All Forum Posts by: Paul Wakim

Hey everyone, 

So I have a strong lead on some properties in the East End of Pittsburgh, one of which is a 4 plex that is more like townhomes from the 40s. 3 are rented, 1 is vacant. The rents are.... wait for it.... $370/m, $550/m, and $555/m. In my opinion, the rents could very easily be $1000/m or more with minimal work.  I have the opportunity to purchase this property off the market and I am really worried about the laws of raising rents or evicting tenants. Unfortunately, these tenants are elderly and have been living in these units for 25+ years so it's going to be hard no matter what to make this decision. 

Has anyone heard of or dealt with a similar problem first hand in PA or better Pittsburgh? 

What are the laws around purchasing a new property and immediately raising the rents or evicting tenants with the goal of getting higher rents? 

Thank you in advance for your help!

@Joe Davalos thanks for the info. I know the laws could be very different here but were there any hurdles you found to rapidly raising rents so fast? 

My concern with doing something like that, other than the possible legal complications, is that the tenants have been there for 20+ years and have made a home there. 

Hello! So, I have been reading up on some buy and hold acquisition strategies but I would like to know what others in the community have to say about analyzing my first deal. 

So I have the potential to purchase 1 - 11 units in a local investor's portfolio. None of them are on the market, and he is ready to get out of the game after 30+ years of ownership. Most of the properties (at least 7) are in great up and coming areas here in Pittsburgh. There are 2 4plexes, one duplex, and 1 single family home. I am most interested in one of the 4plexes which is a few houses down from where I live now. 

The current owner purchased this 4 plex in 1993 and paid $85,000. 1 unit is vacant, 1 unit has an older woman living in it that is paying 1/4 the market rents, another is rented by a family that has been there for 20+ years and the 4th I don't have info on. From what I gather from short phone conversations with the existing landlord, he most likely has done a poor job "training" the tenants to pay on time and take the best care of their units. 

With minor aesthetic updates, I know each unit could rent for $1000- $I200 per month (*without seeing the units yet*). I am friends with another investor in the area who owns properties on the same street, he showed me around his units and told me that he gets $1000-1200 per unit per month.  I have not had the chance to send a contractor into the units but I definitely plan to put at least $30,000 into updating all of them over time, the roof and chimneys will need to be replaced or repaired for sure and none of the units have AC. 

As for my financials, I have a private money lender who is a recommendation from the other investor who showed me their units. They have done business together for 18 years and he has offered to make the introduction. The lender will need 20% of the purchase price as a down payment and will fund 100% of any repairs or updates. All the loans will be done at a 10% interest rate. I plan to pay him back when the property is updated, fully rented and refinanced (<6months).

My plan was to put the down payment in, do some minor repairs and aesthetic updates to the empty unit, get it rented, try to get the older lady out of her unit (cash for keys) and see if I can do the same with the other existing tenants. Whether I can get the long term tenants out or not (maybe I won't have to) and get the rents up to market value, and once the entire building is rented I would then go to a traditional lender to get a conventional mortgage. 

Can anyone give me any advice on getting an older long term tenant out of a unit so that rents can be raised to market rates? 

I completely understand the saying that you make all your money when you purchase the property so I am worried that if I pay too much now I will not be able to be cash flow positive even after the refinance with the conventional mortgage. I am also worried about purchasing at the right price to be able to cover the loan the private money lender will be giving me when I refinance. How should I go about coming up with an offer price for this property? 

I would appreciate any and all advice greatly. Please let me know if you need more information. Thank you!

@Harold Isaacs @Caroline Barnett  I'm in the process of building one. Once finished I will send it to you in exchange for being a beta tester. Let me know if you are interested

@Mike B. Thanks again mike! Excited to see where this journey takes me.

Hey @Mike B. thanks so much for your quick response. I really apprecate it. Is there a reason you perfer the BRRR method vs owning multiple properties that will not appriciate significantly?

I only ask because, to me, owning multiple proerties that cashflow a significant amount per month almost immediatly is better than a single property that barley cashflows and that wont pay a significant amount until I sell it or pay down the mortgage.

I have a few areas in mind that might appriciate in vlaue and the homes do not need a significant amount of work. To me that sounds like it would be the best case senario. I could get a few homes for low prices and not have to do much work, then in 2 or 3 years when the area is beginging to develop more the properties would be worth more. At that point I could do a refinace on 1 or all of them or sell and be in a similar posistion to where I would be if I had done the BRRR strategy with 1 property. I know this is all hypothetical at this point.

Hello everyone, I am having some trouble figuring out what strategy I should use as I begin my search for my first deal. My goal is to build a large business that cashflows as much as possible in the future. 

I have $50,000 in investor capitol to work with. I am stuck between a few paths and would like some advice on what you think I shoud do with the $50,000.

So there is no shortage of homes in my area that are possible candidates for the buy and hold strategy. The problem I am facing is how to go about aquiring the properties to meet my long term goal.. 

I can use my investors capitol to open a few small mortgages and purchase properties that are ready to rent and could cashflow $300-$600 per month right from the start, but with very little appriciation due to thier poor location. I calculated it out and I assume I could aquire 3, maybe 4, properties all in this way with my invstors capitol. If I were to continue this process after having used all of this ivestors money I would need to find other outside sources of money and repeat.

Or I could do the BRRR stategy and purchase a single property in a nicer area of town with all most all of my investors money, rehab it, rent it, and refinance it to get my investors money out. In this situation however, I am faced with the chalenge that once the properties are refinanced (at a the higher value) the monthly payemnt on the loan will be so large my cashflow will be $100 or less. The properties that fit this description are not only low cash flow but they have been very hard to find over the past few months where as properties that fit the first senario are not hard to find at all. Additionally, I will have to use a portion of the investors funds for the down payment on the mortgage. BUT, I now have a majority of my investors money and can go do another house in a similar way.

My "problem" is cashflow, I am having a very difficult time desiding if I should opt for more cashflow from the lesser quality properties that will not appriciate much or do I opt for less cashflow, nicer properties that will appriciate, pay my investors back a majority of their money and have the ability to do another property?

My investor is a family friend who is not concerned with getting a large return on their money immediatly. We have agreed on an interest rate that is good for him and great for me.

I have considered the fact that I could always go with my first or second option and find more investors but Im very new to this and dont exactly know if that is a good idea to involve more poeople. 

Thank you in advance!

@Chris Mason Thank you very much. Im primarily concerned with the closing cost difference when compared to the traditional mortgage loan. 

Just for clarification, I will pay closing costs the first time, when I purchase the property with the line of credit and I will pay a second time when I finance it with a traditional mortgage. 

@Chris Mason Thanks for answering so quickly. Like you said I will be a "cash buyer." However, I do plan to get a traditional mortgage in the future, not immediately. 

I intend to have the closing costs for the property paid in full with my line of credit but my primary question is this:

When I am running my numbers for a property what amount should I allocate towards closing costs? Specifically, do those closing costs change when I am an all cash buyer or are the closing costs for a property the same no matter the type of financing? 

Hey, just wondering if there is a difference in closing costs when you purchase a home with all cash from a line of credit versus when purchasing a property with a traditional mortgage.

I dont know if it makes a difference or not but the line of credit is secured with assets. 

Thanks in advance!