Newbie from Pittsburgh looking for advice/feedback on what could be my first deal. It's a duplex, 2 bed/1bath either side, five min from my house. It's a lower income neighborhood in a nice middle class area. Low crime, good school district,low vacancy rates, easy access to main highway to downtown (25- 30 min drive) walk to grocery store. but no public transit. i found it on Zillow, no interior photos. it was a foreclosure, but now owned by Deutsche Bank National Trust. waiting to hear back from realtor who seems to be on a lot of foreclosure listings. So here are the numbers.
total rent $1500 (according to rent o meter and my brain)
Zillow value est $150K
county assessed value $110K
taxes $428 yearly
50% rule $620 cashflow with mortgage $750 w/o ( could possibly pay cash)
rehab cost- no clue, lets say 25K?
This looks good on paper, but maybe too good to be true. Seems like a great first investment.
So whats the worst case scenario?
Is this a no brainer?
what else do i need to know besides rehab estimate and is it occupied,current rent and utilitiy costs etc?
And of course, what would you do?
Thank you in advance for any and all feedback!
Knowing nothing of the Pittsburgh market ....
Assuming an all-in cost of $61K and a monthly gross of $1500, this seems almost like a no-brainer to me.
Now, of course we have to factor in true quality of neighborhood and tenants. Whether or not a newbie landlord is able to self-manage if the neighborhood and tenants are difficult? Are there any outstanding city assessments (for unpaid water, garbage bills, etc)?
It will be interesting to see what others have to add.
Also a newbie here just trying to learn how to pick spaces and the basics for holding a multi-family property. This may be a dumb question, but how did you find a landlord to manage the building/tenants for you?
I just saw this on Zillow yesterday, I’m excited to get started but I’m new so ... but if I bought this I would be the landlord and for the time being I would manage it. So I accounted for the cost of property management.
Randy, I don’t know about outstanding bills. Just know the taxes are paid. It’s almost my neighborhood but crappier. Not a war zone or anything just a little poor. But also much nicer homes and values in the same zip. I would be a newbie landlord. But determined to follow all the best advice on tenant screening and being a good landlord etc.
also I’m pretty handy at home improvement like painting and floors and light carpentry, power tools etc but willing to sub out the harder stuff.
Thanks for your input!
@Laura Srocki sounds too good to be true. Its most likely in a low income high crime area. Or maybe you just got lucky. If its not on the MLS yet then it may be some sort of auction. Could be a sheriffs sale , or other site that may list the property but its not yet available. If its that good of a deal then move forward carefuly and have your cash ready. Chances are the bank wont accept financing.
Thank you Alex, I’m in West Deer and this is in Russellton. It’s a little run down but not high crime. And it’s in mls. I contacted agent through Zillow and they also sent me an email about financing info. So I guess that means financing is available? If financing isn’t available and I pay cash does that mean I don’t have the option to back out if an inspection shows the rehab cost is way to high? Thank you for responding 😊
@Laura Srocki What would be the after purchase repairs be? Any chance you can get a clearer picture on those? That would really be my main concern. Foundation issues? or anything crazy expensive? Don't know ....
Other than that ... looks good.
Good Luck !!!
I have no idea, if there’s no interior photos on Zillow, either its trashed or slobs live there and they can’t get good pictures. hope to find out over the weekend. I guess if the rehab cost and purchase price still gives good cash flow then it’s a pretty safe bet.
I just talked to agent, he thinks it’s already under contract and it needed a lot of work, the former owner turned it back to single family! So that’s crappy.
@Laura Srocki Sorry to hear that one didn't work out. From what I have been seeing (in Washington state) if it is anywhere near as good of a deal as that one looked like, it will be gone within a few hours.
If you come across another one I would....
1. Work with an agent that is able to show you properties TODAY, not later in the week, or this weekend. Good deals are gone to full cash offers in hours in most markets in 2018.
2. Be REALLY critical of your numbers - Don't trust Rent-o-meter. It is an OK first guess, but be very careful to trust it. I would do your own research on the area based on Craigslist rent adds (or whatever is the most used online site for rents in your area) and then call a reputable Property Management company. I have found them to be VERY knowledgeable and very willing to help you understand what it would really rent for in that neighborhood - they are trying to help you so you'll bring your business to them, which you might want to after you have a few units. If you're going to be doing a lot of investing, I think the cost of a BP Pro membership is worth it just to use their calculators (unless you are an Excel junky :) Use the BP calculators and try really try to get good numbers for each sectoin. A few % off on a vacancy number can take out a lot of your cash flow.
3. As a new-investor, you should probably follow @Brandon Turner 's advice and double your rehab budget until you have a really good sense of what rehab actually costs in your market. This SHOULD leave room for some pretty major mistakes in estimates.
4. Go to your local BP meetup and try to find another active investor who would let you shadow them on a deal (go to look at properties with them, etc) even for only a day or two. This could be the most valuable time you have ever spent learning about investing.
Thank you so much Justin! That’s a great idea to call a property management for rent, it does seem pretty accurate from what I know. But still. I like to do as much research as I can whenever I do any project, like home improvement or the “hobbit house” I built last summer. I didn’t think I was about to make a deal this soon but the price and location seemed worth looking into.
I haven't found any meet ups around here but the are several REIA meetings and in my calendar!
Thank you so much for taking the time to respond. 😊
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