I want to own investment property. Where do you all suggest? (Pittsburgh: real estate, apartments)

[painkillers]

Here's my situation:

I am a transplant from California working in finance here for the next 12-16 months before I get relocated. I have established some solid relationships with people in real estate here I hope to maintain and partner on stuff. I have been living in South Side Flats since the summer in a great house with great roommates I found. I have a moderately high W-2 job (actually in real estate finance) and about $30k sitting on the side. I think this is a great opportunity for me to begin investing in real estate, since back where I'm from your starting home costs $400-600k depending on the neighborhood. I want to do the following three things, listed in priority:

1) Buy a 2-4 multiunit or SFR to live in and rent out the other bedrooms. I would like to put 5-10% down and find somewhere I could put some sweat equity into the property to increase the value. After I move, I could either keep renting it out of state or sell. I'd preferably like to be in Southside Flat, maybe Mt. Washington or the area around Shadyside.

2) Do a flip to generate more cash in the short term. I've made a few offers over the last few months, but haven't gotten any accepted. But I feel like I am always coming in too low over competition. My repair estimates are significant - $40-60k on most properties. I conservatively assume what the ARV is on the sale. When I see most homes sell $110-130k and there's a small handful that sold at $170-190k, I assume something closer to 140-150k. I would hire a contractor to do these projects and have spoken with some.

I am looking at these neighborhoods for flips listed by primary and secondary areas. I have these areas, just because they're close to me than out in the suburbs so I've driven them more often. I am of course open to suggestions.

Primary:
South Side Flats
Dormont
Brookline
Crafton (South of Stueben)
Avalon
Brighton Heights (north of Woods Run)
East Liberty
Garfield (towards Highland Park/Morningside)

Secondary:
Lawrenceville (I know its priced high now)
Beechview (ARV isn't really there)
Mt. Washington (have no idea how to value houses here, there's a ton of variance)
Mexican War Streets Area?
Shaler?

3) Buy rentals, preferably multi units. I'd probably like to pick up my first rental at the end of the year 2017 or into 2018. I'd like to own larger unit sized properties. I'd like the flipping to help generate some cash that could help purchase some of these down the road over the years.


The trouble I'm having is not being a 20-year resident where people know neighborhoods on a street by street basis. Here in town, it's so different that what I'm used to. Back in CA, you know a zip code will be $XXX when you fix it up. Here, you could go across an intersection and find a $30k home that's a dump vs a $300k home that's beautiful. It's really hard to not overpay because you aren't familiar with these neighborhoods on a street by street basis.

Appreciate any advice!

[ferraris]

I think you're getting ahead of yourself beyond maybe financing a multi-unit to live in yourself and rent out the other units. $30K isn't a lot to play with in real estate, even in Pittsburgh.

[Paul2421]

As you are finding, Pittsburgh real estate really isn't that cheap when you get down to it. It is great for someone making out of state wages but the houses are priced low because wages are low and will likely stay that put. Pittsburgh was pretty much immune from the housing crisis but price growth is slow because of that.

Unfortunately all of the areas you are looking in aren't going to have much of a return in overall growth at least in the short term. Some other areas could be a good 10-20 year play such as troy hill but that is still risky. There is just not the job or population right now to make all neighborhoods in the city winners.

Flipping is really based on how low of a price you get and how risky you are. The good deals are probably going to those with good connections.

It seems like you have a great approach though so I would recommend keeping up your research.

[guy2073]

Multi units are hard to finance, you may want to start with a duplex. I always look for the least amount of costs to purchase to allow me the highest roi. I am an amateur when it comes to real estate transactions but i can make more money buying a property in swissvale, braddock or homestead than i could in Lawrenceville.

[Lost_In_Translation]

1. I'm not a real estate pro, but flipping in Pittsburgh is very hit or miss. You're looking for the right buyers and frankly unless you get properties way cheap and in the right areas, you'll be breakeven to underwater. I invest but specifically stay away from flips.
2.For multiunits, Duplexes are the way to go. Once you get above 3 units, sometimes the city will consider you a commercial building and then things get expensive if you want to upgrade and renovate. Also, stay away from single families converted to duplexes. Old school Pittsburghers did some atrocious things to convert these buildings and it will come back to bite you. Stick with original configuration duplexes and your life will be way easier.

