Home prices are wildly high around Pittsburgh and they are selling (Dormont: chapel, homes)

[PGH423]

Originally Posted by gg

True. I was only comparing Pittsburgh to Pittsburgh 5 or so years ago. Prices soared over that time for Pittsburgh. My mind wasn't comparing Pittsburgh to San Francisco. We will never get there unless San Francisco falls into the ocean.

Well, that's silly. We're not even near the national average.

[SteelCityRising]

Originally Posted by PGH423

Well, that's silly. We're not even near the national average.

For metro areas? Perhaps.

I don't see how anyone can say that rents are far below average in the city proper, though. I mean the suburbs are usually less desirable, so it makes sense that they would be cheaper universally.

[jea6321]

Originally Posted by SteelCityRising

For metro areas? Perhaps.

I don't see how anyone can say that rents are far below average in the city proper, though. I mean the suburbs are usually less desirable, so it makes sense that they would be cheaper universally.

there are so many relatively inexpensive apartments out there.
I found these in about 2 minutes of looking. all within short distance of your current apartment. I think you just need to move if you are unhappy with your rent/apartment/landlady. Honestly, she might just keep raising your rent in hopes you do move so she can update and charge more. It happens all the time. the logic is to just keep raising, if the tenants stay thats fine, but if they move you go and spend some money fixing up the place and can potentially charge 15-25% more.

https://www.zillow.com/homedetails/3...98825002_zpid/

https://www.zillow.com/homedetails/3...04077690_zpid/

https://www.zillow.com/homedetails/9...05245142_zpid/

https://www.zillow.com/homedetails/3...02836711_zpid/

https://www.zillow.com/homedetails/3...11400532_zpid/

https://www.zillow.com/homedetails/3...11400472_zpid/

[28CarsLater]

Originally Posted by Doowlle34

This is the latest high-priced home in Dormont that is causing some disagreement in the community:

https://www.zillow.com/homedetails/1...11571209_zpid/

Some residents have expressed shock at the rise in prices in recent years, while others (including folks in real estate) have suggested that the work here is well-done and that the price is not unreasonable based on comparative sales.

For my money, I quite like this listing, that just hit the market today -- with the only drawback for me being the fact that it only has one bath:

https://www.zillow.com/homedetails/3...11655684_zpid/

I'm familiar with Dormont, (or Dirtmont as we called it), and I think that while beautifully done is eye watering in terms of price.

Even Zillow shows it sold for 85K in 2017, so even with a solid 100K in it, it becomes 350?

[28CarsLater]

Originally Posted by PghYinzer

Hit the panic button when houses in Beechview (with great public transportation by the way) start going for $800k+.

I overall agree with your post but this would be a boone to the South Hills

[28CarsLater]

Originally Posted by tyovan4

Meanwhile, its impossible to walk through certain neighborhoods without tripping over a sign advertising 'luxury' apartments that someone like me could never afford. Even though it seems as if the market is saturated, the tax breaks continue for more 'luxury' units to be built.
...

Your overall post is brilliant, I wish I could upvote it a thousand times. However if you're curious as to why only "luxury" units are being built this helps explain why:

https://www.zerohedge.com/news/2018-...ment-developer

From the article:

To be sure, none of this is happening outside the luxury market, where rent increases are still strong due to low supply. Developers say they simply can't afford to add anything but luxury.

"The two-by-four doesn't care whether it's in a luxury building or in an affordable building. It costs the same," said Bozzuto. "The differential of course, is the rent and there's a huge disparity in high-end rent versus low-end rent. So the issue is for us to develop an economically viable, feasible project, it has to be, by its very nature, high end. The rents have to be high to support the cost."

***The rents have to be high to support the cost***

Inflation.

[jea6321]

Originally Posted by 28CarsLater

I'm familiar with Dormont, (or Dirtmont as we called it), and I think that while beautifully done is eye watering in terms of price.

