All Forum Posts by: Shawn Ginder

Matthew,

Welcome to BP! I am from Lancaster county just south of Reading, currently live in Europe, but this year made my first purchase in real estate in June. I spent about a 1 1/2 years studying the markets before I jumped in and was able to close on our first deal. 

When it comes to Reading PA beware!!! 

I was under contract to purchase an 8 home portfolio package deal from an investor in the Reading market. During the due diligence period I ended up talking to a Reading investor who has been in that market for over 20 years. Here is what he had to share. He said your best to stay out of the city rentals and here's the reason's.

First you will pay a 4% transfer tax on city homes, normally for most other areas in PA it is 2% transfer tax.

Second he claimed 70% of the cities population are Hispanic who for this city have a reputation of drug use, and have a track record of not treating property well and often will get behind on rents.

Third he claimed 80% of the city is on welfare, all the big companies have move out of the area making it a poor city economically to invest in

From our conversation I said where the 8 homes were located and they were all in bad neighbourhood's or blocks. In fact he owns a rental unit on one of the same streets and he said to me he would give the property to me for free if I'd take it. He has had difficulty renting it and when it sits vacant for any period of time it gets vandalised. He challenged me to ask the seller if the 8 rental units were current on the rent and low and behold only 3 of the 8 were actually current on the rent, yet all units were tenant occupied. After getting a run down of the condition of the city, I backed out of the deal.

He said 20-30 years ago when businesses where there the market was an entirely different situation, but it has turned over the years and not in a good way.

He did however recommend looking in the surrounding suburbs and this is where you can do much better. Just stay out of the Reading city he said.

I see you are from State College area. Why not check out that area? Or check out the Harrisburg suburb markets, again with Harrisburg city there are few areas that are good in the city, but the outer areas have a lot of great potential when you get into more of the residential suburbs of Harrisburg. 

Take some time to read some articles on investing in the cheeper rentals, it will give you some perspective. No need to rush into something, but again once you do your first deal it will be a learning experience all the way through. My best advice find people you can ask questions of that can give you advice like a mentor. Like I did with the Reading investor, his advice was freely given when asked, and it very likely saved me years of mistakes and losses. 

Let me know if can help in any other way.

Welcome to BP!

If you do move forward with moving up to the PA area I can recommend you check out the people at the following companies:

http://www.padeals.com - This is a turnkey company for Harrisburg area, I have attended their free seminar, they also have periodic free webinars to connect with them. They talk about the advantages of investing in the Harrisburg markets.

http://www.564rent.com - A Harrisburg Property manager we are using and doing a great job for us.

http://www.slatehousegroup.com - A property management group we are using and can recommend for much of south central/east PA

We are new investors, have two properties in Harrisburg and one property in York PA. 

However as others have mentioned, there should be a lot of great opportunities in TX!

Wish the best for you,

Feel free to reach out if you make the move up north.

I am a new investor also, we closed on our first deal in June 2016, we bought a total of three properties in two different towns, a total of 6 units. 

My advice would be no, it isn't worth it to buy in a bad part of town. From all the advice I have read on BP and other places best to avoid on your first one. Reasons: getting good tenants will be tougher, property likely won't appreciate much, risk tenant and owners safety when going to the property, as well as a few other reasons.

A friend of mine purchased a deal through a turn key company in PA, only to find out it wasn't a suitable part of town. What happened is couldn't get long term tenants in to stay, the place got messed up with each tenant costing funds each time to turn it over again. In the end he sold at a huge loss just to get out of investing.

We purchased our first two properties in the same city but a better part of the city, and are doing well with paying tenants. The properties are old, but I expect they will serve us well for the coming years. We got the existing tenants to sign a new 3 year lease and a new 2 year lease, that is the kind of situation you want as you begin. After you have some property and you want to explore the rougher parts of town by all means nothing stops you. 

When I was getting started I was looking at an 8 house portfolio deal in Reading PA, but after talking to a local investor it was eye opening to learn from him. He knew the seller, knew the properties she owned, they were way over priced and the condition of the city had dramatically changed in the last 20 years making it a bad market to invest in. His advice was ask the owner if the tenants are current on the rent, I did to discover only three tenants were current, I walked away from the deal. Long story short, you are doing the right thing by asking these questions, listen to others in the local area and filter what they say and make sure you know what you are getting.

In my journey I also looked at and had a deal under contract for a 5 unit in a not so nice area. In the end we let it go as the price was $85,000, but after extensive estimates from contractors had seen it would require another $85,000 worth of rehab. I am glad I let this go, as after taking ownership on our first ones we did buy what happened was the insurance company does there own inspection once you take a property and if they find things needing repaired they give you 30 days to get it fixed or they send a second notice with another 30 days to fix it or they will cancel your policy. The repairs on the property were minor issues and things we knew about. I am grateful that we didn't do the 5 unit at $85,000, as we would have had to do some major repairs for insurance on a time line no doubt.

Bottom line you got to run the numbers on any deal, make sure you cash flow after all expenses, and factor in repairs that will be needed if the property has deferred maintenance.

Wish you the best,

Shawn