All Forum Posts by: Account Closed

Yuriy,

Great post! I recently put an offer in on a RSA-2 zoned property in Philadelphia that has been used as a duplex for the past 14 years. My intention is to continue to use the property as a duplex and house hack. A couple of questions:

1. Are you able to rent the other side out while going through the variance application process?

2. My understanding is that if I live in one unit I don’t need to get a rental license, and therefore can push off the need to get a variance until I move out. Is that correct?

Also, I dug up an application from 1978 from the owner to use the property as a 2-family. On that application, the owner also indicated that the property was currently being used as a 2-family. I’m thinking this will be useful to point to if/when I need to apply for a variance.

A neighbor a few blocks over also very recently applied for a 2-family variance for his RSA-3 property and was supported by the neighborhood. I felt confident enough to make the offer, but am hoping that there’s not something I missed or was unaware of at the time. Any/all feedback is much appreciated! 

Hi Joe,

Speaking as a former Temple student as well, and one who lived off campus for the majority of my time as an undergrad (2300 Park Ave area), I think your initial thoughts/concerns are right on. Students (in general) are harder on properties than other tenant demographics, and you'll definitely need to account for that fact in your CapEx budgeting. Going along with that thought, other amenities are always sought out when deciding on a place to live (dishwasher, W/D, central AC, doorbell, etc.) but I need to constantly remind myself to break down the cost benefit of these in terms of rent, and what I will be paying to fix them when they break. Not to mention the added stress in management of your tenants calling/emailing to tell you that they broke. For me, if the market doesn't demand a W/D in unit or a dishwasher, then don't install them. Just another thing to worry about.

Thank you, Jessica. What would you recommend asking of the seller? The house is rent ready, and was recently rehabbed. 

Jesse

Sean,

To clarify, the 3/1 should rent for 1,200 and I have included rental income from the 1/1 into my analysis. I prefer to run the numbers this way so to see understand the financials even if I am not living in it. 

Jesse

Hi BP,

I'm on the hunt for a house hack in Philly, and seeking some advice for a duplex  (3/1, 1/1) on the market. I need a gut check -- in this competitive market, where can one take some liberties to buy in the path of progress, live and wait. And where is such a strategy just "pie in the sky" thinking, and too risky of an endeavor when asking price is doesn't meet the 1% rule? 

To clarify, my thinking would be to live in the 1/1 for a year or two while the neighborhood continues to improve and gradually increase rent. And while monthly cashflow is -$495, if I add that to market rent for the 1/1 ($950) then my girlfriend and I would only be paying $125 more than what we are currently paying to a landlord every month ($1,200) while building equity in a home in a neighborhood where prices are only increasing. 

Am I being TOO optimistic? Or are these compromises necessary evils in hot metro areas?

The Numbers:

Thanks,

Jesse Fields

Ok, thanks Mindy Jensen !

I've only ever been able to see 5 previous reports with my Plus membership. I know this and features at every membership level will be changing on 11/15, but should Plus memberships currently allow you to see all previous reports or just 5? Wondering if this is a bug too..

Thanks, John. For situations like these where a house requires minor rehab to rent, but a more thorough rehab to boost rental income, I'm starting to run the numbers both ways. That way I can cover my bases and insure that the house will still cash flow in both cases. As an update, for this particular property the house would do well if a low offer (~210k) is accepted. But I'm not willing to risk the large amount of capital that would be required to rehab this property for my first deal, since it would only generate a 6% CoC ROI. On to the next one! Jesse

Originally posted by @Jason D.:

Calculate cash flow based on after reno rents if you are doing the reno right away. FHA loans also have a monthly "pmi", so be sure your expenses are correct. Are you applying for an fha(203k) loan? If the property needs renovation, I don't think the property will be approved for the financing. Something to inquire about before putting in an offer.

Thanks, Jason. I included the PMI at $137/mo. The mortgage broker I'm working with does not support 203k loans, so I'm not currently seeking them out for my first deal.

Jesse

Originally posted by @Yuriy Skripnichenko:

@Account Closed

What area of the city you are looking at?

Most of the duplexes in Philly are not sold for it's value based on the income they produce. The prices are based on previously sold in the area similar houses. Also it depends on how hot is the market in that area. Your agent should be able to provide you with the comps.

Also I noticed that on the $215K purchase price you are budgeting $5K closing costs. I think the closing cost for that price would be in $12K area, unless if you are using on of the first buyers programs that are covering some closing costs for you. If you do not know about the programs hit me up, I will send you the links. 

@Yuriy Skripnichenko, 

The house is located in the Manayunk/Roxborough area. Thanks for the info, and catching my underestimated closing costs. Can you please send me the link for the first time buyers program?