Even Zillow shows it sold for 85K in 2017, so even with a solid 100K in it, it becomes 350?

100k doesn't go as far as a lot of people think it should in a old house rehab. Ive done a few and have been actively involved in many more and most often if you do a quality flip it ends up higher than that.

also, for quick math. say it sells for 325k(possible), and the total Reno only cost 100k. closing on the front would be about 3k, on the back would be about 27k. taxes, insurance, utilities for 18 months. lets say 2500. we can use 100k for the Reno if you like but id venture to say its closer to 125 or possibly 150.

at 100k Reno selling for 325, you get a profit of 108k. sounds lovely
at 125k you get a profit of 83k pretty nice
at 150k you get a profit of 58k. still a good deal.

but is this the whole story? not at all. you still have to fund the project somehow. either your own cash, credit line, private/hard money. looks like by the time this closes it will be in the ball park of 18 months which is nice since it will be capital gains for taxes and not ordinary income. however, the financing costs will add up.

with cash, its just the opportunity cost of the money that could be sitting in an index fund or dividend paying stock. use at&t as 6% dividend. you could do nothing and collect approx 20k over the 18 months for having the same amount of capital invested excluding any appreciation or depreciation of the asset. So if using cash, take 20k off the above profits.

with a credit line against a rental property or your own home at say 6% interest. you will be paying approximately the same 20k in interest over the life of the project. so again take 20k off the above profits.

if using a hard money or private lender ( which a lot of flippers use), you will be paying anywhere from 9-13% as interest only currently. lets just use 10% for simple math. over the 18 months you will spend approx 30-35k in interest. so again take this off the profits.

but wait, you still owe tax on the left over profit. with a 15% capital gain on the best case situation the final spendable dollars(subtracting out the opportunity cost) would be about 75k. calculated as an annual ROI, this works out to be about 29% which is nice. but on the more likely situation of say 125k Reno with a private money loan at 10% and the after tax dollar is now only 42k. the ROI is technically infinite because you used other peoples money, however if the property only sells for say 300k, you are almost to a break even once you add the extra holding costs.

the economies of flipping are a lot more nuanced that a lot of people tend to think. they just see a house sold for 85 and lists for 350 so the flipper is making 125k+ On occasion someone makes a really good profit but a lot of times the Total profit is 10-20k for a decent bit of time and effort finding, managing and selling the project.

[28CarsLater]

Originally Posted by jea6321

the economies of flipping are a lot more nuanced that a lot of people tend to think. they just see a house sold for 85 and lists for 350 so the flipper is making 125k+ On occasion someone makes a really good profit but a lot of times the Total profit is 10-20k for a decent bit of time and effort finding, managing and selling the project.

Overall a solid post! However if this is typical profit couldn't this be achieved with much less effort on less of a scale? I.e. purchase for 85K, do bare minimum changes, price $125K and take $110-115K?

[PGH423]

Originally Posted by SteelCityRising

For metro areas? Perhaps.

I don't see how anyone can say that rents are far below average in the city proper, though. I mean the suburbs are usually less desirable, so it makes sense that they would be cheaper universally.

Rental prices are more reasonable (rather than low). But I was talking about house prices. There may have been a tangent somewhere about rental prices but the subject of the thread was house prices.
Are you sure the suburbs are cheaper than the city? I haven't seen the average house prices compared.

[jea6321]

Originally Posted by 28CarsLater

Overall a solid post! However if this is typical profit couldn't this be achieved with much less effort on less of a scale? I.e. purchase for 85K, do bare minimum changes, price $125K and take $110-115K?

some people go that route if the opportunity is there, I know I would if it was possible. however, it tends to not work that way. a house that needs complete rehab is tough to do a lipstick flip on. Its a pandoras box that to fix some of the major problems you end up basically gutting the whole thing.

you have shotty old wiring, so you end up opening walls which you realize have no insulation, so you open everything and end up replacing all plumbing since its open. so on and so on. at that point you pretty much just need to go all the way.