Running numbers on Small Multi Deals in Pittsburgh

10 Replies

Hello BP members ,

I am writing this post to ask to double check if there is any important things to consider when analyzing deals in the Pittsburgh area. My family has a few properties under our belt in the Central PA area. I moved to Pittsburgh a few months ago, and am looking to expand our portfolio in this area. I just wanted to present how I generally run my numbers before diving deep into a specific deal, and see if there is anything that would be edited for this area. Thanks!

Vacancy 8%

taxes: given

Insurance $800 for 2 units or cheaper property and upwards of $1,500 for 4 units and more expensive

Sewer/Water: $1500 for duplex and I add $500 per extra unit  (ex; 4units+$2,500)

Garbage: $500

Electric/Heat tenants responsibility if sub metered?

Repairs/Maintenance: 8%

Cap Ex: 7% 

Property Management: 10% 

What would be a ballpark estimate for lawn care and snow removal on an average size lot for small multi around the city? 

Thanks!

anytime I see capex as a % I think that's a mistake.

A roof costs about the same in Mt Oliver as it does in Mt Lebanon.

Garbage seems a bit high. I am only doing SFH but it usually is around $150-250 a year that I have seen. I usually mow my own during vacancy times but last year my schedule did not allow this and I was paying $45 every 10 days. Most services I inquired with were $40-80 per visit. Since you are from PA I assume you are good with finding the mills for all 3 taxes needed to run numbers. That can throw some out of state folks.

@Logan Koch These seem mostly accurate. Might want to go a bit higher on the repairs and capex if it's a 1920s or older building which there are a lot of here. There a decent amount of buildings out there that have water metered separately too. Lawn care typically $30-$50 a cut and snow removal I like to see if one of the tenants can handle that during the winter for a little bit off their rent. Usually just giving all the tenants a bad of salt gets them to handle their portions, depending how the building is laid out. Also as Chris said earlier, keep in mind the actual dollar figures as well not just percentages, depending on what kind of price point you are looking at. 

@Logan Koch I would have to agree with Jeremy about setting aside enough for repairs, general maint.. and large items like roof, sewer line, and misc...   too often do I see investors look at the glass 1/2 full. Although its good to be optomistic its also good to look at the glass 1/2 empty. Its a fine line in this business between positive cash flow and negative cash flow

What area of town is the property?  8% vacancy may be a good average but in my experience it can be low as 0% is hot areas and 100% vacancy in certain areas.   

@David Lee Hall, III I'm looking into the Pittsburgh market and saw in your comment you mentioned 3 taxes...

"Since you are from PA I assume you are good with finding the mills for all 3 taxes needed to run numbers. That can throw some out of state folks."

Would you mind expanding on what you're  referring to or point me to where I might find out more? Thanks so much! 

@Michelle Cherian

There are three kinds of property taxes every property owner pays in Allegheny County, because they must pay tax to three different entities: the county, the local municipality, and the school district.

Allegheny County Tax: current at 4.73 mills

Local Municipality Rate: https://apps.alleghenycounty.us/website/millmuni.asp

Local School District Rate: https://apps.alleghenycounty.us/website/millsd.asp

If you own a property in the city property, you receive a combined Pittsburgh City Tax and Pittsburgh Public Schools tax bill. You still pay county tax separately to Mr. Weinstein.

If you're investing outside Allegheny County but still in our area, you're going to be looking at very different tax structures and tax rules. For instance, Butler County has very high school district millage rates compared to Allegheny County, typically about five times higher. This is because Butler County hasn't had a county-wide property tax reassessment since, I believe, 1969. A relative of mine just bought a house there for three quarters of a million dollars and Butler County assesses it at $41K.

This goes a very long way to explaining why the community of Cranberry Township exists.

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