All Forum Posts by: David Haynes

All of us who BRRRR properties have probably come across this problem. Our goal is to refinance as much cash out as possible, but sometimes there's not enough data to support the appraised value that we hope for.

I'm currently selling two single-family home rentals in the suburbs of Philadelphia for $110K. They will easily bring $2,200/month in rent after basic updates (flooring and paint) and cashflow $8,500/year after all expenses.

The problem is... there are not many two-bed homes for the appraiser to compare them to when you go to refinance them. Given the income, they should be worth $200K. However, since they are single-family homes, the appraiser may not give that much weight to their income. 

There are only three or so two-beds in the same zip code that sold on the MLS in the past year, none of them within a quarter-mile. If the appraiser were to look at them as income-producing properties, I'm all set and should be able to refinance all of my cash out.

So my question is, how much weight (if any) is the appraiser likely to place in the income-producing aspect of the properties? What has been your experience? And have you ever found yourself in a similar spot while analyzing a deal?

If little to no emphasis is placed on the income, thankfully I'm only leaving $10K cash at most in equity which I will recover within a year. If the emphasis is placed on income, the opposite is true. I'll be pulling out $10K more cash than what I put in.

I'm still waiting for the day I find a million bucks.

We've all been there. When you're walking through the most undervalued homes in your community, odds are you're going to be shocked at what you find.

Here's a small list of what my team has found while walking the homes of Philadelphia:

- Bathtub full of used toilet paper

- Surprise, surprise... squatters!

- Charging pitbull

- Uncast ballots

- Crinkly Playboy collection

- Kittens!

- Creepy mannequins

- Three-legged fox

I'd love to hear your stories! What did you find?

@Erica Gordon Have you looked for single-family homes that are zoned RM1? If you're planning to use a 203K loan, you could utilize the rehab money by converting it into a duplex. You can find a lot of RM1 zoned properties in parts of West Philly and Germantown within your price limit, yet still within an "okay" neighborhood.

@Buyan Thyagarajan Here are some great zip codes that I'm seeing for single-family rentals similar to Darby and Sharon Hill. Having sold many properties in these areas, I'm very familiar with the rents, property taxes, and tenant classes in these areas. I think they all make financial sense when considering a BRRRR.

These are all C and D class neighborhoods. Rents range from $1,100-1,400/month for a 3 bed/1 bath. You can easily meet that 1% rule. The ones in the city will have lower property taxes and are more tenant-friendly. The suburbs often have a better tenant class but higher property taxes. Of the ones listed below, Eddystone does have the best school district, Ridley.

19022 - Eddystone

19050 - Lansdowne

19082 - Upper Darby

19023 - Darby, Collingdale

19079 - Sharon Hill

19132 - Strawberry Mansion

19143 - Cobbs Creek, Kingsessing

19144 - Germantown

19140 - Hunting Park, Nicetown

19401 - Norristown

Here are a few solutions:

1) Build connections with experienced wholesalers in your area. Their deals will be lower in price and have much less competition.

2) Get preapproval from a hard-money lender. They'll help shorten your close date and give you the convenience of an offer that is as good as cash.

3) Strengthen your offer in other ways. The fewer the contingencies, the better. If you're worried about the inspection period, have a trustworthy contractor walk the property with you before placing an offer. 

Just like @Kim Tonetti, I'm also licensed in PA and operate in Philadelphia. So I limit my work to the state boundary. The market is no less hot here, but you could also try expanding your horizon. 

That quad in Olde Kensington sounds very interesting. In my opinion, multi families are the only good rental plays in that area. I'm working on a duplex lot in West Kensington right now for $80K. I'd be curious to know what number you got that quad at.

Thanks for explaining that more thoroughly @Joe Steinheiser

I was working on a transaction earlier last month in Brewertyown and was amazed that what used to cost $375K to build had gone up to $400K because of lumber. It seems like lots have gone down in value for that reason.

I've been finding several RM1, CMX1, and CMX2 lots in the city of Philadelphia at low prices. I'm very familiar with turnkey multis, so there's half the battle. But I need to sharpen up on the intricacies of estimating new build costs. 

The cost of lumber has thrown off new construction costs recently, but I'm not sure by how much. Can anyone provide insight into this?

Also, how should you accurately estimate the construction costs? I know the basics... like multiplying the lot dimensions by 0.75 to calculate buildable square footage. But where do you get your numbers for price per square foot?

Has anyone attempted a new build around Philly? How did it turn out for you?