Refugees Settled to Date
Decisions for Christ Sponsored Through Our Partner Doulos Partners
Get Project Updates
Family Move In
We’re excited to announce that rehab is officially complete and our first family has moved in to the upstairs unit. It took several weeks to match a family once all work was complete, but we were finally able to match a lovely family of 3 from Afghanistan with a 1 year old through Bethany Christian Services.
The family is settling nicely and getting oriented to the area.
Below, you can find walkthroughs of both units of the duplex after rehab completion. We were fortunate to partner with a local church to fully furnish both units prior to move-in so the matched families can focus on the other aspects of their adjustment to Philadelphia.
The downstairs unit will have full and exclusive access to the first floor and basement where the bathroom and laundry are located. While the unit is not rented yet, we hope to have a family placed shortly.
The upstairs unit is now home to our family of 3 from Afghanistan, who have since rearranged the layout based on their own needs.
We expect to have the second unit rented to another refugee family in the next few weeks. We are especially excited at the prospect of multiple refugee families living as neighbors to help support each other through the challenging adjustment to a new culture.
Meanwhile, we are also working on one more important step! Remember back in the beginning when we mentioned that only 25% of the cash needed to purchase and rehab the property needs to be fundraised? Well that is because we use some special financing to get access to short term funds that allow us to purchase the property with cash. Now that the property is fully rehabbed and rented, we need to refinance the property by opening a mortgage.
Why get a mortgage now? If we had gotten a mortgage when we first purchased the property, then we would have been able to get a loan for 75-80% of the purchase price of the house. That means we would have had to put down 20-25% of the purchase price in cash as a down payment. Afterwards, however, we would have had to pay for all of the upgrades and repairs in cash.
The significant cost in repairs and upgrades, however, have now raised the value of the home by at least that amount. So when we refinance and open a mortgage on the property now, we will be able to get a loan for 75-80% of the new home value. This value is called the after repair value (or ARV) and is significantly higher than the initial purchase price of the property.
When we open the mortgage, the bank will give us cash for the value of the mortgage. And this cash will allow us to pay off the initial short term loan we opened to make a cash offer on the property.
Confused yet? If so, don’t worry about it. Just know that by waiting until now to get the mortgage, we will have saved about $30,000 for a fully refurbished house. And that savings gets us that much closer to the next impact home.
After closing on the property in the end of January, rehab started almost immediately. The first week or two are always a little slow which subcontractors come out to make bids on the work to be done and routine inspections are performed.
In any rehab, it’s important to plan for unexpected repairs, and we’ve had a few along the way for Kingdom House. Once the roofers were able to get closer access to the roof, they quickly determined that it would need to be fully replaced. Fortunately, it’s much cheaper to replace a row home roof in the city than it is to replace a single family home roof in the suburbs.
We also learned that the chimney liner was improperly sized for the number of appliances that were connected for exhaust, so the chimney exhaust system will require an upgrade as well. Even with those additional items, we are still within our conservative estimates.
In other news, one of the boilers that heats the house is fully operational after some routine maintenance, so we will only have to replace one as we hoped for. The boilers were one of our first discussion points with the contractors after we had to replace Foundation House’s boiler in the final week of rehab late last year. The new boiler for the one being replaced is already on site and ready to be installed.
Our contractors sent over some updated pictures of work that is underway. Below, you can see the new windows which were replaced on the first floor unit.
All of the walls have been painted and the stairs are being refinished (they were previsously carpeted).
Below you can see the upper unit bathroom which is being retiled and cleaned up. You can also see the new laminate flooring and painting in the bedrooms.
As far as rehab goes, the roof is still underway and there are a number of small details to touch up here and there. The most time-intensive item remaining is upgrading the chimney and exhaust system. Our most recent estimate from our contractors is a two week turnaround for parts delivery and then installation after that. As with most things in real estate, it’s not an exact science. But we are still hopeful to be complete by the end of the month.
For this project, we’ll be working with Bethany Christian Services to place our two refugee families. We’ve already given them a heads up on our 4/1 move-in goal and they are on board. Bethany gets travel notifications when families are incoming to the U.S. in the near future. Unfortunately, the notice is usually short, in the range of 1-3 weeks prior to arrival and sometimes as short as 48 hours. For this reason, we likely won’t have our families identified until just before they are ready to move in.
It’s official! Kingdom House is now officially Compound Impact’s second impact home. Settlement passed without a hitch. Now on to the fun part…
With keys in hand, it’s time to get right to work on the rehab so we can get two refugee families placed as soon as possible. Not only do we want to get our families into a safe home as soon as possible, but every week that the house is not rented is another week of expenses without income. In order to keep the project on track, we’ll need to get it rented on time.
