All Forum Posts by: Kevin M.

Congrats on your projects finishing up. A few things;

1) Make sure you can meet the qualifications of a "real estate professional" under the eyes of the IRS. If you have a full-time job with W2 income you might not be able to do it. I'm sure your accountant is giving good advice but just google it quickly because there are hour/income requirements.

2) Familiarize yourself with Philly-specific regulations. There are about a dozen little laws/regs in Philly that can trip up a self-manager. Our municipal court system is set up in a way where if you do not comply with these laws, you won't be able to evict, and in some cases collect rent. Lead testing, rental license, CRS, bed bugs, smoking policy, fair housing, property maintenance code, etc.

3) The most important part of managing is tenant-selection. Make sure you have tools in place to market your properties to as many potential tenants as possible, so you can screen from the largest pool available and select responsible, respectful, paying tenants. Properties with great tenants manage themselves.

@Bradford Behrins do you mean a company to manage the properties? Or simply renew the licenses? 

Rental licenses can be easily renewed online through the eClipse system. You'll even receive a reminder email when it's time to renew. I recommend simply spending 5 minutes to do this yourself annually for each unit. Technically owners are supposed to be the ones actually renewing these licenses anyway since you have to make certain affirmations about the property (lead status, fire safety, habitability, etc). 

@Dan Fine my situation was with a triplex. Violations were not serious at all. Building was code-compliant. Violations were due to work without permit. Primarily administrative. Unfortunately a lot of your experience with L&I will depend on luck and the specific inspector assigned. No two agencies in the city talk to one-another so it's chaos trying to nail down any kind of answer. 

Jobi- I'd be happy to talk things through with you from the management side. Send me a DM and we can talk more. 

Really depends on your lender I think. I don't really think most read all of the fine print of your lease when refinancing. I've had small perks built in that don't seem to affect the 'monthly income' calculation. 

Another I use; a perk where you guarantee tenants the right to renew for an additional 12 months without rent increase at the end of the term if they elect to renew. They seem to like this security. 

They HAVE however taken issue with lease terms less than 12 months. I would be hesitant to apply with those. 

@Dan Fine the guidance here may be now things 'normally' go with L&I violations but I assure you violations carry a daily fine by statute. 

The penalties can be steep. I am personally aware of lawsuits filed by L&I for residential properties with existing violations for over $100,000. They carry a fine for each day they remain uncorrected. Most of the time- if you resolve violations through L&I, they will simply close them out. They just want the violation corrected.

If you fail to correct to their standards and time demands- they can/will send the case to the City Solicitor's office and they'll sue for the full amount owed by law. Each separate violation is billed for each day it existed. Doesn't matter if you inherited them from a previous owner. You will still be on the hook (at least in the eyes of the city lawsuit).

Just something to keep in mind. I have direct experience with this and it was a nightmare. Ultimately resolved, but painful and expensive. 

Yes to clarify, for any new leases or renewals after January 1st 2021 the landlord must;

1. Provide to the tenant an informational notice regarding bed bugs (not available yet of course)
2. Develop, maintain and follow a 'bed bug control plan' and
3. Provide to the tenant a written disclosure of the history of bed bug infestation and remediation history for the dwelling unit for the previous 120 days.

Like many local regulations- If a landlord does not comply with the above, the tenant’s rent will be abated. Not only will the tenant not have to pay ongoing rent, but any rent already paid by the tenant during the period of noncompliance must be refunded.

I would imagine 95% or so of Philadelphia rental properties will be non-compliant with Philadelphia regulations in one way or another by the end of next year (bed bug, lead, CRS, rental license, zoning, Partners in Good Housing, EHPA notices, Good Cause, CLIP, maintenance code, etc). Becoming a professional tenant may be one of the hottest new gigs in Philly...

Yes this would require a permit and drawings in Philly. The architect submitting your drawings would know the code but a bedroom requires a window, closet, and certain square footage. A kitchen requires a window close to the range or a ventilation system.

Can I ask why it’s so important for it to be a ‘legal’ 1BR? I really haven’t heard of people undertaking this kind of work just to change from a studio to 1BR on paper. Unless it will significantly improve the layout and rentability...

Make sure to check with your mortgage provider about borrowing down payment money. Since they want to be the first (and only) lender in line, they will often times make you promise you don't have any other debt or loans related to the property. They will pull bank statements in underwriting to make sure you don't have any money transferring around that could indicate another lender in the picture. 

It's best to be open and transparent with your mortgage provider so there are no surprises. You don't want to find yourself in a shady situation at closing..

@Catia T. can I ask how you got your 5% Property Management numbers? Generally the larger managers in the area are 7%-8% with a per-unit minimum rent price that may be above some of these D-class units. Also don't forget to factor in leasing fees in your PM calculations. This number generally seems low for any reputable manager, which is legally required for HCV properties.

Did you account for rental license? 107 units annually is another $5,992. 

Also the city is requiring lead testing now for all residential units constructed before 1978. Are the units already tested or are you prepared to pay for testing & remediation of all units if necessary? 

I'm not in the business of buying seller-financed 100+ unit portfolios but this zero-down proposal just seems too good to be true. But hey- great achievement requires great risk. Just things to add to your analysis.