All Forum Posts by: Paul McCormick Jr

Hey @Eassa Ayoub, 

I don't think your plan to partner in a deal to have them occupy a property then vacate is necessarily a gray area. It's just a matter of specifics I would think, are you talking about a regular SFH or Multi-family property? The only hitch for that plan I would think would be the "low down payment" part for a mortgage you mentioned. If you're talking about an FHA (3.5% down) then I do not believe you can be on the mortgage. I believe this is because it has to be owner occupied and has more specific criteria that you'd probably have to research more. Now there are probably smaller banks or credit unions that may be willing to do 10% down, 90% value loan, or other piggy back variations if you are trying to avoid PMI but keep a lower down payment. If you are attempting to borrow money with another person, I personally would want to make sure you have your i's dotted and your t's crossed when it comes to the specific language in the mortgage or contract you have with your partner about who pays, who pays if it falls through, etc.

Now for Philadelphia, there are probably a lot of different areas you can invest in or look in that would meet your criteria. It's very large obviously so I don't think there is one neighborhood in particular but probably a few different areas. It seems like Point Breeze prices/values are higher than they were a year or two ago, but you can always look. I know Brewerytown was getting scooped up recently and over the past year with talks of commercial/residential development and renovations. The Fishtown area over the past couple years has been expanding, and the edge of it just keeps extending and extending. Now, there are places in Kensington that are being advertised as Fishtown, or East/West Kensington, but your mileage may vary and definitely research and do your due diligence. I'm not sure what your price range is, how much you want to spend on renovations, what your targeted ARV would be, I think that will help narrow your potential search to more specific areas.

Just my two cents though, and also not trying to say you can't find any deals in "prime" areas already, just have to look hard enough, do your research, be prepared, and get a little lucky. 

Hello all,

I had a general question about time stamping photos, I was wondering what everyone's best practice was for time stamping photos during the move-in & move-out process with tenants. I'm not sure if I'm thinking too much into it, but do you use a newspaper or something in addition to your camera/phone to prove time stamped photos. 

My cautionary thinking was that with technology it's not to difficult for someone to change the time stamp on digital photos. I was wondering if anyone had foolproof ways of time stamps and if anyone had any experience or stories about being challenged in small claims court.  I know it's a stretch, but just curious, and wondering how everyone protects themselves. 

Thanks,
Paul

Hey all, 

I was planning on attending a Philadelphia DIG meeting next month and was just wondering if anyone had any suggestions for any specific subgroups to go to for the first meeting. I know naturally, you would want to go to the subgroup meeting for the area in which you plan to invest. I've never been and just want to see a meeting.

I've attended numerous SJREIA meetings which are great, but wanted to check out the Philly DIG meetings as well so any advice would be much appreciated. 

Thanks,
Paul

@Account Closed  

Hey Mike, 

That's not a bad idea at all! I know just from looking down that avenue myself, I've noticed that multi-families are not as common closer to center city. A lot of them I've seen are more up in the northeast or in the suburbs & S. Jersey. 

Not to try and discourage you at all, there are some that definitely can be had! But I think they are less prevalent in the Philadelphia area for some reason. I think a lot of the neighborhoods are mostly single family homes and the rentals are more apartment complexes instead of  duplexes/triplexes that were built or converted & split from single family homes. 

I continue to always look myself as part of a habit because those are what I would be looking for as well. So good luck on your potential search

Paul

@Matt Woods Sorry, this is a little after the post, but I would say it's wherever you can find great deals and the numbers make sense. I am currently in Delaware County myself, there are parts where you can get great cash flow but the appreciation factor isn't there. Best place would be where you could get potentially both. I think that West Chester and Phoenixville are very popular right now for SFH sales, not sure about rentals thought.

I would say I 100% agree with @James Brand in the fact that wherever you decide as long as it's close to Public Transportation/SEPTA (ie regional rail preferably, bus/trolley lines next). I think there would be better demand for either the rentals or the property itself and if you wanted to get out of it at some point in the future. Like he said, Philadelphia is a major Metropolitan area, which has a ton of employment opportunities, so you would definitely want potential tenants to have easier access to that, again that's just my opinion though. 

