All Forum Posts by: Michael Wolffs

I'm in the middle of doing this.  I just bought a 4-plex.  It's in somewhat hard shape, and I got it pretty cheap.  The rents are also significantly below market.  I plan on doing all the exterior work, and do whatever interior work needs to be done as units turn over.   The property tax assessment is also significantly above what I paid, so I plan to challenge that.  I paid for it with a personal credit line, so the property does not yet have it's own mortgage.  

Once the work is done, and rents are up to market, I then plan on getting a mortgage. I got it at a pretty high cap rate (10), higher than is the norm for the area (8). When I'm ready, I intend to mortgage my money out of it, looking for a valuation based on the increased NOI and decreased cap rate. Based on the numbers I'm anticipating, if I care to do so, I'll be able to get 100% of my purchase and reno costs, plus some more, and still be significantly cash flow positive.

@Dave Foster

Okay, that's interesting.  I could possibly make it work, but not sure I'd want to.  There would be issues with renting the primary residence (it's an NYC coop apartment, so there is a sublet fee.)  It also means I need to wait a year or more to get that capital into action (well, I could get a equity line, maybe.)

Okay, did some digging.  Apparently I'm wrong.  They got rid of the roll over provision for primary residences in 1997.  It changed to a blanket exclusion of taxation on the first $250K or $500K (single / married.)  So I guess the whole question goes away.

Sorry.

There is a tax provision for rolling tax liability forward from a primary residence (don't know the chapter reference).  There is a provision for rolling forward the tax liability from an investment property (1031.)  The question is, can these be crossed?

I own a personal residence with A LOT of equity.  I'm single, so if I sell it I can avoid tax on $250K of cap gains, but there would be significantly more than that.  If I sell the property, and roll the proceeds into a large mulitfamily that would cost more than the gross sales amount of the residence and absorb all the cash coming out the sale, can I defer the entire tax liability of the sale?  Would it matter if I subsequently lived in the new property or not?  If allowed, would this be considered 1031 exchange and have to be performed under the 1031 rules?

Any information appreciated.  Thanks.

@Alex Deacon, thanks.  As I move forward, I may take you up on that.

@Angie D. Why I picked up on Pittburgh, and why Baltimore didn't get on my radar, is that Pittsburgh seems to be getting past its rusty old industrial economy to one based more information age technology.  Specifically Carnegie Mellon University seems to be a major center of AI research.  The city could leverage that in a major way moving forward.  But at the same time, it doesn't seem the the RE market has runaway with itself, as it has here in NY metro, and decent deals are still available.

The types of deals I've been looking at are small multiunit rentals (three unit at least). Most of what I've seen is BRRRR type properties. I have the ability to self finance these to the point of refi. I'd also look at bigger deals where I'd have to leave money in, if they are operating and at least minimally cash flowing at purchase.

If I have any reticence about Pittsburgh is the distance. The BRRRR project I just completed had me very hands on, and I was at the property pretty often (one or week or more mid construction), and I was essentially GCing it at the end. That simply wouldn't be viable between NYC and Pittburgh, unless I temporarily moved out there. So that would mean I'd have to get over the hump of remote management, both for construction and rental. Of course getting over that hump would probably be a good thing. Philly, OTOH, while not exactly convenient, is someplace I can get down and back in one day.

I'm an investor out of NYC.  The NYC metro market rental market is in the twin bad places of being both priced and oversupplied with rentals currently.  So I'm looking elsewhere.  I had keyed in on Pittsburgh as an investment target city, and have been talking to a broker and reviewing properties.  As I was doing this, I thought that I might want to see how Philly compared.  I will admit that part of this is that it's a bunch easier to get to Philly from NYC than Pittsburgh.

So for those who've looked at both, how do they compare. Specifically I'm looking cost and availability of multi-family properties, and the rental prospects for completed units. I just finished a project in Jersey City that turned into a BRRRR type project, and would entertain that in either city. I would also look at bigger operating properties. I would expect Philly to be a little more expensive, but to have equal or higher return percentages. Is this correct?

Any info appreciated.

Since you're in Teaneck, is this in the same general area (meaning reasonable commute to NYC)?  What is the configuration of the units and their condition?  Is it subject to any type of rent regulation?  <1000/unit in NNJ close to NYC is a ridiculously low rent roll.  I have a Triplex in Jersey City and get $2000/unit for 2/2s.  Without seeing the property and knowing more about it, I have to think there's serious upside to the rents   I'd be looking at what average rents for similar units are in the area.  I'd also look at how much you'd have to put into the units, and how much additional rent the renovated units would bring in.

My issue is that I'm looking for markets that are only starting the boom cycle.  It seems like this is not the case in the big TX markets.  It seems like the boom never really stopped.

Jeff,

I was thinking about the big metros down there, so that wouldn't be the case.  But it doesn't seem to be a situation where there would be any bargains either.