[xdv8]

Look at Garfield if you can find a duplex. Keep it to within 3 blocks of Penn and you should be able to get a decent return in the relative short term, if you don't overpay of course. Further up the hill could work if you wanted to hold for at least 5 years.

[Retiredcoach]

I am sorry to say that you sound as if you are watching too much HGTV. Despite the fact that these scripted reality housing flip shows are showing simplistic ways for anyone to make tremendous profits flipping/renting properties, many fail in the process. They tend to underestimate the actual costs associated with flipping the property, a grasp of the market in which they are buying/selling/leasing, the knowledge and experience of contracting and/or repairing the property in a cost efficient manner, purchasing the potential "value added" property at a price to show profit at sale, the cost of the time elements involved, and sustaining a substantial enough bankroll to pay for the unexpected costs that ultimately arise. I would hope to see you succeed in your property acquisition, but a whole lot of things will need to fall optimistically (often unrealistically) into place for you with the plan that you have tentatively in place.

[jea6321]

Im assuming you are going FHA? if so you can do up to 4 units. You can no longer do owner occupied 5-10% down conventional loans. Its fha or 20% conventional. 3 and 4 units typically will be better from strictly a financial point of view, but they are also more work and can possibly have more potential problems. ( economies of scale work in both good and bad ways)

FHA loan limits are a little over 400k, so it opens up a good bit of options. If its currently rented, you can use the income from the units you do not plan to live in to help qualify for more loan.

really you need to know what your ultimate goal is going to be. Do you want maximum cashflow potential? max appreciation potential? what types of tenants are you looking to target? how handy are you? do you own most basic tools? do you own a vehicle that can transport materials?

for neighborhood, just buy where you yourself would like to live. I always use that as a starting point with people that want to do a live in multiunit. drive/walk around the area, and while looking at the building keep asking yourself "would I as a renter want to rent this place?" chances are if you say no, so will most potential tenants that you show it to. Also keep in mind the demographics of the area. If you want to target young professionals, you will want to buy in an area that those people want to live.

As for flipping, there is a ton of competition right now. Lots of contractors and investment partnerships that have systems in place and fairly deep pockets. Id highly suggest not going down this route unless you are confident in the project. Most people break even or lose money on their first flip because they dont plan properly or way underestimate the cost to rehab. 40-60k can be eaten up way quicker than you may think. thats actually a very small budget unless its a very basic reno.

[jea6321]

Originally Posted by Lost_In_Translation

2.For multiunits, Duplexes are the way to go. Once you get above 3 units, sometimes the city will consider you a commercial building and then things get expensive if you want to upgrade and renovate.

Im not aware of anywhere that considers 3-4 units commercial unless its a mixed use building with a commercial component. any 3-4 unit that is just apartments should always be considered residential. The only thing that really differs from 2 units and 3/4 is the need of a fire escape to get an occupancy permit.

[Lost_In_Translation]

Originally Posted by jea6321

Im not aware of anywhere that considers 3-4 units commercial unless its a mixed use building with a commercial component. any 3-4 unit that is just apartments should always be considered residential. The only thing that really differs from 2 units and 3/4 is the need of a fire escape to get an occupancy permit.

If you look at zoning permits, there is a 1,2 and 3 unit residential, then goes to a multi family permit which encompasses commercial apartment buildings, where you need things like integrated fire prevention system like sprinklers. Usually the old 4 units did not have them and they were grandfathered in, but once you begin renovations, it becomes a judgment call by the inspector whether you should or shouldn't have these systems and good luck getting your occupancy permit from the city then. It's a crapshoot as to how various inspectors interpret the code and permit. My advice is stay away from 4+ unit buildings if you're a small operator. The city is not here to make your life easy and they are not landlord friendly.