All Forum Posts by: Rich O'Neill

As others have said, that seems like a fair price to me. Cost of a full paint job alone is likely in the $3000 range. If it's 2 coats that's a no brainer. The TP valve on the heater is very simple (as long as that's the actual problem. If there is no expansion tank then it could be over pressurizing and that is a more expensive fix). Depending on the size of the yard the landscaping clean up is usually cheap. Most dumps either don't charge you for yard waste or it's very cheap (they just compost it and use it as fill). A transfer station will charge you something because they have to move it. 

Overall that sounds like a good price to me! 

@Thomas Rodgers some good advice above, but I will add that a cap rate is not totally relevant when it comes to the value of anything below 5 units. It is a metric of the value of the investment, but in this case, not necessarily the property, if that makes sense. 

I like to use a Cash Flow per door number and back into purchase price that way. Like you said, list price should be irrelevant, especially right now. Calculate the offer price based on what works, and make the offer. If they don't accept, follow up every 2 weeks that it sits on the market and try again. Do this on 20 properties and chances are that one will end up taking your offer. 

For expenses, I would price in a commercial loan in case you can't get owner occupied financing for any reason. Price in management fees because you won't want to manage it forever. Price in a healthy number for repairs/maintenance/cap ex/vacancy because those can eat you alive if not properly estimated (don't ask me how I know that...). 

Good luck! You have some excellent resources here that are so willing to help. 

@Melanie Tan If you are doing a full rehab - electric, plumbing, hvac, everything but full framing, this is not a bad number. Minus some of those larger ticket items and it gets a little less enticing. 

I have several points I want to make to you and anyone reading that is looking to work with contractors, especially for the first time.

It is hard to give a $/sqft number on anything except a full gut and rehab or new construction because there are so many variables. 

The other challenge is that it seems like there was a decade or more after about 2011 where the price to do a Philly row home was $75k, with almost no exceptions, and that was the expectation for a long time. Now that has almost doubled (hence your $150k price) and the expectation has been slow to change. The price of everything has just skyrocketed over the last few years. 

One micro example is that I used to be able to get hot water boilers swapped in my rentals for about $4k. 2 weeks ago I had one of my best HVAC guys charge me almost $10k and I almost lost my mind. And that was the 3rd and best price I got. It's that bad. 

Detail in the quote can be hugely important. If the contractor walks through in 15 minutes and spits a number out at you, RUN away. They are either building so much profit in that they can afford to be sloppy with their quote, or they aren't building in enough and will leave you somewhere in the middle of the job once they realize it. They might get lucky sometimes, but you don't want to take that risk. You should be able to read off the line items and either cut or modify them to fit your budget. 

The last piece I will leave you with is "cheap work isn't good, and good work isn't cheap". We have taken over more projects than I care to admit where the client got screwed by a contractor who under bid the project and walked off when they realized they weren't going to make any money on it. 

These last two points have everything to do with the professionalism of the contractor. You don't need the guy that shows up in a fully wrapped, macked out truck, but they need to at least demonstrate to you that they understand their business and will be trustworthy. You also don't want the guy that shows up in a beat up (possibly stolen) van and doesn't seem to have his head on right, but gives you a cheap price. 

Sorry if this was rambling but I hope it's helpful. I have had to help too many of our clients get out of bad situations and I hope that doesn't turn into you! 

@Edwin De leon I will second what @Rob Lawrence said. I am local here and invest in the suburbs of Philadelphia, specifically Delaware County. I will caution that the age of properties in most of the northeast make it a little tricky. Anything built before 1950 likely has knob and tube wiring, which can be costly to replace. The sewer lines are also likely cast iron which is likely to fail and be costly to replace. I have learned the hard way that a FULL renovation can yield larger long term cash flow than the cosmetic rehabs, especially in this age group. 

If you want to chat more about SE PA feel free to reach out! 

Hey Ian, I will send you a PM. 

Check out Rentwell Property Management, @Kevin M. Otter Property Management, and @Yuriy Skripnichenko with TrustArt, though I am not sure he does South Philly. I personally use RentWell for my Delaware County properties. Best of luck. @Nathan Gesner clearly has some great points in terms of vetting PM's here. Use that knowledge wisely! 

Hey @Sean Carberry I am in the Philly area and would be happy to chat. Like others have said, it depends on your goals/how active you want to be. Turn-key is great, but ROI is generally much smaller than other methods. BRRRR has much higher ROI, but is way more active. There are lot's of other strategies in between. If you are accredited, you can also invest in syndications, but again, lower ROI than some other strategies. Happy to talk through this with you if you would like.

@Ada Li I would recommend Jim Lynn. He is a broker, really sharp, and is a true advocate for the borrower. Shoot me a PM and I can get you his info. 

 This is gold. Incredibly valuable. 

Do your own due diligence, but I use RentWell in Delaware County. Good luck! 

Hey @Jewel B. these are excellent questions and of course the answer is "it depends". 

All I can tell you is what I do. 

I think right now anything over 45 days makes sense to give a low offer. Even 30 is worth a shot. Expectations are so messed up from the last few years that if the property doesn't go in the first weekend the sellers *might* have an "Oh $hit" moment. 

% of asking price will vary by seller, and it's impossible to know what that number is, even if you're an expert negotiator and you get the seller sitting across from you. I would say if the numbers make sense for you, then make the offer. Even if it is 50% of asking. All you can lose is some time in writing it up, and maybe a quick sad feeling when the seller/agent yells at you. To spend less time writing it up, I created a template of the important deal terms I like to convey and send it over as a letter of intent to start the negotiation with a comment that I will formally write it up for them if the terms look interesting. 

I don't ask for the discount, I just make the offer. Sometimes I will get the agent on the phone and try to probe/be really friendly. Lot's of "Man, this market is tough huh?!" Then I will call them back after I have "run my numbers" (I have probably already done this before the first call) and try to lighten the blow with "Hey Mr. Agent, I ran my numbers and its not really a great number compared to your asking price. I am not sure I even want to give you the number." 9/10 times they will all but beg you for the number, and when you finally give in, it isn't as insulting because you warned them. I learned this in "Never Split the Difference" by Chris Voss. I highly recommend that book! 

WHEN they don't accept the first time (they usually won't), I like to follow up every 1-2 weeks. Of course I will see if it is still for sale before I call. If it goes pending I will call the agent to congratulate them and see if I can get the number they ended up taking. This can help me feel out the market as well as give me some positioning if the deal falls apart. 

At the end of the day, this is a numbers game. Lot's of offers need to be made, and most will not get accepted. The key is doing things that will increase your likelihood of getting your offer accepted with some of the strategies above. You may get 1 in 100 of these accepted. You may get 1 in 10. 

Good luck!