All Forum Posts by: Jeremy Taggart

@Imtiaz Koujalgi generalizing by zip code doesn't work in mostly all zip codes in the Pittsburgh area. For example this zip code includes parts of the Point Breeze neighborhood in the city which is an A area, all the way to East Hills and the rougher parts of Wilkinsburg which are borderline D areas. Then you have the in between like Churchill and Forest Hills also in this zip code. Even within the same neighborhoods you can be very block by block or street by street so makes it tough. Generally best way to compare areas are down to the specific neighborhood/borough/township though. 

@Alec Jacobs about half my portfolio is in Beaver County and we do quite a bit on the sales/leasing side there as well. Tends to be a little better rent/price ratios compared to Allegheny County for similar quality areas. Probably won't be as high of a ceiling appreciation wise long term as closer to the city but I think it's a good area for rentals in general being close to the Airport and Cranberry. Decent amount of local jobs as well. 

@Kadia Lawrence Yeah it helps to cast somewhat wide of a net if you are trying to build. Sometimes tough to get enough deal flow if you only focus on one area.

And yeah I would consider Homewood, Lincoln/Larimer, and Wilkinsburg east of the busway to be the wild cards right now since they're still pretty rough. My money would be on Larimer first though out of those.

The areas across the river and interstate 376 closer to the city aren't quite as high crime so they are starting to see more of the spillover right now. 

@David Kraus If you want turnkey 3BR with a budget of $150k in the city I would say Carrick, Observatory Hill, Crafton Heights, Southside Slopes, and Etna (technically outside city but just as close) would be good options 

@Luke Tetreault going in cap rate doesn't really mean as much if you are buying value add. You are more so going to want to make sure you know market cap rate since it will dictate your value once stabilized. I would ask some local brokers or investors that work in that space as they'll give you the best estimate of that. Like I said kind of subjective so you may get different numbers depending who you talk to but best to take an average of multiple opinions or comps if you can. 

@Kadia Lawrence I would say the most "sure bet" areas right now that have the most upside are the areas that directly border the East End neighborhoods of the city. Spillover effect is starting to happen albeit it still pretty early. Most of the East End neighborhoods closest to the hospitals and universities won't cash flow as long term rentals anymore and are starting to become unaffordable for owner occupants as well so it's spreading outwards. Same with the neighborhoods directly bordering downtown on the North and South. 

I think the areas that aren't currently high crime or too run down will stand the best chance because they will attract owner occupants which drive appreciation. So for example right across the river like Troy Hill, Millvale, Etna, Sharpsburg. Or just across Interstate 376 on the other side like Greenfield and better parts of Homestead/Munhall, Swissvale, and Wilkinsburg. 

The high crime/more run down areas are more of a wild card for example Homewood, Lincoln/Larimer, and the not so nice parts of Wilkinsurg or Swissvale. Potential for sure long term but riskier getting into right now and will likely have to deal with management headaches for the next 5-10 years until/if they would start to turn.  

I also like neighborhoods along route 65 like Brighton Heights, Bellevue, and Avalon. Along with southern neighborhoods like Beechview and Brookline. Carrick has started hitting it's stride in the south as well. I don't think those areas will see massive appreciation but do have good upside going forward as they've already start gaining pretty good traction as a result of the top tier neighborhoods closer to the city on the North and South getting expensive at this point. 

West is still the most affordable section of the city that I think will benefit the most if Pittsburgh were to go thru mass gentrification but that's more of a toss up right now IMO. Most everything stems from the East.

I am also a fan of areas close to either Cranberry Township or near the Airport/Robinson Towship. South Fayette/Bridgeville area as well along interstate 79. Tons of development going on there so it's also starting to benefit residential real estate located near there as well outside the city.  

@Luke Tetreault There are a lot of nuances to this, but high level it depends on the NOI (net operating income) of the property once rehabbed/stabilized and the market "cap rate" of where your property is located. If you have both of those numbers then you can back into a "market value". The general forumula being NOI divided by Cap rate equals property value. A "cap rate" is generally what is considered the return you would get on a multifamily property in that area without having a mortgage on it. Typically that number is higher in low end areas, and lower in high end areas. The rationale there being higher end areas are less "risky" so investors are willing to accept a lower return on properties there. Market cap rate is a somewhat subjective measure and appraisers might not all agree on what it is. The best way to find this out is to speak to investors doing 5+ unit multifamily or commercial brokers. You can also try and back into a cap rate by looking at what comparables sold for if you are able to see the financials on those properties.

The NOI is going to be calculated by taking your net income after all expenses without accounting for your mortgage or major capex items. A good rule of thumb is to assume 25% of gross income for expenses if you don't have actual numbers. These will cover your vacancy, maintenance, and property management. This will obviously vary but good rule of thumb. You will also want to subtract property taxes and insurance costs. This will give you your estimated NOI to use for the calculation. Take both of those numbers into account and you should be able to get a pretty good idea of value.

As for lack of comps that can be risky business on the back-end refinance. I always feel more confident going in knowing there are comparable multifamily the appraiser can use in the immediate area ideally. If there aren't they may either go into similar towns that are further away or start trying to compare it to other commercial property types that are similar like a mixed use building. Hope that helps!

@David Kraus 150k budget if you are looking for a 3BR in decent shape can get you into a C class neighborhood in/around the city. If you go outside the city you can potentially get into a B area for that price point. You can get B in/around the city for 150k all in if you are okay with buying a fixer upper. Hitting the 1% rule for 150k and under is doable as well on the cash flow side. Do you know general part of town you are looking to be in. Plenty of neighborhoods in that price point. The city of Pittsburgh itself has 90 different neighborhoods alone haha. 

@Tyler Fitzpatrick I've done 6 house hacks here in Pittsburgh myself so I can definitely attest to the strategy working here. Might do a 7th this year. 200k is a bit tight of a budget if you are looking to get into 2+ units in a B class or better area in the city on something that's turnkey or close to it. Most of the B class areas in and around downtown are running low 200's at this point. You are starting to creep into C/C+ once you dip down below 200k for turnkey on a duplex. Cavet here being if maybe one or both units are 1BR units or a studio. The price per unit goes down a bit as you get into 3/4 units which I tend to be a fan of if you are house hacking especially with the FHA loan. Not as many of those but they make it more doable to live for free if that's the goal. 200k budget will get you a lot more as you get further away from downtown. Most of the properties that will still at least break even on the cash flow side with an FHA loan are going to run about 50-120k/unit give or take depending on area/quality of property. My last 2 I have bought were 4 plexes in A/B areas close to downtown and I've been able to live for free. Hopefully that helps!

@David Kraus when you say "family apartment" are you looking for a multi unit building? Or are you looking for a single family home?