All Forum Posts by: Rich O'Neill

@Peter Bogdon you bring up a great point about dialing in goals (therefore criteria). I just had this conversation with a friend about how nobody has their goals defined and it worked for a while because just about everything was supposed to make money. Now its harder to do, and we need to define our criteria. That way we know a good deal when we see it. 

@Jesse Harr Thank you! 

I don't manage anymore. I wish I had outsourced it sooner. I am glad I self managed for a little while though as it helped me understand how to manage the manager, since I know what the job takes. 

I use Rentwell for my properties in DelCo. I have clients that had good experiences with Otter Property Management (@Kevin M.) and depending on the area TrustArt (@Yuriy Skripnichenko

Hey @Jesse Harr

@Eric Greenberg is totally right. 1 block can make all of the difference in the city. 

Something I would strongly consider and often recommend is looking for deals outside the city in the neighboring counties. I personally like Delaware County. The big complaint there is always the RE taxes so make sure you factor those into your numbers. 

I don't personally buy in the city any more because of the regulatory environment. It is too hard to evict a bad tenant in my opinion. There are several other things the city has done to make it more difficult for landlords. At the same time, plenty of people make big money in the city, so there is obviously opportunity. Just not for me. 

Happy to discuss further if it would be helpful! 

 Building permits can be difficult to get for one, though I am sure that's like most big cities. 

The most tragic one I know of is the lead testing requirements. On the surface it sounds like a great thing, keep people safe from these old buildings. The problem is the implementation. I have heard countless stories of landlords in the city who had a property that needed to be lead tested in order to renew their rental license. When the inspector shows up to perform the test, the tenants won't let the inspectors in. Then the tenants stop paying. When you finally get to court, the courts are saying essentially "well you don't have a rental license so you can't evict". What is the landlord supposed to do in that situation? Force entry to perform the test? That can be a safety issue.

Obviously that is a worst case scenario, but I have heard it too many times for it to be a one off. 

Curious where everyone's head is at this point in the market cycle.

I am looking out the next 6ish months and I think there is a lot of opportunity headed our way, if you're ready for it. This is what I am thinking, though of course, I don't have a crystal ball.

Right now, lot's of sellers still seem to think they can get what they could have gotten in the spring, which is justifiable because a 6 month old comp is back in APRIL, when rates first started their moonshot. At the same time, buyers simply can't afford nearly what they could in the spring due to interest rates. 

I think that's why a lot of markets are seeing DOM and BOM's go through the roof. There's a huge disconnect. 

As those comps age out and the DOM continues to go up, I think we will see a further drop in inventory from "Make me Move" seekers giving up. 

What remains will be sellers that actually need to sell, and will pay attention to any offer they get, even a low one. It will become a numbers game for us buyers, and the odds might start to tip in our favor. 6 months ago if you offered any less than asking, it was pointless. In the next few months, particularly after the holidays, I will be out there throwing offers at anything that looks decent at a number that fits my criteria, regardless of the ask price. 

What will be important here is how professional you look to the seller. They will be tired. They will have dealt with the tire kickers. If you can position yourself as a closer, they will be much more likely to accept. Make sure you are personally in the best borrowing position, as credit boxes are already tightening. It might be harder to fund these deals pretty soon.

"But what about high interest rates???"- It is just a number in your calculator. Conservatively underwrite that number, and you should be fine. 

A unique combination of things over the next few years could turn good deals today into great deals tomorrow, as @Daniel Scruggs put it to me. Rents generally rise more in line with inflation and overall housing cost than the actual value of housing (think monthly payment, vs home value). Both of those things are likely to continue to go up in the next few years, which leads me to believe rents will continue to rise at a faster than average rate (maybe not the crazy rates now, but higher than average). At the same time, I find it hard to believe that mortgage rates will continue to remain this high for 3+ years. If the Fed accomplishes their mission of reducing inflation, they should start to slowly back rates down to earth (maybe not as low as they were, but lower).  I think they still have room to go up, but I don't think they will stay forever.

So hypothetically in 3 years, you will have bought a good deal now, rents will go up, rates will come down. If you refinance then, you could turn a good deal, into a great deal. 

Now, I am not naïve enough to think those things will definitely happen. Let's say NONE of it happens, and the only thing you get is a good deal- you are still getting out ahead! 

Where am I wrong? I would love to hear what others that are smarter than me are thinking. 

Biggest con for me is the regulatory environment in the city. They make it very difficult for small landlords or anyone trying to do the right thing to make money. The eviction process is very long and tenant friendly, and several other regulations are prohibitive. Suburbs are a different story for the most part, with exceptions. 

Crime in the city is another big issue for me. 

Age of the housing stock can be a pro or a con. For the most part, Philadelphia and the immediate suburbs were build up in the Early 20's through the 40's, most of which were designed with hot water heat or steam systems, knob and tube wiring, and cast iron plumbing, all of which are maintenance nightmares. If you know what you are looking for and not afraid of a big rehab, these can create opportunity others don't want to touch. 

For Pros: @Rob Lawrence hit the nail on the head. Many different types of markets exist for whatever your looking to get into within a fairly tight geography. Of the major cities on the northeast coast, values are some of the lowest for what you get. Most of the markets also didn't see meteoric rises over the last few years that are at risk of coming down if the market goes south. In fact historically values have remained relatively steady and in line with national averages, avoiding huge peaks and valleys some other markets have experienced. You might not get the same appreciation you are getting in some of the hotspots around the country, but you likely won't get the downside of that equation either. 

In short, if you're investing in SE PA, be ready for a big rehab, I argue to avoid the city, buy for cashflow and steady growth. 

@Eric Samuels will do! 

@Angela Romero Shoot me a PM with your email and I will connect you with my contact there. 

@Joakim Ryan for long term loans check out Philadelphia Federal Credit Union and TruMark. Some of the best terms I have seen. Hard money loans are all over the place. Not a bad idea to look into using a broker for those to help you compare lots of different options vs. getting tied down to one. 

@Gabriel L. did PFCU increase their rates? I spoke to them very recently and they still hadn’t increased their rate, but it could have happened since then. 

If so, I’d look at using a broker. Different banks and raising their rates at different rates and the one with the lowest could be different every week. A good broker would be in tune with these changes. I have a good one if you shoot me a DM.