All Forum Posts by: Austin Mudd

@John Powell what sort of hoops do I have to jump through if I'm acquiring a building that needs rehab. I'd need to obtain a 203(k) correct? What kind of red tape is there with that, and what does the timeline look like @Austin Youmans maybe you have some insight too?

@Ed Emmons When i was in the burgh for interviews we actually went out in Southside and I definitely got that impression, but it looks like a fun place. I'll look toward Mt. Washington too, how's the commute downtown (where I'll be working?)

I’m from San Diego and went to school in LA. I’ll be moving to Pittsburgh late summer to start work in commercial real estate (lending). I joined BP to learn the residential side and I hope to dabble in private real estate investment as I progress through my life. One note: my job has me in Pittsburgh for 18-24 months - there’s a possibility it might be up to 36 months.

As a California kid all my life, moving to the North East is a huge move for me (what's winter? Never heard of it). I did a summer in NYC for an internship and have been to Pittsburgh for the interviews for this job, but It’ll be a complete change.

Here are two options I’ve thought of:

1) Owner occupy a 2-4 unit.

There are a few neighborhoods that I’ve been recommend to check out to live in from friends (Shadyside, Southside, Lawerenceville). It looks like these have the highest demand, thus the acquisition prices are higher and competition among other investors is fierce.

Adv: Can take advantage of strong rental rates, start building an income-based portfolio, and take advantage of PA lending programs that can lend up to $6,000 repaid at 0% interest over 10 years that goes towards closing costs. Can take advantage of putting down between $5-15k.

Disadv: My lack of knowledge about the neighborhoods without living there makes it extremely challenging to connect with RE professionals, view potential opportunities, and keeping a close eye on trends. I’m concerned I’m going to have to find a place month to month to lease for a few months until I acquire something. LL’ing with a full-time job might be tough? (Can be mitigated by prop. mgmt).

2) Flip 

I’ve been reading that Pittsburgh is also one of the hottest flip markets in the country as well. I’m seeing people sell property for prices like $40k-150k. In SD, your D class dumpy house wouldn’t sell less than $200k. So the barrier to entry is much lower for someone without a ton of cash like me. 

Adv: Low barrier to entry and seems like a compelling market to flip. Ability to connect with investors to fund rehabs (both in the Burgh and from back home?). Have the ability to settle down, find a place to rent, learn the neighborhoods, and then take 4-6 months to do a flip once all that is taken care of. I have the power not to get stuck with RE out of state in case the time comes to move back to the west coast.

Disadv: Little knowledge and experience about rehabs (well anything really) and the types of homes common in the North East. May be difficult to work a full time job and do flips. Is it possible I take on more risk at losing my capital?

Bonus 3) Channel my inner Donald Trump and do both at the same time

I think this came out longer than I anticipated, but hopefully someone can help me out!

Link to that PA program: http://www.phfa.org/consumers/homebuyers/advantage.aspx

@JD Martin I have a question. I am moving to Pittsburgh in a few months. I'm wanting to get into a 2-4 multi with an FHA unit since I'll be able to enter the real estate game in one of the most affordable cities in the country. I don't know how resilient Pittsburgh is to a downturn - it's been something i've been trying to learn.

What do you think? Am I stepping into this as we near a peak?

@Jay Hinrichs - Guy in his 20's who would read that sort of post, ha.

Anyways, systemic risk largely caused 2008. Institutions like Lehman were so entrenched that its collapsed halted capital markets. If we look at the state of the economy today, can we point out large risks? 

Debt held by Americans - auto loans, student loans, etc. This is causing debt to income levels to rise. Tighter lending requirements are also making it harder for people to obtain mortgages. Home ownerships is decreasing. But demand is still enormous. So what's that about? Also, will student loans even be a catalyst? Isn't much of the debt owned by the government, plus the student loan market isn't securitized and traded.

QE - Not too knowledgeable about the Fed's program and how this will affect the economy. But what impact will a rise in interest rates have? Prices will decrease, but how fast and for how long? Is the underlying demand in real estate strong enough (it seems like people here think it's VERY strong) to be able to support absorption? Can the Fed even increase the rates back to normal levels in a quick timeline? With wages stagnant, how will Americans afford homes? 

I think I'm the youngest in this thread. When 2007 came about, I was coming out of middle school. Went through high school when the economy was in the garbage. Went through college as the bull cycle continued on. So, I haven't experienced a downturn as someone with skin in the game.

They always say, don't they, that the next recession is caused by the thing that people couldn't predict, didn't anticipate, or overlooked. I wonder what that is...

@Logan Drew Would you have any input on this?

@Chris P. No expert here by any means, but looks like a typical equity partnership seen in commercial development. Except usually it's something something like 90-10 investor/developer pari passu up to 12% returns, then the developer's promote hits a threshold and increases to 80-20, 70-30 etc. as % return increases past 12%

But GC is offering 50% split on profits while it looks like they're going to be doing more hand-holding? Seems like a good gig... Plus you have a firm underwriting your deals.

edit: "Every property is titled under a unique LLC, which is owned 100% by Gorilla Capital."

Noticed that, does that mean you're not a partner in the LLC?

Took the liberty to google them and found this: http://gorillacapital.com/wp-content/uploads/2015/..

@Chris Isaacson might I ask what sort of youtube videos you looked for as you studied to prepare yourself?

@Chris C. Appreciate it. I will take a look at it. Looks like this helps you quickly look over a property in only a few minutes to see if it warrants a deeper look. As you've used this, have you found that to be the case? Accurate enough that you can quickly scan deals and when it looks like it might work, it does?

@Account Closed that sounds like a good rule of thumb. We're looking for heavier rehabs by looking for your ugly <1950s distressed properties. That 30-40 number is from overhearing my mentor speak about heavier rehab projects. Are your numbers consistent with labor in an area like Southern California?

But yes, of course you don't know until a professional walks the property, but i'm looking to get 10-20% or so within the actual cost while I'm looking through a bunch of properties per day. Want to have the process be quicker so I can get a quick idea if the subject is something worth looking to put an offer in.