All Forum Posts by: Pat Hamilton

I don't think it is worth the hassle of converting.  I recently sold my nightmare 3-family home in West Philly (best day of my life!) Owning a 3 family home in West Philly has costs that I don't think a duplex would have:

- I spent thousands of dollars on a fire monitoring system

- I spent hundreds of dollars getting the annual certificate

- I also spent hundreds of dollars getting a monthly monitoring service for the fire system (this is optional)

- You need to get a public lighting account with peco and light the hallways.

- You need to pay (I think around $500) for trash/waste

- you need to clean the hallways, landscaping, snow removal

- you need to have *EXIT* signs that are wired by an electrician - this was crazy expensive!!!!!! 

- Fire escape certification if you have one (you may need to get a fire escape if you don't have one)

Is your basement tenant paying rent on time?  I had a tough time evicting, even though I had my renters license and everything was in order. You may have a tough time evicting if you don't have your paperwork in order.  I would combine your first floor apt and basement apartment and make it one huge unit, and rent it that way in the future.  

@Alan Asriants

I would love to just do nothing...sometimes it is the best way to go! Sometimes I'm just too proactive and it doesn't pay. I think my personal SS# is attached to my commercial license (they wouldn't accept just the LLC's EIN). With the speed and efficiency of computers (especially in the future) ..... I'm worried that it will creep up on me one of these days. Just like an old dental bill of $28 (which I wasn't aware of) impacted my credit score a decade ago. Anyway, I would love your CPAs info. Thanks :)

@Ben Gleason

In my experience, the worst part about being a landlord is dealing with annoying tenants, especially ones you need to see periodically.  I feel for you and hope the situation gets resolved soon.  You want to be comfortable in your own home.  I would not be too confrontational with this crazy tenant, since you need to see them frequently.  Try to keep all communication to a minimum....the next thing you know they would complain about the "noise" upstairs.    

@Troy Sheets

Great advice!  I don't mean to be too down on Philadelphia.  I actually think it's a wonderful city and I'm sad about the experience I went through.  I would definitely consider investing there again one day, but not anytime soon.  I'm now trying to fill out my BIRT and NPT tax so I could close down my commercial license, but even that hasn't been easy.  In addition to paying capital gains tax, I find it annoying to have to pay these taxes...I know I also paid some type of tax at closing.  So far, these are the taxes I think I'm responsible for:

3.278 % transfer tax (Philadelphia tax) - PAID AT CLOSING

1 % transfer tax (Pennsylvania) - PAID AT CLOSING

BIRT TAX 

.1415% on gross receipts, and 5.81% on taxable net income

NPT TAX

3.44% of net profits

I of course also have to pay capital gains on my own state taxes (and Pennsylvania State taxes), also the federal tax!

Am I missing any taxes here!  I just want to make sure I comply.

I just sold a nightmare property in Philadelphia and I'm bathing all my paperwork to figure out my taxes for next year.  I'm trying to do it on my own, without a CPA...Does this look right? 



PURCHASE PRICE IN 2020: $50,000

SALES PRICE IN 2023: $275,000

EXPENSES (payments to contractors and closing costs etc): $150,000

PROFIT: $75,000
BIRT TAX RATE SAYS: 1.415mills

on gross receipts, and 5.81% on taxable net income

.001415 X $275,000 = $389.13

.0581 x $75,000 = $4357.50

total is $4746.63

----------------------------------

NPT Tax 3.44% of net profits (after paying BIRT)
$75,000 - 4746.63 = 70,253.37
70,253.37 x .0344 = $2,416.72

______________________
So, I am paying $2416.72 + $4357.50 = $6,774.22
Does this look right? Also, I think I have to file a Pennsylvania tax return, in addition to my New Jersey tax return (I live in NJ). I think it's about 3%, is that right? Plus of course the federal tax return. I think I'm in the 15% bracket.  

I think you would need to fill out a BIRT & NPT because after you sell the property, you will have made a profit (hopefully :)  

I recently sold my rental property and was trying to close out the commercial license I had gotten in order to get a rental's license.  They said I can't close out the commercial license without first filling out the BIRT (they didn't mention NPT, but I'm assuming I have to complete that as well).

@Eric Greenberg

@Herb Lau

I had issues with my contractor and my property manager, but I think I could have handled all of that.  It is to be expected.  I initially thought that by purchasing a 3 family home with 3 different tenants, I'd generally have a positive cash flow.  If one of them don't pay, at least the other 2 would.  I guess I didn't factor in the fact that the tenants speak with each other and give each other tips on how to work the legal system in Philadelphia.  I found myself in a situation where I had to evict all 3 tenants!

I think Philadelphia is nuisance to invest in.....from the rental permit (lead testing) & annual birt and npt tax....it' just annoying paperwork.  Jersey City, for example, is much better!  Less annoying paperwork.

My investment in Philadelphia has been a money pit.  I had a 3 family property in an awful neighborhood with awful tenants, I was finally able to sell it and now I'd like to know what next steps I need to follow in order to be rid of this experience for good!  SIDE NOTE:  I love Philadelphia and would consider investing there again but not anytime soon :)

I had purchased the property under an LLC (LLC was formed in PA right before I purchased the property) - It is the only property I had owned under the LLC and I'd like to close the LLC as well.

I already closed out the utilities and I went into Eclipse to close out my rental license which had been active (I filed an amendment, they didn't do it, but after a phone call, they finally closed it out).  

Before contacting the state of Pennsylvania to close out the LLC I think I need to cancel my commercial activity license. I was told I need to close out BIIRt first. It's all so confusing....I don't have an accountant, I'm trying to do it all on my own as I have run out of money (I spent sooooooooooo much money on this property, all going to contractors and eviction lawyers....also terrible property managers)

Anyway sometimes in life it's better to do nothing. What happens if I never close out my commercial activity license or LLC. Maybe I didn't even need to close out my rental license??? I'm almost sure that I don't owe any taxes since (like I said) this property has been a constant money pit.

@Matt Bishop

Hiring a property manager was the worst decision I made in my life!!!!!  They are not proactive but reactive.  I feel like I'm managing them.  I have to constantly be on their case for simple things.

@Mikielle Elum

I am also in the process of evicting and it's awful.  I don't understand how people can not pay rent for over 6 months and still be angry with the landlord.  The mediation part is also a joke.  I hope you have good luck with your property manager.  Mine has not been good...the only thing they are good at is charging.

I would love an "easy tenant" - I'd say just raise the rents a bit.  I have been trying to evict a non paying tenant for the past 6 months!!!!!  I have lawyers and a "professional" property management company.