All Forum Posts by: Rich O'Neill

Thanks @Kevin M.

@Marshall Secord A few notes for you: 

DIY to Subcontracting is a big jump in cost. Be prepared for that. 
I get nervous when someone says "it's not a gut, but needs a lot" because a lot of times we will find that something behind the wall is messed up (knob and tube wiring, cast iron plumbing, etc) and add a giant change order to the budget. 
"Minor Structural Work" can be an oxymoron. This can turn into a can of worms quickly, especially if you are already seeing a slope in the floor. 
If the work is only what you are saying, it could probably be done in the $80k range, maybe less if doing some work yourself or managing the subs yourself, but I get nervous on these projects because there's a lot of room for variation. At least with a gut you know everything is going anyway, so theres not much that can go wrong. 

Best of luck! Let me know if I can be helpful at all! 

@Lauren Robinson is this one of your first properties? If so, it breaks my heart to see this on one of the first ones. It’s part of why I encourage people to scale as fast as possible. This type of thing is bound to happen, but if you have more properties to spread the losses across then it hurts less. Unfortunately this is not an uncommon occurrence in the city right now. Between courts being closed, then backlogged, and mandatory mediation and payment plans, it gives the tenant lots of runway to not pay before they move on. Like others have said, take your hits, learn your lessons and stick to the strategy. Good news is that rents have gone up in most parts of the city quite a bit since you last rented it, meaning you might be able to rent for more and recover some of the loss. 
best of luck! Sorry for what you went through but try not to let it discourage you. 

@Alan Hale purchase was $40k, rehab was $35, “plus clean up and a couple more thousand” total of $80k. They pulled $63k out of it, meaning they had to leave $17k tied up in the deal. Property is worth $90k so now they have $10k in forced equity over and above what they put in. 

Their full equity is $27k ($90k-$63k) but that includes the money they left in the deal. 

@Jun Ho Lee gotcha. Keep us posted! 

Hey @Jun Ho Lee, Makes sense. Based on the other comments here, any of the plumbers you bring in should be able to shut your water off at the street to test either the groundwater or neighbors line theories. If they shut it off at the street and the flow stops, then its obvious what the problem is. If it doesn't then you know it's probably not your line, unless it is between the main shutoff and the street main, which I would think is a city problem. 

If it is not your line, next diagnosing step I would think is the consistency of the flow. Is it always the same amount of water flowing day after day? If so, I would think that it isn't groundwater, as that would fluctuate at least a little, and you are likely dealing with a neighbors broken main. 

Good luck with this!

Not a whole lot you can do here other than call a few plumbers to get quotes for repairs, unfortunately. It's not clear to me based on the description if this is a water supply issue or a sewer main issue. Does the water gush continuously, or just when you flush a toilet? 

If it is just when you flush the toilet, then its a sewer problem. There are ways to "line" a sewer main without digging up too much of the street, but I don't know if that will help you here. 

If it is continuous, then it is a water main problem and you need to replace the main. Hopefully they can access the defect from inside the basement, which will save a lot of money, but they might need to dig up the sidewalk. 

Yes Philadelphia transfer taxes are crazy high, hence the $17k. Generally that is split by the buyer and seller though, so you would likely only pay half of that, depending on the deal you structure. The total transfer tax rate in Philadelphia is 4.278% I believe, and customarily that is split in a standard on-market deal, but often buyer paid on off market deals. You could also be asking for an assist on the properties you are looking at, but you need to make sure your "offer price" is high enough to offset any assist if you want your offer to be accepted. 

Homeowners insurance seems high as well. Have you talked to an insurance agent about that number?

Like @Danielle Jackson said MIP seems a little high as well.

Hey @Danielle Du Plooy, make sure to check out DIG, they are the biggest one in the area and are affiliated with NREIA. 

There are lots of other more local ones as well. Vanguard Realty does one in West Chester on the 2nd Wednesday of the month. Delco Property Investors (DPI) is another one that I think meets on the second Tuesday in Delco. I am not as familiar with the Philly ones but I know there are several of them. Hopefully someone else on here can comment on those. 

@Riley Thomas check out the Philly Zoning guide. Not positive it says anything about minimum sizes but it’s a helpful tool to have when looking at anything zoning related in Philly. https://www.phila.gov/media/20...

@Orlando Watts welcome to the pro's/con's/business planning portion of real estate investing. First, I wouldn't say the site "teaches" a specific process to follow. There are tons of different business models and ways to make money in real estate, so you will see several of those outlined here on the site, but in most cases you are not signing up for a step by step course. People are just sharing their experiences and strategies. Step by step courses exist, and some even on the site I think, but I wouldn't say the site pushes any specific strategy. 

FHA loans are only available when you title the property in your personal name. I think it also needs to be your primary residence for an FHA loan, but don't quote me on that.

This is an ever raging debate in the forums here - to LLC or not to LLC. An LLC is just a legal entity that many investors use to own property. The law views an LLC as separate from you personally, as long as you follow a bunch of rules (ie, don't "breach the corporate veil"). This means that if something ever happened in one of your properties (injury, fire, etc) where the owner could have some liability, having the property owned by an LLC means that the damaged party SHOULD only be able to come after assets in the LLC, and shouldn't be able to come after you personally. There is much more to it than that, but that's a simple explanation. This is called asset protection. This is great, but financing is more difficult in an LLC, especially a brand new LLC. It certainly exists, but it may be a bit more expensive and harder to get. Buying in your personal name has the advantage of cheaper/easier financing, but has less asset protection, and generally conventional loans limit you to 4-10 mortgages.

So there are generally 2 arguments. 

1) Buy as many as you can in your personal name, get an Umbrella insurance policy to cover you for liability if something happened, then deal with LLC later once you have maxed personal mortgages.

2) Always buy in an LLC to protect yourself, and learn to deal with the extra complications of commercial financing.

I personally lean towards argument 2. I found it more complicated to navigate keeping myself protected and continuing to grow while keeping everything in my name. I just learned to deal with paying a little more for financing and how to talk to commercial lenders vs. conventional lenders. 

There is MUCH more on this debate across the site. Learn as much as you can about the pro's and con's and make a decision for your situation.