All Forum Posts by: David Haynes

I've worked with a lot of first-time rental buyers in Philadelphia. I always push them towards a class C property to start with. In my opinion (at least in Philly), I would never own a class A rental. It wouldn't bring strong enough returns. Class B is slightly better in cash flow. Class C and D provide strong cash flow, but you're more likely to find problem tenants with Class D.

Again, a lot of this may be market-specific. But I'm sure there are some similarities no matter where you are.

Sounds frustrating. I understand the feeling.

Refinancing would not help cashflow unless it reduces your interest rate by a large amount. And since the goal is to keep as much cash-on-hand as possible, paying $20K off your mortgage is not a good option either (even if the $20K was coming from a second home's equity). 

I definitely would not put any more cash into this deal. There are better uses for that cash, like buying another rental. The creative things you should be focusing on are raising rents and reducing expenses. 

For instance, are you paying for something that the tenant could be paying for? Examples are lawn care, utilities, snow removal, etc. If you're using a property manager, is it necessary? Depending on the current lease, is it possible to get a higher-paying tenant? Is there a certain amount of inexpensive work you can do to the property to attract higher rents? In my opinion, these are things you should be focusing on.

I completely agree with @Ryan D.

The only possible dip in prices in Philadelphia was between February and April of 2020. And I wouldn't say a lack of demand caused it. It was caused more by the restrictions placed on the real estate industry. 

Demand in the city has consistently outpaced supply. I don't see demand going down any time soon.

I agree with @Joe Norman. All these youtube trained wholesalers have been destroying the industry. I'm glad the laws are being passed, but I have yet to see them enforced.

I must have five or so wholesalers contact me each day. One out of twenty is good at what they do. One out of a hundred is good enough to make a decent living. 

My advice, @Lena Oeun, would be to become an agent, join a real estate brokerage, and invest and wholesale on the side. As the wholesale industry changes, you'll be in a position to take advantage of it.

@Eliam Birnbaum Obviously, I'm biased towards Philadelphia. The mass migration from NYC has affected Philly in a positive way. Rents are up and investors are revitalizing communities.

I'm seeing a lot of multi-families swapping hands off-market at pretty strong prices, everything from 10+ units down to the typical 2-4. Annual taxes are pretty low in the city and about double in the suburbs. You asked about special taxes. There is a transfer tax throughout PA every time you buy or sell something. It ranges from 5% in Reading to 2% in most counties. 

Are you planning to close on the property while you're abroad? It's a state-by-state matter, but there are some hoops you'll have to jump through to do so. I sold an off-market 4-unit in Norristown PA to a guy while he was off the coast of Saudi Arabia. He gave his father power of attorney to make sure closing went smoothly. Otherwise, he would have had to go to the US embassy to notarize documents. You might want to work out those details before you attempt anything.

@James Short I guess it would be more of a "BRR" deal instead of "BRRRR" haha

It doesn't sound like a bad idea. I've had clients in Philly use a HELOC for the downpayment while using hard-money, and it worked out fine. I'd be curious to know how the HELOC interest rate compares to the conventional loan.

My first step would be to see how quickly cashflow will pay off the HELOC. And I would be extremely careful to find consistently paying tenants. Otherwise, you'll find yourself in a very difficult situation.

Best of luck

@Asish Balu

If you're looking for single-family homes around Philly that BRRRR well, I would actually shoot for a lower value. Most homes valued at $200-250K won't meet the 1% rule. I'd say $120K to $160K is the sweet spot.

Those values can be found in most C class neighborhoods around here.

I agree with @Rich O'Neill

Unless its zoned RM1, its a long shot to convert it to a legal multi. And even if you get approval for RM1 zoning, the building's square footage dictates how many units you can create. 

And here's the real deterrent. If it's not legally zoned, the bank will be forced to value it as a single-family. Its current income wouldn't phase them.

Being an illegal triplex when zoned a duplex is one thing (which is actually something I'm going through right now). But being an illegal 5 unit when zoned a SFH is the extreme. I'd stay away from it unless it has value as a SFH.

@Yang Zhao

I always recommend RentWell. I just sent you a message with their contact info.

Hey Reuben,

I'm biased towards Philadelphia haha

I can't say too much about New Jersey, but I am finding some solid multi families here around Philly. I can keep you updated on them. I just sent a connection request.

Each neighborhood has its pros and cons. For instance, I'm selling two cashflowing triplexes in Overbrook for around $480K. It's just inside the city border. Multis in the city have lower property taxes and easily meet the 1% rule. However, they're much more difficult to come by and the city is overly tenant-friendly.

In contrast, cross the border into Delaware County where I just sold a triplex in Upper Darby for $205K. The property taxes are much higher, yet you're still meeting the 1% rule. And the county is much easier to work with when it comes to delinquent tenants. Multis are also much easier to find.