The contractors were able to walk through the property before settlement and develop a full scope of work for the repairs needed. A scope of work is a contractor term for a detailed list of all the work that needs to be completed on a given project. In total, repairs and upgrades for Kingdom House are projected to cost around $36,000.
The downstairs unit is a 1 bedroom/efficiency unit that has had a decent amount of work done in recent years. Some of the windows will need to be replaced as well as the back door. We’ll also be doing some touch-ups to the bathroom in the basement. All the appliances are in pretty good shape including the fridge, oven, dishwasher, washer, and dryer. The floors are also in great shape.
Boilers also heat water, but the water is circulated through the radiator system to provide heat for the house in the winter. In the picture below, the boilers are the rectangular boxes connected to plumbing at the bottom of the stairs in the basement.
While there are a variety of ways to heat houses, boilers are common in older homes in Philadelphia. A new boiler can cost $6,000 or more to replace. Unfortunately, one of the boilers will definitely need replacement in Kingdom House. While the other boiler is aged, it appears to be in good enough condition to avoid full replacement.
When we made our offer on the property, we accounted for these upgrades in our offer price. Fortunately, replacing a boiler is a significant upgrade that is likely to increase the value of the house by the time we are ready to apply for a mortgage during the refinancing stage.
The upstairs unit has two bedrooms and is in need of a little more work than the downstairs unit. We will be making some significant repairs in the bathroom and installing laminate wood flooring throughout the unit. While carpeting is common, it is not a great choice for rental homes and requires frequent replacement, raising costs over the long term. Laminate flooring is a durable hard surface that resembles traditional hardwood flooring at a significantly reduced cost. Laminate holds up much better than carpet and is a mainstay for rental properties.
Aside from these major renovations, there will be a variety of smaller touch-ups throughout both units to make them look their best. Our goal is to provide a comfortable, safe home for our families and to achieve the highest property value with minimal expense. A higher property value means we will be able to finance a larger portion of the property with a mortgage during refinance, freeing up more cash to cover our short term financing.
In the end, that allows us to get this home operational with the least amount of cash invested.
It’s rehab time. Our general contractor will be bringing in a number of subcontractors to complete a variety of upgrades and repairs over the next few weeks to get the house into top shape before move in day. At the moment, we are aiming to have families moving in around April 1st.
With a move-in day set, we will also begin to work with Bethany Christian Services, one of Philadelphia’s major refugee resettlement agencies, to match families to our impact home.
At the same time, we’ll also be completing a variety of logistical tasks such as applying for a rental license for the property and performing a lead inspection.
Just a few days ago we managed to get a house under contract! The house is a duplex home with a lower and an upper unit. The upper floor is a two bedroom unit with a large kitchen, full bathroom, and washer and dryer. It will need a little work to bring up to rental shape.
The lower floor is a 1 bedroom/efficiency unit with a mostly open layout and a separate kitchen. There is access to the basement where there is a full bathroom and a second washer/dryer set.
We had been targeting the same area as Foundation House in order to try to create a cluster of impact homes, and this property is only a 5 minute drive away. The proximity will be helpful in allowing us to build community over time.
The house has already had some significant improvement completed, especially on the lower unit which is close to rent ready. It was originally listed at $225,000, but was probably a little overpriced during the hot market this summer. Now that the market has cooled off for the winter, they have been steadily dropping the price to try to sell, most recently down to $189,000.
Since there is not a lot of movement in the market at the moment, we put an offer in for $180,000 with an inspection contingency (meaning we can back out of the deal if an inspection turns up issues that we are concerned about). The seller replied that they were holding at their original price of $189,000. Since we were not in any kind of a pressure situation, and after discussion with our fantastic realtor team, we told the seller that $180,000 was our final offer.
On Christmas Eve, we heard the news from our realtor team that they officially accepted the offer, putting the house formally under contract.
Paying in cash
One of our key purchase strategies is paying for houses in cash. When anyone makes an offer on a house, and that offer is accepted, the house is considered “under contract”. The sale of the property has not occured, but the contract is an agreement between the seller and buyer that the sale will occur on a future date (called the settlement date).
While the house is under contract, there are a number of ways that the deal can fall through. For example, there is often an official inspection of the home by a licensed inspector. If there are any serious concerns, the buyer can leave the agreement and have their initial deposit returned. This is called an “inspection contingency”.
Another common contingency is a financing contingency in which the buyer can back out of the deal if they are not able to secure a mortgage for the property. Many deals fall through this way. However, if the buyer is going to pay in “cash”, meaning they are not going to be getting a mortgage from a lender, then the seller does not have to worry about the financing falling through at the last minute.
For this reason, buyers (like Compound Impact) who are able to pay “cash” for a property have a significant advantage over another buyer who will need a mortgage to purchase the property.
We do not fundraise the entire purchase price before purchasing a property. Instead, we fundraise about 25% of the property value and use short term loans (which last only a few months) to obtain the remainder of the “cash” needed to purchase the property.
