Next BRRRR deal - 6/2 twin in Germantown

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Next BRRRR deal - 6/2 twin in Germantown

Mauricio Botero
Investor · Stafford, VA · Member since 2014 · 45 posts · 12 votes

Hello BP,

My partners and I put a contract on our next property: a 6 bed 2 bath twin in Germantown. It's near the intersection of W Seymour St and Greene St. 

House seems to be in decent shape and it was rented via Section 8 for $1,825. Something of note is that the house next to the property is supposedly being renovated, slowly but surely, by the owner and at the moment looks like crap. 

The idea is not to renovate it with top of the market finishes but it will get a renovated kitchen, bathrooms, new floors throughout, windows, doors, and paint. Possibly add a half bath depending (will add to reno budget number) depending on contractor walk through.

Numbers:

Purchase price: 72k

Reno budget: 25k (contractors are going in tomorrow for inspection)

ARV: 180k (that's what I'm going for conservative)

- Comps a few blocks away show that 4/2s and 5/2s sold for $180k-199k range, with one of them selling in 2 days in early March this year. 

- Other Comp I'm looking at is a 6/2 that sold in 9 days but back in April 2017 for $228k

Calculating Rent: $2k

- I don't think this is a conservative number but I don't think its a stretch either. 

Looking for advice/guidance/suggestions on the area as I am not familiar with it before, and what you think of the Rent and ARV numbers I'm using to analyze the deal.

Keywords: Philly, Philadelphia

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Peter Dunne
Real Estate Agent · Philadelphia, PA · Member since 2014 · 51 posts · 36 votes
8y

@Mauricio Botero I live about 10 blocks from there and almost bought a triplex at Wayne and Manheim, but my rehab numbers were closer to $125k. Values/rents/crime vary dramatically block by block in that section of Germantown. I have friends that just bought one of the 6 bedrooms on Manheim for $280k, so there is upside. However, it was renovated top to bottom with permits and all new MEP, kitchen, baths, etc.

These huge Germantown homes often require quite a bit of work, so your $25k feels low to me. What did the inspection look like? 

There is a challenge with renting 5-6 bedroom properties, as most of the folks in the neighborhood are looking for 1-2 bedrooms in the $800-950 range. Your potential tenant pool is simply smaller at numbers like $2k. If they can afford that, they can afford to buy a house in Germantown. My guess is the Section 8 was pushing up the value.

Best of luck! Really dig into the rental comps to make sure it works.

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  • Wesley Mitchell
    Philadelphia, PA · Member since 2018 · 16 posts · 5 votes
    8y
    Congratulations! I don’t have any advice to give because I’m just starting out, but the fact is this is real progress for you and I wish you the best!
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  • John Leavelle
    Investor · La Vernia, TX · Member since 2015 · 1k+ posts · 865 votes
    8y

    Howdy @Mauricio Botero

    With $180K as your ARV I would be using $126K (70% LTV) as my all-in amount. You could go as high as $90K for an offer price if you need to. That's based on your $25K Rehab estimate and my $10K for Holding and Closing cost estimate. So $75K - $90K for your offer works (depending on the last two numbers).

    I can’t help you with that Market.

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  • Peter Dunne
    Real Estate Agent · Philadelphia, PA · Member since 2014 · 51 posts · 36 votes
    8y

    @Mauricio Botero I live about 10 blocks from there and almost bought a triplex at Wayne and Manheim, but my rehab numbers were closer to $125k. Values/rents/crime vary dramatically block by block in that section of Germantown. I have friends that just bought one of the 6 bedrooms on Manheim for $280k, so there is upside. However, it was renovated top to bottom with permits and all new MEP, kitchen, baths, etc.

    These huge Germantown homes often require quite a bit of work, so your $25k feels low to me. What did the inspection look like? 

    There is a challenge with renting 5-6 bedroom properties, as most of the folks in the neighborhood are looking for 1-2 bedrooms in the $800-950 range. Your potential tenant pool is simply smaller at numbers like $2k. If they can afford that, they can afford to buy a house in Germantown. My guess is the Section 8 was pushing up the value.

    Best of luck! Really dig into the rental comps to make sure it works.

    1Reply
  • Cliff T.
    Rental Property Investor · San Francisco, CA · Member since 2016 · 215 posts · 42 votes
    8y

    What was the final outcome on this deal?

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