Looking To Buy First Property In Roughly 10 Months

12 Replies

Hey Everyone,

To start, I just wanted to list some brief information about what I am planning to do for my first property purchase. I just wanted to get some advice from the members of BP on my plan.

I will have about $25k saved for the downpayment/initial costs of my first property in 10 months. My plan currently is to pursue a duplex, triplex, or quadplex in the Philadelphia area for around $200k-250k. I am planning to do an FHA loan and live in one of the units. I would guess at this price point in Philadelphia I would be looking for a turn key duplex (not sure if I could find a turn key tri or quad for my price range).

Some issues I've encountered when I look at my plan:

I have contacted lenders and initially wanted to do an FHA renovation loan and possibly fix up the property but it seems like it is more hassle then it is worth. I was looking for about $30k in renovation loans, but the fees I was quoted on this were a little bit outrageous ($3k increase in closing costs).

Also... It seems like there are not very many triplex or quadplex properties for sale in Philly, and if they do come up they are scooped up almost immediately. 

I definitely want to pursue a buy and hold multi-family property for my first purchase. Do any other members have any advice that they could give pertaining to my current plan? I am open to considering anything.

Thanks!

-Sean

@Sean Minford

Well I would challenge you to take a good hard look at the distressed property again.  Just because it needs repairs, will be more of a hassle, and will cost an extra 3k in closing is no reason to dismiss.  As I look back on our 4 buy and hold deals, we have made a majority of our money from buying the place others did not want.  The equity we have made dwarfs any income we have made 10 to 1. And we have not done bad in cash flow.  The high equity in turn allows us to buy more properties. 

Keep looking and you can land a GREAT deal, but be cautious, cuz bad and good deals look strongly simialar at times. 

@Joshua D.

Thanks for the comment.  I like your point about increasing your equity through the renovation value and using it to buy more properties. Certainly something I want to consider as I am looking at my strategy. 

Also made me think that it would be nice to buy a duplex with one side turn-key to rent out and one side in bad shape for myself to live in and possibly do a house hack as income comes in from my day job.  Then move out after a year and look at new investment possibilities.

Hey @Shawn,

I am a noobie as well but I am basically looking to get started the sameway as you. My local market is definitely at a higher price point but I'm pretty optimistic that there is a deal out there ..... Somewhere. Which is why I started getting ready for a direct mail campaign where I will be targeting local landlords who own small multi units. 

Like @Joshua stated, we win when we buy low. If the turnkeys in the area are still high maybe look into some other ways of locating great deals. 

I'll let you know how the direct mail route goes. If it works here it for sure should work for you. Good luck!

Hi @Sean Minford ,

Born and raised in Philly.  I am a buy and hold investor in the city.  You are correct in that triplexes and quads are very rare in the city when it comes to sales listings.

I believe your buy and hold strategy is a sound one for the Philadelphia area right now, I would encourage you to pursue it.

With that said, there are a great deal of duplexes to be had in the city.  Your price point of $200K - $250K may get you a turnkey or it may not...it all depends on the neighborhood.  In the prime neighborhoods (Center City, Fishtown) your price point will buy you no more than a fixer, if you can find one.  In neighborhoods such as Manayunk, Temple University area, and Mt. Airy, to name a few, you can get a fixer to a turnkey for less than 200K.

If you don't know Philly, get to know it.  This is a city of neighborhoods, housing stock and purchase prices vary greatly depending on the area.  With respect to renting, proximity to public transportation, the number of bedrooms offered, and even the street the unit is on will also vary the rental asking price.

I hope this helps.

Good Luck

Shawn,

Your in the right path. Your ideas are solid. Piece of advice would be to continue to listen the podcasts and absorb all the quality info available on BP.

If I can be of any help, don't hesitate to contact me.



@Paulette Midgette

Thanks for the input.  I currently live in Northern Liberties right now so I can see first hand your point about the higher priced neighborhoods. With that being said I would most likely be looking in the Manayunk, East Falls or similar areas for a $200k turn key duplex.  I think that would be a sound strategy.  

You also mention a great point about getting to know the neighborhoods.  I am fairly familiar with the different Philadelphia neighborhoods but I could certainly get to know them better.  This will be one of my goals in 2016.

Make sure you compare each property with your REI goal before you purchase. Don't get lured in if it's going to compromise your goals. Sounds like you're heading down the right path and talking with the right people. Best of luck!

@Sean Minford

Great strategy! I love the Greater Philadelphia market and as some earlier posters have said, there are so many different sub-markets and neighborhoods that vary in price and housing condition. 

I've spent a lot of time checking out Multi-family properties in East Falls and Manayunk, and your price range of $200-250k is definitely attainable (maybe not 100% turn-key, but pretty close). 

Not sure of your specifics (i.e. work commute, etc), but other neighborhoods in Philadelphia county I would recommend to check out would be Point Breeze, Newbold, East Passyunk, Pennsport, and Brewerytown - you may be able to find something in your price range. 

Best of Luck. 

@Zachary Paul

Thanks for the feedback!

I looked into the location of the latter areas that you posted (point breeze, etc) and I'm liking the location closer to center city (compared to East Falls and Manayunk). I haven't really ventured into these areas, but have heard they can be a little bit rough.  I am planning to pick a day to drive around the neighborhoods and seeing where the good pockets are in each one of them.

Originally posted by @Sean Minford :

Hey Everyone,

To start, I just wanted to list some brief information about what I am planning to do for my first property purchase. I just wanted to get some advice from the members of BP on my plan.

I will have about $25k saved for the downpayment/initial costs of my first property in 10 months. My plan currently is to pursue a duplex, triplex, or quadplex in the Philadelphia area for around $200k-250k. I am planning to do an FHA loan and live in one of the units. I would guess at this price point in Philadelphia I would be looking for a turn key duplex (not sure if I could find a turn key tri or quad for my price range).

Some issues I've encountered when I look at my plan:

I have contacted lenders and initially wanted to do an FHA renovation loan and possibly fix up the property but it seems like it is more hassle then it is worth. I was looking for about $30k in renovation loans, but the fees I was quoted on this were a little bit outrageous ($3k increase in closing costs).

Also... It seems like there are not very many triplex or quadplex properties for sale in Philly, and if they do come up they are scooped up almost immediately. 

I definitely want to pursue a buy and hold multi-family property for my first purchase. Do any other members have any advice that they could give pertaining to my current plan? I am open to considering anything.

Thanks!

-Sean

Hi Sean, I did exactly this in the Brewerytown section of Philadelphia two years ago and it's been the best move my wife and I have ever made. We bought a 4-unit with an FHA loan and are living for free. What I mean by that is our tenants completely cover PITI plus a bit of extra cash every month. We're not truly cash flowing as we're not covering vacancy, maintenance and management (we self-manage) but when we do eventually move out we'll cash flow nicely.

TD Bank has a program for most areas that allows you to put 3% down and pay no PMI. It's not income based either. I wish I'd known about this loan when we were buying as PMI sucks!

Let me know if you have any questions, I'd be glad to help.