What happens in a few months? Don’t worry, we’ll get to that soon!
Now that the house is under contract, we will have a licensed inspector walk through the property to make a formal report on it’s overall condition. As long as there aren’t any major issues, we’ll move on to settlement in about a month, at which point the official sale of the property will occur.
The Search Continues
We are well on our way to securing our property, but we don’t have a house under contract yet. As it the case every year, the winter months tend to bring a slower real estate market (especially compared to the red hot market this past summer!). As properties become available, we will continue to run our analyses to see if the numbers make sense. When we find a good fit, we’ll put in an offer!
The search continues for now, but hopefully it won’t be long before we have something under contract. We’ll make sure to keep you posted!
Let’s Find a House
We are happy to report that we have our temporary financing in order and are ready for the next step. We are currently looking at a number of potential properties, but do not have a house under contract yet.
The property selection process is one of the most important steps in the process. Purchasing a house for the wrong price can end up costing thousands of dollars, so it’s important to get right. And making an offer too low can lose a potentially great deal.
What to Look For
When we look for new properties, we look at many factors. But there are a couple that stand out.
Purchase Price: The purchase price is one of the most important factors, but the list price is not always the final answer. We often bid under asking price, though some properties may sell for even more than the list price.
Work Needed: We always look for houses that need significant about of work done. This is an important part of our model, and ultimately allows us to buy houses much cheaper than they are worth. The more the house needs work, the lower the price we can get.
Cost of Rehab: We always make an estimate of how much the rehab of a house will cost. We are able to make our estimates using experience and our highly qualified team of contractors who will often walk-through a house before we even make an offer. This process helps us make accurate projections.
Market Rents: All of our refugee families pay normal rent rates for our impact homes. It is important to remember that refugee families aren’t in need of discounted housing, but rather of fair and accessible housing. Rent is determined by the current rates of nearby similar properties and is an important factor in our financial analysis.
We are currently looking in the NE Philadelphia neighborhoods of Tacony, Mayfair, and Oxford Circle. These neighborhoods are home to many successfully integrated Eastern European refugee families as well as Syrian and Afghan communities.
We are continuing to search for the right property. When we find a good fit, we make an offer immediately. It is not uncommon to have to make several offers before we get a property under contract. Of course, we’ll let you know when we lock one in!
<< November 5, 2021 >>
Through an incredible showing of support, we have completed funding for Kingdom House much faster than anticipated. And we’re excited to get started! We want to offer a sincere thank you to all who have contributed to make this next project possible.
- Initial Project Funding 100% 100%
If you are just joining the Compound Impact family, then we’ll make sure to get you up to speed. We use a very specific process for finding, rehabbing, and financing properties which will each ultimately be the home to many refugee families over the years. For an overview, check out our home page.
One specific part of the process involves buying each property in cash (rather than with a mortgage). We will be obtaining a mortgage further along in the process, but by buying in cash, we are often able to save 10s of thousands of dollars in the end. There are a few reasons for this.
First, sellers tend to prefer cash buyers. When you purchase a property, you start with a contract or agreement that states the terms of the purchase and a future date to complete the transaction (the settlement date). There are a few ways that an agreed upon deal can fall through during this period between the contract and the settlement, and the buyer’s financing is a major one. When we buy in cash, the seller knows we won’t have to worry about a lender getting in the way at the last minute. And this can lead to price reductions or being first in line for a great deal.
Second, most of our properties need at least some work before they are ready for renting (sometimes a LOT of work). By making the necessary repairs, we are able to increase the home value significantly.
Why is that important? Because when we wait until after the rehab to get the mortgage, we are able to base the mortgage on the new increased property value rather than the original purchase price. And as a result, we are able to pull out a significantly higher fraction of the cash we used for the purchase and rehab.
So where do we get the cash? We don’t fundraise enough to purchase each home outright. Instead, we only fundraise the amount that will need to remain invested after the home is refinanced. That means for a few months, we need a short term loan that is large enough to cover the remainder of the purchase price and rehab. This is different than a mortgage, and will allow us to purchase the home in cash and complete all the necessary repairs.
So where are we now? We already know where we will get our short term loan and are just finalizing the details before we make an official offer on a property. Once those details are complete, we’ll be ready to purchase a house! In the meantime, we are already looking at properties so that we are ready to act quickly.
We are very excited to announce the official launch of our second impact home project. Before we can jump to the exciting step of searching for a property, we need to get our baseline funds set aside. As of today, we’ve raised about $15,000 of our $40,000 goal, with about $25,000 to go.
- Startup Project Funding 37% 37%
We are already looking at a number of potential properties, but we won’t make an offer until we have most of our startup funds in place. As fundraising continues, we will continue to post updates with the progress to date.