Signup last week after stumbling upon BP.. been reading great articles and posts here.. *speaking of brain overload* :)
Completely new to RE investing and wanted to start with Single home rental property or a condo for student but still taking my time to educate myself before jumping in.
For all this time, I thought that Pittsburgh is quite bad for RE market, considering most houses don't appreciate that much.. but then today Yahoo posted that Pittsburgh is #4 in Flippers market!!
a little bit about myself:
- Graduated from Duquesne University (class of 98 - business major)
- working full time in IT field
- working part time as wedding photographer
- married to my beautiful wife, blessed with a 3 y.o son.
a couple quick questions to start with:
1. I'm wondering about the capital needed to purchase my 1st rental property,
can I refinance the home I stayed in (50K left in mortgage) instead of a HELOC? how much will the bank let me refinance?
2. I'm quite handy with tools, but never really make a major DIY project like tearing up a wall (but I could replace toilet/sink, put tile flooring, etc) - how important is the ability to fix almost everything in a rental place? most contractors I have contacted in the past are either: good work but very expensive or affordable but sub-par work... I'm afraid if I get into a terrible fixer-upper, I will spend a lot of $ fixing them due to my inexperience.
3. does an LLC be necessary for the 1st rental property?
4. Anyone from Pittsburgh with exposure to buying sheriff' sale willing to share info with me? :)
I have more questions, but I figure I introduce myself first (and do more research in the forum) before bombarding away with repeated questions.
Welcome @Yos W. !
I'm a buy and holder myself with some property in Pittsburgh. I think you'll do well there.
Hey @Yos W. welcome to the site! In answer to your questions:
1.) Each bank is different, but you should be able to do this as long as you qualify. You can probably find a bank willing to go up to 80-90% of your home's value. I actually like this better than a HELOC - cause it's a fixed rate loan, vs. an adjustable line.
2.) I think it's better NOT to know how to do too much. Because if you know how - you'll end up doing it all. It's better to be good at managing people. It's more scalable.
3.) I don't think it's ever too early for an LLC, but definitely talk to an attorney. You may be better off with a large umbrella insurance policy.
4.) Can't help ya there!
Good luck and glad to have you here! Be sure to set up your Keyword Alerts for "Pittsburgh" so you can jump into local conversations!
Hi Yos! I'm also in the Pittsburgh area. A great place for you to start would be attending an ACRE of Pittsburgh meeting http://www.acrepgh.org/ClubPortal/ClubStatic.cfm?clubID=1346&pubmenuoptID=18385 -- there you will find some great resources, along with LOTS of people happy to help you!
To address your first question, I don't know how much your house is worth -- it would be helpful for you to include how much the property is worth (in the future) when you provide information regarding how much is owed because you need to know both to figure out how much equity you have in the house. You can find some banks that will loan you over 90% of what your house is appraised for. I am partial to refinancing property to buy more for 2 reasons: 1. it tends to be a lower interest rate 2. I always thought that having a lien (that you put against your property) is a measure of security.
I think doing work on a home you live in is great, but in a property you are using as an investment, it's best to leave it to the professionals. Your time can be used more wisely -- if you make $40 an hour at your regular job, you are better off paying someone $15-20 per hour to get it done quickly. Even if you are quitting your job to do this full time, you are going to get the property onto the market faster ($$$$$) if you are managing the project, and it frees up your time to look for more properties/grow your business ($$$$). I think it is important to know how to do the work, however, as you should know if it is being done correctly and in a timely manner.
I think it is important to create an LLC. before you buy your rental property as what you save in taxes and filing/lawyer fees you will lose 10 fold should you get sued. I actually like the model of one parent company and clump together maybe 2 or 3 properties (depending on value, you may only put 1 property on an LLC) as a subsidiary or the parent company. On that note, if you have an LLC. make sure you are following the rules and not piercing the "corporate veil".
Best of luck,
**I am NOT an attorney, this is all my personal opinion**
@Yos W. -- hope that helped.
Welcome aboard, this is a most amazing find, there is so much to take in. Wish you the best of luck in your endeavors.
@Michael D. , I'm hoping Pittsburgh is a good place to start :)
@Brandon Turner , Thanks for the info. will check my bank. I also agree to not DO it all by myself, must start searching for a good handyman.
@Anissa Coury , the house was appraised for $135K in 2009, so I'm more than half way in equity. As for hiring professional for fixups, I think I have to do that for bigger jobs, but not sure if I will hire someone to manage the rental investment/property, I'm weighing the pro/con. As for the LLC and corporate veil, I'm not worrying too much on the creditor/debt law suit, but more toward the potential law suit from renter (been reading a lot of freaky renter stories). And yes, I'll attend ACRE meeting to get going..
@Terrell Perrin - Thanks! I'll need the encouragement to move on with RE investment.
currently looking at 2 possible RE:
a house across the street is probably going on Sherrif's sale next month, it was for sale in 2010-2011 but didn't sell due to the high asking price and a tree growing 10 inches away from the house (probably the root hits basement wall).
a 1 bedroom condo near university, located under a 2 bedroom condo (so it's more like the basement with separate entrance). no garage, just 1 assigned parking lot.. maybe there's a condo fee.. price at 80-90K, which probably NOT a good rental property considering the rent might only be around $650-700
First off, you're on the right path!
Regarding the HELOC, be sure to run your numbers thoroughly if you're planning to use it to support part of your investment...the downpayment for example. I like to think of this as financing almost 100% of the property...because effectively that's what you'll be doing. Just make sure the ppty cash flow can support the debt service necessary for both the primary lien and the 2nd lien (the HELOC).
On the LLC, I started an LLC when I began. Two years later I wish I did not make this move. Why? Because the financing terms are advantageous for an individual vs. a commercial loan (comm necessary for LLC). Moreover, I bought residential units...why do a comm loan?
Good insurance is the ticket. I am in the process of buying my next investment ppty in my own name instead of LLC for the reasons mentioned above.
Best of luck
@Yos W. , yeah I was worried about a renter suing (most people see landlords as a gravy train). If you see me at the next ACRE meeting say hi and I can make some introductions for you (there is a banker who lends at over 90% -- and he attends the meetings.)
Welcome Yos. Hopefully, I'll see you at the next ACRE event.
@Yos W. ,
If you need a Pittsburgh Real Estate Attorney, here is a link to his site:
I do NOT work for, or receive any compensation for recommending this Attorney.
@Raymond B. Thanks for the link. I'll check them :)
Like Yos W., I'm new to investing in Pittsburgh too. Any idea on whether one needs a business license to buy a rental property in Pittsburgh? Some states require one. Thanks.
I was about to answer with my opinions, but @Brandon Turner answered everything just as I was going to! His advice is the same as I would give. Just know too that you don't have to get properties necessarily in horrible shape to have rentals. You might pay more for nicer ones, but then you don't have to worry about work. It sounds like you are almost (but not quite) meshing rental properties with flipping, when those are two totally different things. If you want to buy a fixer-upper to hold as a rental property, that's fine, but otherwise flipping is one thing and rentals are another. They don't have to go hand-in-hand.
I would imagine that Yahoo ranking was talking about flipping in terms of buying, fixing up, and reselling. Versus holding after the fix.
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