@Mark Adler That's a tough situation. I'm not sure how leaving the full time might affect things, but I know from the local SJREIA group there is @Joseph Scorese. You can look him up, he has a Bigger Pockets profile, I can't post his contact info on here outside the Marketplace. I believe he works at First Trust bank and I believe he said he does Portfolio Lending and Hard Money and know he does loans & deals in South Jersey and Philly. 

Hopefully it works out, good luck. 

Paul McCormick 

@Carla Krash Yes, the cash return you can possibly achieve through real estate is very enticing indeed!  Hopefully, the possible "negative" aspects of selling  real estate and out of state can be further clarified to not deter you.

I don't think selling the property while being out of state is that big of a deal or potential problem personally, people do it all the time. The only thing to be aware of is of any state specific tax laws in regards to real estate investing. For example, the article you linked to they were selling a property in Pennsylvania and lived in Maryland. I believe Maryland has a unique law where if you set up an LLC to own a property in Maryland, you need to file an LLC tax return every year regardless if you have bought any properties with it or any other investing related activity.

Unfortunately, most investors will have to pay taxes on real estate at some point in their investing careers. If you ever hear or read of investors saying they are not "paying" taxes, what they usually mean is that they are deferring their tax payments to Uncle Sam until some point in the future (via a transaction called a 1031 exchange). 

But, if you are not a tax professional I'm going to assume you will be using a CPA for your personal return including your real estate investing activity. You would just have to make sure they have the experience and technical knowledge of any of those nuances per the state she would be selling it from. In regards, the depreciation recapture and the capital gains tax, that is something that you mostly likely would have to pay if you were to sell after x number of years holding the property and wanting to keep the gains to pay off your own mortgage. Now as a caveat it all depends on the person's tax situation and you should definitely consult with a tax professional (CPA) to discuss your options and how to best accomplish what you are trying to do. 

@Maurice Etienne

1.) I think there is no right or wrong financing strategy based on the location. I think it comes down to personal preference and what type of multifamily you would be looking to get into. If you wanted low money down and were going to occupy a unit, you could an FHA loan, which has a down payment as low as 3.5% if you qualify. This might be better if you wanted to have some cash leftover to do any renovations the property might need. If you do the conventional financing route (30/15 yr fixed rate), 20% down, it might be better if you wanted more equity in the property up front and to avoid PMI.

2.) I would suggest using areas as a guide but not definitively. My thought process would be if the #'s on the deal make sense and you are ok with the area, then specific zip code may not matter as much. Again, it's probably your own personal preference. What type of tenant you are looking to have rent your property, and you can work backwards from there. Do they want to live in a certain zip code or neighborhood, a good start is where YOU would want to live personally and work from there as well. Some areas (South Jersey, parts of Del. County, the northeast) I've looked and found places where the #'s made sense. I noticed multi families closer to center city are very expensive (way under 1% deals) and hard to come by as well, just my 2 cents though. 

3.) As previously mentioned, the deal calculator here on BP is very, very good. Alternatively, I usually try to eyeball things according to the 2% rule, and 50% rule as a guideline, again not definitively. Also, another good resource is looking under the Shared File section of the BP website. There are a ton of useful calculators people have uploaded to use, just as a caveat though make sure you know how they are working in regards to what they take into account, exclude, etc. (Cap Ex, Vacancy factors, other variables that are estimated). 

Good luck!

Paul McCormick 

@Zoe Mercier  Just trying to be devil's advocate here, but what would your exit strategy be? If some potential buyers of the property can't get financing how would you get out of the property if need be? What would the process be for dividing the properties or changing the zoning?

I am also curious as to how this seller financing would work as well. I thought that usually you could negotiate more with seller financing as to the terms, down payment, interest rate, etc. Because they are having problems selling to "normal buyers" I would say you might be able to work something out beneficial to both parties if you wanted to get creative.  

I  also thought that the insurance, taxes, as well as the current leases can be figured out during the buying process/due diligence and that something can be put in the purchase contract regarding what to do with those items going forward.

-Paul

Congratulations @Nate Burnett on the new MFH, and house hacking plan! 

I had a question for you, I'm hoping to have a similar plan and house-hack a MFH for my first home purchase. So I was wondering what methodology you used to value the duplex and put in an offer?

I'm curious, were the rents and or operating costs in the listing, or were you using rent-o-meter/just browsing local rental ads for a ballpark? Did you use comps, or use the local cap rate for the MFH's to come up with the offer?

Thanks, and Congrats again!

Paul