All Forum Posts by: David Haynes

Investment Info:

Single-family residence wholesale investment in Philadelphia.

Purchase price: $179,000
Cash invested: $85,000
Sale price: $360,000

This property was in the highly sought after area of Girard Estates close to where Rocky II was filmed. You may even remember Bruce Springsteen's famous song about a mobster in Philly within this area. Just like these two memorable classics, this flip was a classic. As soon as I and my team put it under contract, I sold it within an hour to one of my faithful investors who was looking for something in South Philly. Much to his surprise, the HML's appraisal came in $30K above our estimate. This flip demanded a full gut and rehab which gave tremendous value-add opportunity. The high ceilings with recessed lighting and the big basement with egress gave this home a head start. The block was littered by recent rehabs selling between $340K and $370K. No wonder it sold so quickly.

I like what @Michael S. had to say. Montgomery has two large military bases and lots of potential. They are revitalizing their downtown area and are experiencing appreciation.

When investing in new markets, it's good to consider the following:

1. Job growth and employment diversity

2. Population growth

3. Infrastructure development/city plans

4. Affordability

Do your homework, and if you find a great market before others, you'll be set for life.

@Brian Miller Sounds like they want the majority holder to sign. Many investors create a new LLC for each property they invest in. If your partner isn't wanting to sign or if you're not wanting him to be liable for you, you might consider creating a new LLC.

@Art Johnson I just sold a triplex in Parkside Philadelphia for $75K, so the properties are out there. However, you do need to sacrifice in two ways: location and renovation costs. The one I sold needed quite a bit of rehab. In fact, the rehab will cost a little more than the purchase price. But it will be worth the risk. A duplex (not a triplex) sold for around $250K on the same street! Rent in Parkside ranges from $900-$1100 for a one-bed and $1200-$1300 for a two-bed. Do your math and you'll see that the cash flow will be astronomical. No wonder it sold in 30 minutes. So yes, my advice is to be flexible with the area and the rehab in order to find multis at that purchase price.

@Xavier Bruce Buy-and-holders are more concerned about two things: 1) Cash flow per month after all expenses including refinance 2) How much cash is left in equity after refinancing

The higher the cash flow, the better. The lower the cash left in equity, the better. I work with investors in Philadelphia, but these criteria will stay the same in any area.

@Kenny Yoo The extent of the renovation depends on the neighborhood its located in. I'm not familiar with Maryland neighborhoods, but I'm very familiar with the Philadelphia area. Some neighborhoods merit a thorough rehab with top-notch finishes. Others do not. I would do two things: 

1) Check out the MLS for neighboring comps with an ARV you are shooting for. See what finishes they put in their homes so that you do not overdo it or underdo it. If you follow the comps, there is less chance for error.

2) Get a reliable contractor to give an estimate of the cost after showing him your property and pictures of neighboring comps. 

OR find an investor familiar with that particular neighborhood. This investor will have an accurate idea of what the estimated rehab will be. 

@Dan McCarthy @Emilee Strubeck

Good contractors are hard to come by. The best ones are all booked up. There is a surge of real estate investing in Philadelphia right now, so there's a shortage of available contractors. This explains why no one is answering your questions. But you may want to check out the website Angie's List. You can find many that are available there. Or even, just do an old-school CraigsList post. You'll be surprised by how many reach out.

One thing on the mind of PA investors, particularly the ones I work with in Philadelphia, has been the possible extension of eviction protection. Currently, Tom Wolf's executive order provides protection until August 31st. This was signed July 19th. 

With the 31st quickly approaching and no further actions taken (as far as I am aware), should the possibility of extension be given much weight? And how are buy-and-hold investors making their decisions when purchasing a new property, especially when it comes to occupied rentals in Pennslyvania? Are you still preferring to purchase vacant properties?

@Mason Kimball

Some other good questions are:

1. How long have you been practicing real estate law? But keep in mind the more experienced they are, the more they can typically charge. The best ones come with a high price tag, but paying that price is almost always worth it.

2. How long have you been practicing in PA? Some attorneys have the experience, but that experience is in other states. PA is tenant-friendly, so it's important to find an attorney who is up-to-date on the current laws.

3. Can you provide me with references? I ask the same thing to contractors I work with. Now, you have to ask in a respectful way. Most are unwilling to release their client information, but it can save you some heartache. After following up with one of my top candidate's references, I realized his work was less than pleasing.

@Karl McGarvey it looks like you have your answer, but I agree with those who say keep the car debt. At 2.5%, that is likely the cheapest debt you can find. Take advantage of that. If you paid off the debt, you're saving a few hundred dollars in interest but losing your chance to gain so much more in cash flow.