Beginner to real estate

Starting Out
5yFollow

Beginner to real estate

Justin Walker
Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes

Hello everyone, this is my first post on BP and I hope to post more. I am a full-time college student in Scranton PA and I work part-time. Through investing in stocks and saving I have accumulated a little over $7k which I plan to invest in real estate.

Recently my neighbor passed away and their family expressed that they do not want the house and are willing to sell it when the time comes. It was originally a 2-unit apartment but was converted into a SFH long before I was born. The house has been well kept and currently is valued around $95k. Because of a family-like relationship and their desire to get the house out of their possession, I could definitely get a deal for 50k or less. However, there are two problems that I face:

1) I would like to convert the house back to   2 units. 
2) They have an in-ground pool in their backyard. 

Would this be too much on my plate for a first time investor/home-buyer? (I would be willing to house hack with this property) 

I don’t know the rules about pools for rental properties so would I have to fill it in because of it being a potential liability? 

4Reply
109 views

Most Popular Reply

Bob Derwin
Investor · Mountaintop, PA · Member since 2013 · 110 posts · 57 votes
5y
Another thought, instead of jumping right into converting it back to a double, live in it, and take on a couple of roommates from Scranton U to start making some money.
4Reply
See this reply in the discussion

31 Replies

Jump to latestLatest
  • Chris Tarpey
    Investor · Jacksonville, NC · Member since 2018 · 193 posts · 107 votes
    5y

    Congrats on getting your first BIG lead!

    In response to your question, converting the home back into a duplex can be expensive and time intensive, depending on how much they altered the original layout. Moving a few walls aren't too bad, however if they took out kitchens/bathrooms and reworked electrical and plumbing, you are looking at a bigger bill.

    The pool can be good/bad. It is an attractive amenity for a rental but you also incur maintenance costs. I am not too sure about the potential liability, but there are certain checklist items you need to hit (at least in some states) regarding a fence around the pool. Items like this are things you want to be aware of ahead of time so you can figure out the cost to make everything up to code.

    It all comes down to your comfort level. If you plan to live in the home/househack, it might afford you more time to make some of the repairs on your own, or save up more money and slowly work through it while you live there. This would also allow you to take advantage of an owner occupied loan, so you can put a small amount down and still save up do make the upgrades/changes to the property.

    Best of luck!

    1Reply
  • Kyle Kerekes
    Investor · Scranton, PA · Member since 2015 · 36 posts · 28 votes
    5y

    Hey Justin, awesome to see more young people in Scranton interested in real estate.

    Sounds like you have a nice potential deal - other than the conversion back to a 2 unit, what repairs/improvements does the house need? Do any major items need repair/replacement? (roof, foundation, mechanical systems, etc) If the current as-is value is accurate at 95k and you can buy for 50k you have quite a bit of room to play assuming there is even more room for adding value. I would put a few different scenarios together and run numbers to see what might work. 

    One example scenario might be getting an owner-occupied loan with 5 or 10% down, living there during the conversion (assuming you're comfortable with that), and then refinancing post-construction to pull the equity and put into the next deal. Another angle entirely could be wholesaling it if you can get such a steep discount.

    There isn't going to be any 1 specific way to do the deal that is "right" or "wrong", it's more of a matter of what you're comfortable with and capable of with the resources at your disposal, which is one of the coolest things about real estate.

    Hope that helps a little, feel free to message me about Scranton-specific stuff. I'm no veteran yet but I know a couple of them!

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Chris Tarpey thank you for your feedback! I appreciate everything and I will take a deeper dive into figuring out the potential rehab costs

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Kyle Kerekes thank you for the advice and awesome insight. I will absolutely try to figure out some cost estimates and I will run the numbers with those scenarios.

    I hope you wouldn’t mind if I reached out to you in the future. I’m sure there will be questions I have regarding real estate in Scranton. Thanks again for your advice.

    0Reply
  • Bob Derwin
    Investor · Mountaintop, PA · Member since 2013 · 110 posts · 57 votes
    5y
    Another thought, instead of jumping right into converting it back to a double, live in it, and take on a couple of roommates from Scranton U to start making some money.
    4Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Bob Derwin I really like that idea it’s a solid win win situation. I might actually do that. Thanks for your insight.

    1Reply
  • Lizbeth Vaquero
    Investor · Scranton, PA · Member since 2020 · 30 posts · 6 votes
    5y

    Hi Justin, you have a lot of options... off-campus housing for students, airbnb , househacking , brrrr-ing just to name a few. Lots of possibilities for you.  The inground pool can be filled up no problem, we've done so many in the area. Let me know if you have questions.

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Lizbeth Vaquero I have definitely considered those options and I like the idea of off-campus house hacking. Thank you for reaching out and if any questions come to mind I’ll be sure to ask.

    0Reply
  • Bryan Smith
    Rental Property Investor · York, PA · Member since 2016 · 39 posts · 11 votes
    5y

    @Justin Walker If I was in your situation I would proceed with the house hack option and look into renting out some rooms to friends or fellow students.  It doesn't sound like you have ample reserves for what could be a costly rehab turning the property back into a 2 unit.  Sell the property after you have lived in the property as your primary residence for 2 years and avoid capital gains tax.  I would view this as a 2 year flip with some upside potential if you purchased the property with as much equity as you have stated.  Please see your CPA for tax advice.  I wish you the best on your real estate endeavor.  

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Bryan Smith thank you for your advice. This seems like the wisest decision and definitely easier on my capital. What do you think about getting a HELOC to acquire other properties before selling?

