All Forum Posts by: Sudhir N.

@Alan My properties are in 19121 and 19122 zip codes

Hello,

Greetings! I presently have a few multifamily properties in Philly. I have been with a property mgmt. company for the last 6+ years and thinking of managing on my own. The people are nice, competent, but the cost-value equation is no longer justifiable. I presently handle all the maintenance work working directly with the tenants. I use my own network of vendors because the company's in house rates are exorbitant and the contracted vendors mostly unsatisfactory. The tenants use the mgmt. company's portal for opening work orders which get forwarded to me. The company helps with the rest of the stuff like rent collection, late payment follow up, advertising vacant units, showings, tenant screening, leasing, renewals, reports, and evictions (which is a corner case). They also provide an after hours phone line to report emergencies. I think I can hire a realtor for some of the tasks above (showings to leasing) and an attorney for late payments follow up and evictions. The one critical area I am struggling to line up help with is after hours emergency support. I searched up companies offering ala carte mgmt. services and did not find any in Philly. Any suggestions? If you also have any references for a legal service for sending late payment notices, evictions, etc., please share.

Thanks!

The wild card in Philly is the Office of Property Assessment and their crazy assessments. The property values could swing wildly destroying any rental economics. They come up with values unhinged from realities of the market. For that alone, Philadelphia investing is a path to financial disaster. Just stay away! Philly is not worth it. The city is delusional to levy such high taxes as if it's Seattle, Miami or Austin.

I live in CA and have properties in Philly since 2018. I wouldn't recommend Philly for a variety of reasons. No population growth, no economic surge and rents have stayed flat. Expenses are notoriously high even putting CA prices to shame. Either you should have great cash flow or high appreciation. I hoped Philly would provide a blend of both and it hasn't. I am hands on micro managing maintenance issues. Yet, I barely survive thanks only to the pandemic era low interest rates and tax abatement. The supply of new construction continues to flood the market suppressing rents massively. As an example, I could get $1700 for a 2 bed/ 2 bath near Girard College back in 2018. Fast forward 6 years you still can get units for the same price or lower. 

Hi Stuart - My investments (primarily multifamily dwellings) are just outside of Temple's student housing zone, near Girard. I don't get the student population at all. My tenants are professionals for the most part. Yet, I have seen absolutely no rent or property appreciation. In fact my average rent/unit is exactly what it was 5 years ago. Philly has seen no meaningful population growth in the last decade or so. In fact the population has only declined in the last few years. It's not a Miami or Austin or what Seattle once was by any stretch of imagination. There is a never ending supply of new construction units as well. Often it takes one desperate investor/ owner to drop the rent by a few hundred $ to get the ripple effect going. Property assessments are out of whack. Tradesmen charge as if it is the most expensive city in the world. My investment goals are modest (say, 9-10% IRR over a 7 yr period) and I am convinced Philly will not generate that. I am very data driven and I simply don't see Philly as an attractive destination unless you are -- local, hands on, DIY, don't have prop mgmt expenses, don't pay leasing commissions, get preferred rates from lenders, know a guy who does handyman work, etc. There could be a very few pockets like you describe, but that's like less than 10% of the city. I have 7 years of data from multiple properties and pore over a ton of new listings literally every day and I don't see a pathway to rental investing success in Philly.

I have been operating in Philly since 2018 and it's a market that has seen no rent or property appreciation whatsoever. But property assessments have ballooned recently. Specifically for multifamily properties. The supply of new units is overwhelming and demand is just not there. I am hands on managing remotely and only due to the low interest rates locked in during the pandemic and tax abatement I am making some money. Prop taxes could quadruple once abatement ends. Even if you try to sell in a few years with 4-5 years of abatement left, there won't be any appreciation. As someone said earlier, show me the math and I will advice accordingly. 

Reviving the thread for some follow up. I am NOT on W2 income and spend full time investing and monitoring properties. What activities would count towards qualifying as a real estate professional? (I understand that searching for properties to invest in does not count) Presently I have units managed by a property management company. Yet I contribute in following ways. Do these tasks apply? I read on a different forum that the presence of a property manager negates any work I might do. But I can't find any IRS guidance on that.

-- Market analysis to determine rents (when units churn and also renewals), security deposit and last month rent requirements

-- Work with leasing agent/s to suggest rent changes, incentives/ promotions to enable units to be competitive (if there is too much supply)

-- Review each and every maintenance work order and shop around for contractors / service providers if necessary. Also suggest alternate solutions, if applicable. This turns out to be majority of the work that I do

-- Pay utility bills and mortgage monthly

-- Property tax payment (if not escrowed), city trash collection fees (once or twice a year)

-- Coordinate annual maintenance of sprinkler system certifications and fire alarm monitoring contracts

-- Review owner statements from prop mgmt. company every month to identify inflated or incorrect charges. Also for correctness

-- Property related tax preparation/ filing

-- Plan and execute capital improvements

@Jai Reddy, @Natalie Kolodij, @Ashish Acharya - My sincere thanks to all of you for giving your opinions. I now understand what constitutes as qualifying tasks. It is clear I am nowhere near meeting the requirements, though real estate investing (but not actively managing) is my full time job. I spend no more than 5-6 hrs. / week on property related tasks with the rest handled by the property management company.

I presently invest in multi family properties in PA. I look for properties, buy and hand over to a property manager for day to day management. I spend considerable amount of time setting rents for new leases, renewals, reviewing and approving maintenance requests, paying monthly and annual bills for each one of those properties. I spend substantial amount of time looking for and identifying properties to buy. I don't have a full time job. Under these circumstances do I do enough to qualify as real estate professional? I am reading that "looking for properties to buy" is not essentially a qualifying task. If I exclude that activity, I don't do enough to meet the 750 hours per year threshold. Please opine.

I live in CA and my business partner in PA. We are looking to buy a 6 unit multifamily property in PA that'd come under commercial mortgage. How would we create a single purpose entity / LLC that will have only the property as asset? Should it be Delaware/ Nevada based kind of LLC that would have both me and my partner? Or create one in PA because that's where the property is? What are the ways to set one up? I am venturing into commercial mortgage space for the first time and hence this fundamental question. Thanks for being generous with your time and knowledge.