All Forum Posts by: Ethan Giller

When a property is bought/sold in Philadelphia, there is a 4% transfer tax (1% state & 3% local).  Typically this is split 50/50 between buyer and seller but it can be split in any way that is agreed upon by both parties.

Holding costs are an annual property tax of 1.4% of the assessed value which you can look up here: property.phila.gov.

Use & Occupancy tax is only assessed on commercial properties so you don't have to worry about that for a residential rental.

Wage tax is only for W-2 income so you don't pay that for residential rental income.

You will need to pay NPT and BIRT, which you file online at the end of the year based on your rental profits, you can learn about those here:
http://www.phila.gov/Revenue/businesses/taxes/Page...
http://www.phila.gov/Revenue/businesses/taxes/Page...

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Chante, you should talk to a local title company, they can tell you if you actually have clear title (there are often things that get missed by the firms that process the sheriff sales, plus if it was a tax sale you generally can't get title insurance for at least a year), and can also handle the resale of the property.

Welcome to BP!

The closing process in PA uses a title company so you don't need an attorney for that end of it.  You would generally only need an attorney if you were drawing up or reviewing a context-specific contract, not just a regular agreement of sale.  But if you are looking to do your first investment deal, I would strongly advise you to first connect with a few local experienced investors or agents who are used to dealing with investors, and learn directly from them.  In my opinion, you will make it much harder on yourself if you try to go it alone using free templates and unknown home inspectors.

It sounds like starting on day 61 she is in breach of lease, and it is only at that point that you can start the eviction process, which takes 6-8 weeks in Philly from start (filing the paperwork) to finish (sheriff comes out), or longer if it the case is postponed or reopened.  Unfortunately, it's not as easy as just having her arrested for trespassing.  Consider yourself lucky that the tenant and caseworker are in communication with you at all about this ahead of time, and it sounds like there is a relatively definite end date (i.e. they are not asking for "just another month or two"), and that Section 8 will/should pay you for the extra day as well.

Make sure that you close with a local title company who will offer you title insurance not just a title search, almost every time I've purchased something from auction.com there have been title issues that the bank didn't want to pay to clear but I've insisted, and they've relented.

You either have to get inside the property before bidding, or you need to bid assuming you'll need to do a full gut rehab, or you need to gamble a bit.  But even if it's been vacant for years and there is some mold, that doesn't automatically mean full gut rehab... you might need to replace some drywall if there was water damage but the electrical, plumbing, HVAC, etc. should still be mostly good especially if it was winterized.

Buy J. Scott's book on this site about estimating rehab costs, there's no way to just ballpark a budget without knowing scope of work... you could be looking at $10/sq ft for mostly cosmetic work with builder-grade finishes and low-end appliances (i.e. $15K budget) or $100/sq ft for full gut rehab with luxury finishes (i.e. $150K budget).  Your costs will also vary depending on if you are looking to live here yourself, or rent it out, or flip it.

Good news is that it's fairly difficult to be "screwed for life" from just a single real estate purchase. ;-)

Loan balance of $27K with 60 month period and payments of $450/month, I calculate that as 0% interest.  If you're willing to lend on those terms then I'll take you up on it.  ;-)

In all seriousness, unless that sale price is way above market value, you will be much better off continuing to just rent the property.  If the sale price is close to market value then you should charge interest just like a bank would.  But only sell with seller financing if you can't sell it any other way or you are getting a large premium, and even then you should structure it as a lease with an option to purchase (i.e. deed stays in your name until closing).

I agree with @Thomas S., you are not buying it cheaply enough to justify the added expense of changing out the heating system no matter which approach you take.  Especially for your first deal.  Just use your contingency period to provide an AOS addendum with a take-it-or-leave-it $20K discount, less additional discounts for the rest of the items that came up in the inspection, and walk away otherwise.  That's assuming you are still comfortable with your contract price after all repairs, which you might realize is too high after all the feedback on this forum.

If you did leave the heating as-is then the entire house will be on one thermostat which you could control either as an owner-occupant or with the thermostat locked in a cage.  But you will then get tenants either complaining that the property isn't being heated enough, or else complaining that the pass-through gas bill is too high because you were keeping the temperature up to high - it's a total lose-lose.

$15K-$30K is definitely what I would expect to pay for 3x new gas forced air units installed with permits, with all duct work and soffits (framing, drywall, painting).  You can't just easily add 2x new boilers to the existing system because you would need to change how all the radiator piping is run (i.e. cutting open walls, replacing piping, drywall, paint).

I agree with @Troy Sheets... but only if your property is in a true A/B neighborhood, because you're most likely looking at a $20-30K expense for 3x new forced air with A/C and ductwork.  If you are in a B-/C/D area then I would either use the boiler for one unit and electric baseboard for the other two, or just go all electric baseboard.  Then leave it up to the tenants to get and install their own window A/C units if desired.

Feel free to private message me if you want a second opinion on the area and the deal in general, I own a lot of small multi-families in Philly.

Congrats, sounds like you have a great starting point to start your investing in Philly!

But personally, I would not personally recommend a mixed-use, ground-up construction project for your first investment.  Especially if you are thinking about combining three niche investment strategies into a single property (commercial, student housing, Airbnb).

You will most likely make as much (or more) money by selling the land to another developer who already is already doing new construction in that area and has a crew lined up.  Whoever you sell it to is likely to either a) have a crew lined up who can build much more cheaply than you can if it's your first time, or b) overpay because they don't know what they are doing.

Just my opinion of how to maximize your profit and minimize your headache.  Then take the money you get from the sale of the lot and do some smaller deals.