    0Reply
  • Michael Rice
    Member since 2020 · 12 posts · 8 votes
    5y

    Insurance premiums could be higher with a pool. 

    0Reply
  • Antonio CuccinielloPro Member
    Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes
    5y

    @Justin Walker See as a beginner, making things more difficult for ourselves, you can miss out on some great opportunities, because we are looking for home runs.

    What's wrong with it being a 50K, single family rental for now. Getting you started ASAP. Have it in the lease the tenant cannot use the pool. (Consult your lawyer on this for sure)

    But I am trying to think, how can you simplify this this way you can get started ASAP!

    732-402-6988
    1Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Antonio Cucciniello you’re right this deal could be a simple way for me to learn the ropes of being a landlord while still cash flowing. I think I felt too greedy and wanted the benefit of collecting two rent payments. Thank you for the advice it helps greatly.

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Michael Rice good point. I will have to consult an insurance broker to get the details.

    0Reply
  • Zakariya Odowa
    Wholesaler · saint cloud · Member since 2020 · 2 posts · 0 votes
    5y

    @Lizbeth Vaquero I had a personal question I was thinking of doing a subject to an a property that is a 15 year loan after I take over the payments can I turn that home into a 30 year ?

    0Reply
  • Blaine Alger
    Investor · Waco TX / Conroe, TX · Member since 2017 · 376 posts · 228 votes
    5y

    I would say go for it. 

    Don't try to talk yourself out of the deal. If the numbers make sense and there is some cashflow, pull the trigger. The probability of failing is very high but if you never fail then you won't learn.

    Obstacles to overcome:

    1. Financing

    To get a mortgage from a bank might be tricky given your age but with your part time job, you might be able to fins some money or you could get a parent to cosign. Without bank financing your other option would be to convince the owners to owner finance the property to you which is very probable given your relationship with them. My best advice would be to go talk to several lenders in your area and just see what is possible, they will have a better idea of what you are capable of.

    2. Converting back to a duplex

    You will need to check with local zoning restrictions to make sure that the property hasn't been rezoned since it was converted. Then you will need to find a GC you trust  and that is capable of the work. I think finding a GC is the hardest part of the RE investing puzzle and many experienced investors continue to struggle with it.

    3. The pool

    You already had a sense that the pool would be a liability. Personally, I would probably keep it there while I would be living there (if my insurance allowed) and then once I moved out, I would fill it in. I would having a harder time sleeping at night having the pool there while I was not on site. Additionally, the pool just presents added maintenance expense and cuts into your cash flow. 

    Best of luck to you and feel free to reach out with any other questions. I am always glad to help.

    -BA

    0Reply
  • Rob Falcigno
    Member since 2021 · 5 posts · 2 votes
    5y

    First thing to notice is if there are 2 electric meters on the outside of the house ? 

    Secondly - did the homeowner have the town / city come in and do a final inspection on the conversion back to a single family ? This would be on file with the town if they did it the right way.

    If the answer to the first question is no and the 2nd question is no - you are good to go. 

    I personally went through this exact scenario so if you have questions feel free to DM me

    Thanks !

    0Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    5y

    @Justin Walker Welcome to BP!!! 

    First, I don't think it will too much on your plate, as you have to do is research, learn and ask for your help just like you are doing right now. 

    As for converting back to 2 units, I totally get that rationale but you may have to pull permits and/or spend more money to rehab the property, long!

    Personally, you can still house hack the property AS-IS with roommates. Of course, this is the path of least resistance, and sometimes in life, it is a very ok path to take. Believe me!

    As for the pool, you will have to be ready for maintenance and it's associated costs and the rules in your area as you mentioned. 

    At the end of the day, you are getting a property for 50 cents on the dollar, you can even ask them if they would do owner financing. Now, if that happens, this is what we call a homerun!!! Go get it! 

    Good luck and keep asking questions! 

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Blaine Alger these are very good points and I appreciate your honesty and realistic perspective. Also I will definitely look into owner financing and see if the option is available. Thank you

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Rob Falcigno sounds good and thanks for reaching out. If I have any question I will send them your way

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Ola Dantis If I can secure the deal I think I will leave it a SFH. Renting to some roommates while living would be an ideal situation for me. The only issue seems to be the pool but like you said I will have to ask questions and figure out the best option for it. Thanks for the advice it's greatly appreciated.

    1Reply
  • Bryan Smith
    Rental Property Investor · York, PA · Member since 2016 · 39 posts · 11 votes
    5y

    @Justin Walker Personally I love having the equity in property available via a HELOC. Always run the numbers to make sure the next purchase meets the criteria you are looking for and rely on professionals in their respective fields as a resource for anything you are unsure of during your real estate investing journey. Good luck.

    0Reply
  • Marlen Weber
    Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
    5y

    Hello @Justin Walker. Welcome to BiggerPockets. So sorry to hear about your neighbors passing. I hope the situation with the house ends up working out well. 

    0Reply
  • Patrick D. Calvey
    Rental Property Investor · Scranton, PA · Member since 2018 · 4 posts · 2 votes
    5y

    @Justin Walker love the hustle! If I were in your shoes, I would house hack.

    After some experience being a property owner and building your capital, then you can explore your options from there...

    Go Royals!

    0Reply
  • Justin Walker
    OP
    Rental Property Investor · Scranton Pa, 18505 · Member since 2021 · 17 posts · 9 votes
    5y

    @Patrick D. Calvey house hacking looks to be my best option at this moment and I most likely will. I like that it is an option to ease into being a landlord.

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free