All Forum Posts by: Ryan D.

@Mike D'Arrigo thanks! Can’t agree with you more. It’s funny when people say in both the stock market and real estate market how this is the 10th year of the bull market. What people never seem to remember is that you don’t measure a bull market from the bottom of a bear market, you measure it once it passes the previous bull market highs. So by that measure we’re in year 6 for stocks and real estate is local but I use $REZ (Real Estate ETF for National Price Data) and that recently just surpassed 2005/2006 highs. Bull markets always climb the wall of worry and I truly believe the real estate market in general is undervalued compared to equities. The best time to buy was yesterday 🙂

@Gregory Hiban We have done at least a dozen walkthroughs with GCs to get estimates on other properties and to better my own ability to estimate rehab costs. After 5 or 6 properties of me estimating and a family friend who is a GC estimating, my guesses we’re pretty much spot on with his. My original estimate was 80k rehab but after having our GC walkthrough when it was under contract he said 65k is much more realistic and plenty conservative.

We have no intention of flipping the property. This is a long-term play. As you’re local to the area this property is in the Adaire catchment of Fishtown so supply is very slim in this area.

@Matt Mason Exactly my point. No one ever knows where the bottom is. This notion that a recession happens THEN the investor on the sidelines somehow musters up the courage to finally do their first deal is laughable. The only people who buy in recessions are the people who have been buying in every stage of the cycle.

Hi BP,

This is a long overdue intro post. I'm Ryan and I'm a victim of recency bias. See the thing is we all either got slaughtered personally or had friends/family get slaughtered in 2009 when that once in every ~70-year storm hit. Call it a Panic like we did the 1870s, or a Depression in the 1930s or a 'Great Recession' as we do in the 21st century - the end result is still the same. A global reset that comes with massive losses in asset values. This leads us as investors to being terrified that another downturn is awaiting us just around the corner - recency bias.

If you're like me, you've been telling yourself the past few years you're going to wait to for the market drop again before buying. I get that. I like to buy when things are on sale too. But what if this little dip we've experienced the past 6 months (market depending) is the sale? Who says where the bottom actually is?

It seems every day I log in to BP there's some new doomsday post about the market downturn or recession and how it's supposedly here. Sure, things have softened a little bit but this is by no means (in my market) a downturn. This recent dip in prices was more than enough for me to kick my deal analysis paralysis and pull the trigger. Here are the details of our first deal:

• Took 8 months to find
• Saw over 100 houses in person
• Made 20 offers on MLS properties
• Bid on 15 houses via Sheriff Foreclosure Auctions
• Wrote 5 direct mails (3 responses but no deals…yet)
• Saw 3 homerun deals. Got outbid on the first 2 but landed the last one with an all-cash offer, no contingencies w/ a 10-day close. Here are the details of the deal:

4 bed/1 bath Fishtown, Philadelphia, PA

Purchase: 205k

Rehab Estimate: 65k

Conservative ARV: 400k

Traditional Rent: $2,400/m

This is mostly an appreciation play if we rent it via traditional yearly leases but we are more than likely going to Airbnb the property once we are done living in it while rehabbing. We've operated a couple of Airbnb's on master leases that cash-flowed beautifully for a couple of years and helped us pay off all of our debt while testing our short-term rental strategy. We plan to refi once we complete the rehab, then BRRRR our way through this "downturn", and go find our next property. Hopefully a multi in a grittier part of Philly.

This is my first rehab so I'd love to meet local investors who have experience doing live-in flips or bigger rehabs (pop tops, rooftop decks, additions etc.) in the Philly/Riverwards area. Thanks!

Congrats @Matt I.! Are you in the Norris Square area? I'm working on a 4b SFH in Fishtown right now in the Adaire catchment. Doing a similar rent hack with my best friend paying $500/m to live in the construction zone we're currently calling home. I'll be BRRRRing this and will be using it as an Airbnb long-term.

2nd this. I believe OP bought in Fishtown. With Fishtown, it seems we've been relatively stagnant since Summer 2017 with increasing inventory and DOM, but it still makes sense to hold. You are simply too leveraged with this property and aren't taking into account this investment seems to be mostly an appreciation play as opposed to cash flow. It also depends on if you're in Fishtown proper or north of Norris St. - Kensington. Kensington, Flatiron & Olde Richmond were in a microbubble in Summer of 2017 since they rose to almost Fishtown levels and we've seen a good amount of softening since then. So for that area, I think it'll take a little longer to get back to its rising pace prior to 2018. Either way, if you're in Kensington or Fishtown, you should understand its an appreciation play & either hold or sell to me :)

@Mijin Kim congrats on taking the leap! Some deposit specific questions - is your deposit escrowed/with a title company? Also, I’m assuming they let you see the property before putting the deposit down? I ask because the way it reads it seems as though the deposit happened really fast.

Wholesalers have the tendency to really jack up ARVs so your right in taking a more conservative approach. Quick math for seeing if a property is a good deal would be to use the 70% rule or 80% rule for areas that you are buying for appreciation. If ARV is 100k then you have 70% of that, 70k, to spend on purchase & rehab.

In your scenario the ARV is 65k so you have 45.5k to spend on purchase & rehab if you follow the 70% rule. So going off of your 10k rehab estimate, you'd want to buy the property for 35.5k. If you feel your area is more representative of the 80% rule and your buying for appreciation then you'd have 52k to spend on rehab & purchase. These are just quick ways to calculate a deal and shouldn't be solely relied upon for making the decision to buy or not.

Happy to address any other questions you may have!!

Thanks, Troy. Just for clarification, let's say an RM-1 property was on a 1020sqft lot, would this property be able to be a triplex? According to a local realtor, he said it would be able to. The way the zoning guide reads to me is that this property would only be able to be a duplex since 360sqft x 3 units = a minimum of 1080sqft lot size.

Daniel & Troy, with regard to an RM-1 zoned property, does the 360sqft per unit requirement matter for existing properties meaning not new construction? I was told by an agent that the 360/u is only enforced with new construction but I don't think that is the case according to the zoning guide. 

An example would be an RM-1 zoned property that has a lot size of 1200sqft, would this property be able to be a triplex by right if it made sense? Thanks for any insights you can offer. 

@Hattie Dizmond @Lamar Cannon Looking for advice with regard to a non-refundable deposit with a reputable wholesaler in my region.

This is my first deal with this wholesaler and I've been wanting to do a deal with them for the past 2 years. We agreed to a non-refundable deposit of 5k after we did our due diligence, initiated the AOS and knew we wanted the property. Side note - if you are a cash buyer and working with a legitimate wholesaler, non-refundable deposits are perfectly fair and should be expected if you want to lock up an offmkt deal for weeks.

Our 5k deposit is now held in escrow at a local title company. The issue is the closing date on the AOS is on or before today, the 25th. We've been trying to close for weeks, have the cash on hand and are eager to close but the seller is having trouble vacating an existing tenant. From the wholesaler side of things, would you consider this to be a reasonable breach of contract since they are unable to get the seller to close by the agreed upon date? We still want the deal, we just want the property delivered vacant as it was agreed upon before initiating the AOS. If this continues and they are unable to hold up their end of the bargain, can we receive our deposit back?