All Forum Posts by: Richard Jahnle

@Kyle Koppenheffer - My guess is that your closing costs plus your down-payment (I am assuming 3.5% of the purchase price if you are going FHA) would total around $15,000 to $17,000 in Philadelphia for a $200,000 property. If it is a property with high property taxes and your home insurance is on the pricey size than maybe closing costs plus down payment could be around $20,000.

If your closing costs alone are $20,000 and you also have to pay the 3.5% down-payment, then yes, that does seem high for a $200,000 house in Philadelphia.

@Marissa Nadeau - The exclusion you are referring to, called the home sales exclusion, only comes into effect if you are planning to sell your home, as capital gains comes into play if you make a profit on the sale of your home when it is considered an investment property. Your plan seems to be to rent out your current home if you move, as opposed to flipping your house now or in the next few years for profit. If I am assuming this correctly, I don't think the scenario you are laying out would apply to you. 

This article explains the Home Sales Exclusion in more detail:

https://www.thebalance.com/sale-of-your-home-3193496

@Account Closed - There are probably pros and cons of either place. But it sounds like you have a good idea of the numbers you are trying to achieve with your house hack, so I would first try to find an area that gives you the best chance of hitting the cash flow numbers you are looking for. Maybe start with a location that is close to where you work as you will be living in the investment property. If you are trying to maximize cash flow in the initial years when you are living in the home, you can self manage, and you will have an easier time managing an airbnb rental if you are nearby

@Mike B. - Thanks for the advice - I think this is the method to go with if I run into knob and tube. I will reach out for agents info, thanks!

@Ned Carey - You are right, best to rewire the property right away if knob and tube. Going to make sure I am always accounting for that in my projections.

I am currently looking to purchase a rental property in the Germantown area of Philadelphia. These homes often have knob and tube wiring. I heard that less and less insurance companies are insuring homes with knob and tube. I reached out to a few insurance carriers, and the best I got was a company that said they could insure a house with knob and tube if it was built after 1940, but then when they looked up the exact property of the house I was looking to make an offer on (built in 1950), they said it was in fact not eligible to be insured by them. Does anyone know of a company that will insure a house with knob and tube in the Philadelphia area?

@Lana Lee - 1 point above prime rate, so as of now 6%. Every 6 months the credit union changes the rate depending on the prime rate. Most of the credit unions I spoke with lend at prime rate or even below prime rate if you go with a lower LTV, however to get the amount of credit I wanted I decided to borrow up to 95% LTV of my primary residence

@Kristy Pedersen I agree with @Jason D. to go with a HELOC over refinancing. It is quick and likely less expensive than refinancing. I recently went to a bunch of the credit unions in Philadelphia (American Heritage, Sun Federal, PFCU, Trumark Financial, PSECU, and Franklin Mint) to see the terms of their HELOCs. I eventually went with Sun Federal because they would lend up to 95% LTV. The only cost was paying for an appraisal. If you go the HELOC route at any of these credit unions, you should be able to get the $24-$48K you are looking for.

@Brian Silverman - If your criteria is to find a multifamily property that

1) Allows you to occupy the property and have a tenants cover all expenses

2) Is in a safe neighborhood in Philadelphia

3) Has a purchase price of around $300K

4) is a turn key or just in need of light repairs

(I am also going to assume that you will use an FHA loan, and will put 3.5% down. I think your best shot to pull off all the)

One possible way to at least come close to pulling that off would be to find a property like this:

https://www.redfin.com/PA/Philadelphia/105-Seville...

This property is in a safe area, has a listed price of around $300,000, and looks like it is in good condition. If you got a place like this for around $300,000, your fixed monthly costs would be your mortgage payment (~$2,000) and Water/Garbage (~$100) for a total of $2,100. You could manage the property yourself to eliminate property management costs.

You could live in the one of the bedrooms of the 3 bedroom unit and rent out the other 2 bedrooms to friends or people you found on Craigslist for $600 a room. Those tenants could also help by splitting the other utilities of the 3 bedroom (gas/cable/internet). Then you could rent out the 1-bedroom for $900. That brings your total income to $2,100, covering all of your fixed costs. 

This does not account for variable expenses (repairs, capital expenditures, vacancy) which can quickly cut into your income if you cannot keep the property rented (vacancy) or increase your expenses if the property ends up needing repairs.

Good luck with your investing!

@Megan McGinty - Yes, they were not protected classes. I used the advice given above and politely told them that I proceeded with another applicant, and one thanked me for letting them know, and I didn't hear back from the other one. 

@Ghazey Aleck

@Ghazey Aleck@Linda Weygant

@Steve B.

Ok great, I'm just going keep it simple with my response, and not give any more details. Thanks for all your input!