All Forum Posts by: Conrad Erb

National, I would say. "Aurora Loan Services LLC". Based in Colorado.

Hi Biggerpockets.

I'm wondering if you could give a "newbie" some advice on a property in Philadelphia.

I currently own an investment triplex (C+ neighborhood) and just purchased my own home (A- or B+ neighborhood).

I have an opportunity to buy a bank-owned/REO residential triplex (3-unit building) in a "D+" or type of neighborhood for $62k. I would be paying cash, and then looking to refinance later.

Comps are hard to determine, because the area is very block-to-block, but I think that if the property were fixed up, it would sell for closer to $90-100k.

I'm an athletic guy, and I feel comfortable walking around at night but wouldn't want my friends to live there.

Layout is one 2 bedroom apt, and two studios. Cosmetics inside are quite good.

Repairs of roughly $5k (stolen copper). I think that it could conservatively around $1400 in rent.

The property has some nice upgrades: new windows, old hardwood floors in good condition, and newer furnaces. Utilities (gas and power) are all separated, other than cold water.

By the 2% rule, this looks like a reasonable investment.

The neighborhood is slowly getting better, and the triplex is around the corner from the neighborhood commercial street with lots of pizza shops, salons, check cashing places and the typical things that you see in a lower income area. The property is a block from a high school and directly across from a large church that is very active and well maintained. Security and vandalism will be something that will be on my mind more than other neighborhoods, of course.

ARV on nearby SFHs is in the 40k-75k range depending on condition (lots of poor condition homes because people don't have the funds to maintain them),.

After accounting for taxes, maintenance, insurance, utilities, I think that the place would cash flow about $1000 a month - or $300 per door.

For someone who is still a "newbie" investor, what are the red flags I should consider? Am I missing something here? $62k from a bank just seems like a good deal and could be a good buy-and-hold investment.

I just don't want to get my butt kicked here in a rougher neighborhood.

Would love to get input from seasoned investors.

hi there.

I'm a first time poster and I'm looking for some feedback on a potential deal here on a triplex in the Philadelphia PA area.

This is my first foray into real estate investing, and I would like to know what I'm missing here and if there are any red flags.

(Why I'm buying a triplex - The idea is that in the first year, I would live in one of the units, and after one year, I would move out and rent all three units, so that I get the low owner-occupied rate the whole time. Yes, I checked with my lender about this.)

here are the numbers:

purchase price + closing costs is roughly 185k.
annual net rent is $24,500 (taking into account 7% nonoccupancy)

expenses: total $5k

taxes: $1500/annum (this is from the assessment)
maintenance: estimated $1850 a year (1% of the purchase price per year)
insurance: estimated at $1300
water and trash bill: estimated $1400

net operating income = $24k-$5k = $19k

debt servicing on 4.5%, 30 year fixed mortgage balance of $166k = $841 per month, and $10k yearly

cash flow = $19k (NOI) - $10k (debt servicing) = $9k per year cash flow

cash-on-cash return = cash flow of $9k/downpayment of $18.5k = approximately 53%

first year equity is $2200, so that's another 12% on my $18.5k downpayment, making the total ROI after the first year 65%!

this isn't taking into account possible appreciation and tax benefits.

So - these numbers look fairly healthy. Any thoughts? What am I missing here? of course, I'm not paying a property manager...I am the property manager for the first while :-)

about the property - a semi-detached home with three separate units. property looks to be in good condition, recently rehabbed, and in a neighborhood that is slowly gentrifying.

I would love to hear some feedback. I own my own business and have operated profitably for a few years, so I'm not a total idiot when it comes to how to be profitable and manage basic business operations, but real estate is both scary and exciting.

thanks!
youngreinvestor
philadelphia pa