All Forum Posts by: Brett Stander

Jason, 

As  new Investor myself, I'll give you some thoughts, given that I seem to be in the same position. 

Personally, the house hack idea, while beneficial, can be difficult. Property values in any sort of nicer area (think fairmount, university city, fishtown, rittenhouse, etc) can be rather expensive. Even with an FHA203k loan @3.5% down, it can be difficult to find something that cash flows well as an investment opportunity. 

Also, trying to fix up a property with this type of loan can be difficult and a huge headache. All the reading I have done talks about the difficulties of this strategy. One that seems particular difficult is that, when using an FHA loan, the HUD has to approve the bank to send money for rehab (it is not all sent at once). So, your contractor will have to be happy waiting weeks (or maybe months) to get paid as they are at the mercy of the government, which, to my best knowledge, is not known for their speed.

Personally, the best option I came to for myself (and maybe for you) would be a BRRRR strategy somewhere in a lower income neighborhood (think Mantua/west philly). Because we do not have to comply with the 1031 guidelines regarding finding a new home (45 days to find, 6 months to close) we do have one advantage over other BRRRR investors who may be more integrated already: Timing. Instead, I am looking for a property that has 2-3 bedrooms that I can increase to 3-4, as well as something with heavy rehab potential. This way, even a hard money loan won't be problematic, as I can cash out on the ReFi for more money than I put in, even with a conservative LTV of 75/25.

Of course, these are just my thoughts, and a property where the owner is trying to sell fast may make any one of these strategies work; it all depends on if you can find the right deal. 

Let me know if you want to talk more!

@Marc Winter, thanks for your response! I appreciate the honest feedback (and yes, good point in terms of the "TMI," I am still feeling around for the right amount of openness to get good answers and keeping personal info shrouded). 

Regarding the sub-properties, I think that's a good point. Probably something I know, but having someone say it in so many words does bring the issues to life a bit. 

Hello!

My name is Brett Stander, a fourth year finance major graduating from Drexel University in Spring of 2021 (five year program).

While I understand the value of working a 9-5, W-2 job, I also see fear the dry, repetitive lifestyle that comes with it. So instead, I decided to start learning everything I could about real estate, and to look into buying a property this upcoming year.

A little about my financial situation- I am lucky enough to attend Drexel University with full tuition, meaning I am $0 in debt.

Another thing- while I do not have a large amount of financing to my name, I am working with my mom to buy a property in west Philadelphia. She has an LLC in her name that generates positive cash flows (nearly a decade of operation, so all debts are paid off). However, for tax reasons, she continually operates her business in either the negative or breakeven for tax breaks on her, and my fathers, personal tax statements.

All this considered, we are starting to look into our first property in West Philly. Because the area has yet to be touched by the magic of gentrification, the homes are still relatively inexpensive (a fixer upper level home with 3 bed one bath could go for as little as 35k-45k pre auction/foreclosure). 

Personally, I believe that the value in these homes does not lie in the cash flow (although positive NOI is relatively easily accesible given the nature of these homes in distress), rather the appreciation value. Philadelphia is a quickly gentrifying area, and homes that were in low income neighborhoods just ten years ago are now considered (somewhat) prime real estate.

Given this, I will be BRRRing these properties. I have talked to a few agents who have assured me that there are plenty of distressed properties in the area, and my goal is to rehab, and possibly add another bedroom, to cover the hardmoney loan (given a conservative LTV of 75%, but hoping for 80%).

So, I just have a few questions about buying in these neighborhoods. 

- What are the disadvantages to buying in these areas that I may be overlooking?

- Is it more difficult to find tenants?

- Is there a way for me to calculate (atleast roughly) appreciation value of these properties?

- How much will the neighborhood damage an appraisal value of a home? (attempting to BRRR these homes)

- Would section 8 be a good approach in these neighborhoods, or would this be too much of a headache (as the neighborhood is low income as is, I would prefer to stay away from difficult tenants for my first BRRR).

Any advice at all would help, as I would love to hear from the community on this. Thank you so much!