and I have lived in Pittsburgh for 38 years :) That whole area beyond (read: east of) Homestead and Munhall is "places near Kennywood" in my mind. I grew up on the Northside and that was my only reason to ever be over there.

It's next to Braddock and most folks rarely mention "Braddock" without saying "warzone", so I would imagine it would be a high risk play to invest in Rankin. That all being said, I am not very knowledgable about the area so I may be misspeaking. "Driving the area" using Google Maps I would rank investing there as the same risk profile as investing say New Kensington, Brackenridge, Aliquippa, etc.

I am not sure of the economic drivers in that area, on the bright side it's NOT in a flood zone :)

@Account Closed The roofing was $9,000 plus a change order that I should have fought. I found the roofing company myself after numerous quotes, this was not "the lowest" but "the lowest while still being a reputable company" (or so I thought). There was also a run on roofing work being done at the time (late Fall) since we had about 2 weeks of constant rain and with the insurance company breathing down my neck I couldn't afford timewise to be too picky even if there were better prices out there.

The allure was $4.50 per square foot and was for the whole unit, the painting was for the whole unit. That said the paint definitely came in higher than I would have liked. I should have just taken a weekend and painted myself - but four kids at home and the desire to get the place rented steered me towards making the more expensive decision.

I plan on avoiding these sorts of "rush" decisions in the future by identifying repairs effectively before I make offers

Thanks for the responses everyone! 

We just got some interesting news - the professional tenant continues to not allow anyone in to do repairs. She was notified her yesterday about an electrician coming in two weeks to do some code enforcement repairs and she said she does not grant anyone permission to her home and we will be " prosecuted" if we enter. She is paying rent, albeit very late so we (by we I mean our PM company, as they placed her, this is their problem to fix) can't evict her on those grounds. Her son is residing there and refuses to sign the lease, also she is threatening the tenants in the other unit, so that's at least 3 lease violations. So this is gonna get ugly. Eviction is being filed, but this sounds like it is going to take a while. 

Friendly reminder to screen screen screen your tenants, and if you have a PM to do that, make sure you know their process :)

Happy Friday!

@Anthony Angotti The roof definitely came in high. The roofing company said they mismeasured the dormers or some nonsense and it came out to 3 square more than what they estimated, and they had to replace rotted underlayment on parts of the roof. In retrospect I should have fought them on that. The roof was very old. So the original quote was $9,000 and that was middle-to-lower among the 10 quotes I got. A lot of that had to do with the slope of the roof. Needless to say I won't be using that roofing company again due to the "change order"

So $47k was the total initial cash outlay of downpayment ($15,500), closing costs ($5,500), repairs ($12,150), personal "float" to cover mortgage / lienable utilities while tenants were placed factoring in that 1st month's rent to PM for leasing ($2184), a fridge replacement for one unit, carpet cleaning for the other unit, and rekeying for all locks.

But yes there are various places that we could have optimized, I wish I could have avoided these problems before they happened, but sometimes you have to get burned to know how to properly handle a fire going forward.

Well there's taxable "profit" and real profit. There is no way I am going to make a real profit on it - I would need to sell it for $110,000 after having bought it for $62,000 to #1 Pay off the 75% LTV Loan of $46,000 #2 Recoup the down payment, closing costs and all the repairs I made (~$46,000)... AFTER factoring in seller closing costs... just to break even

Realistically I can maybe get $80,000 for it after all of those repairs. Thus I would likely only recoup about $25,000 of the $47,000 I spent (there is some opex of me having to transfer money to keep the bills paid while we got tenants in)

But I am not sure the tax man is going to see it that way. I don't think with a short term CG sale, I can write off the $22,500 in repairs that I made to reduce my taxable gain, can I?

After all of this, I take full responsibility - I should have walked through the units and made sure they were 100% ready to rent and addressed any issues from the getgo. I foolishly expected PM to have some sort of quality control before they showed a unit and they didn't - that was a failure on my part.

The long term plan is likely to sell this once we pass the one year mark (this September) and would only pay long term CG taxes on it. I agree 100% that our money, even taking a loss for the money we sunk in for repairs would be much better invested somewhere else. 2% COCR is lower than CD rates :(