Excited about my new project

8 Replies

Here are the nuts and bolts of it..... Scheduled to close in <2 weeks.

Duplex in the Germantown neighborhood on Philadelphia.

Purchase price 160k

Just appraised for 215k.

Needs about 40-45k in rehab work total. Mostly cosmetics and exterior work.

My estimated ARV is 250-260. I think that is conservative but comps are hard to come by.

Apt 1 should rent for 800-900.

Apt 2 should get 1200.

My partner is covering the acquisition costs using a conventional loan (25% down) in my name. Just under 50k.

I am covering the renovation costs.

I am responsible for managing the rehab, placing tenants, and ongoing property management.

The plan is to split the monthly cash flow once the property is stabilized and hold it for 1-3 years. Then sell after the 1 year mark to avoid the ordinary income tax rate. The backup exit plan would be to hold for a longer term.

For those of you in other markets these numbers won't look great. But for a good neighborhood in Philadelphia it is pretty hard to find a property that meets the 1% rule these days... So I'm pumped!

@Max Tanenbaum by "partner" are you referring to a financial partner or like a spouse? I only ask because if they are a financial partner you are taking all the risk i.e. acquisition loan in your name and renovation costs coming out of your pocket. there is nothing holding your financial partner into this deal and they are not facing any risk. If you mean partner like a spouse well thats married life for ya lol jk. but seriously if they are some sort of financial partner who has no skin in the game id be worried right about now.  

Originally posted by @Matt Bacenet :

@Max Tanenbaum by "partner" are you referring to a financial partner or like a spouse? I only ask because if they are a financial partner you are taking all the risk i.e. acquisition loan in your name and renovation costs coming out of your pocket. there is nothing holding your financial partner into this deal and they are not facing any risk. If you mean partner like a spouse well thats married life for ya lol jk. but seriously if they are some sort of financial partner who has no skin in the game id be worried right about now.  

 It is a financial partner but also family. I'm comfortable with the risk. I found the deal and brought it to them for the funding. The skin in the game is how I show my confidence in the project. Honestly I could pull it off myself but I'd have to use multiple HELOCs and I'd rather partner up then over-leverage. 

But yes, thanks! I would structure it a bit differently and have a very detailed operating agreement/LLC if the financial partner was that and nothing more.

Originally posted by @Matt Bacenet :

@Max Tanenbaum by "partner" are you referring to a financial partner or like a spouse? I only ask because if they are a financial partner you are taking all the risk i.e. acquisition loan in your name and renovation costs coming out of your pocket. there is nothing holding your financial partner into this deal and they are not facing any risk. If you mean partner like a spouse well thats married life for ya lol jk. but seriously if they are some sort of financial partner who has no skin in the game id be worried right about now.  

 Well there is something holding them to this deal... Their 50k invested in the down payment!

Originally posted by @Max Tanenbaum :

Here are the nuts and bolts of it..... Scheduled to close in <2 weeks.

Duplex in the Germantown neighborhood on Philadelphia.

Purchase price 160k

Just appraised for 215k.

Needs about 40-45k in rehab work total. Mostly cosmetics and exterior work.

My estimated ARV is 250-260. I think that is conservative but comps are hard to come by.

Apt 1 should rent for 800-900.

Apt 2 should get 1200.

My partner is covering the acquisition costs using a conventional loan (25% down) in my name. Just under 50k.

I am covering the renovation costs.

I am responsible for managing the rehab, placing tenants, and ongoing property management.

The plan is to split the monthly cash flow once the property is stabilized and hold it for 1-3 years. Then sell after the 1 year mark to avoid the ordinary income tax rate. The backup exit plan would be to hold for a longer term.

For those of you in other markets these numbers won't look great. But for a good neighborhood in Philadelphia it is pretty hard to find a property that meets the 1% rule these days... So I'm pumped!

 What is the area like? Is it a low risk area with ok schools ?

Originally posted by @Lana Lee :

 What is the area like? Is it a low risk area with ok schools ?

 Lana, your name shows you're from Philly so you must know a little bit about the Philadelphia school system... Luckily that doesn't seem to put a damper on the real estate market.

Is this in West Germantown or East Germantown?  I’m just getting into investing in and around Philly and have been looking at MFH in that area as well. As with many neighborhoods in Philly, seems like it’s somewhat block by block so wondering if there’s a particular part of that neighborhood you focus on when looking for opportunities.  Any insight you could share would be great. Congrats on the deal!

Originally posted by @Eric Seo :

Is this in West Germantown or East Germantown?  I’m just getting into investing in and around Philly and have been looking at MFH in that area as well. As with many neighborhoods in Philly, seems like it’s somewhat block by block so wondering if there’s a particular part of that neighborhood you focus on when looking for opportunities.  Any insight you could share would be great. Congrats on the deal!

 This is in West Germantown. I too am wary of East. The perception is that crime is much worse over there on the East side. The stats say its about the same. However, there is much more development going on West of Germantown Avenue, and home values are a lot higher on the West side.

Hey Max how did this project work out for you? Any updates?

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