First time investing looking in Philadelphia. Any ideas?

10 Replies

Hey BP, I've been renting in Philadelphia for almost 1.5 years and looking to start my real estate investing career when my lease ends summer 2020. I just started looking at both SF and MF homes in the South Philadelphia neighborhoods. Any advice on whether SF or MF is a better way to start out? Or knowledge you can share on the Philadelphia market and where is best to look?

Also thinking of going in with a good friend who lives in Boston - we would split an FHA and I would live in the home. Do you think this is a good idea or is it better worth my money (thinking about return) to go in on my own and get financial support from family if necessary.

Is it necessary to go through an agent for getting pre-approved or should I just do it online?


Great questions!

I'm not the guy with the right answer but I can tell you what I've done here. Firstly, you should talk to a mortgage loan originator to review your financing options. As for going solo or with a friend that is hard to say - your return is generally better when you put down as little of your own cash as possible.

I started by house hacking a duplex with a conventional loan in 2010.

Then did a live in flip to rent small single fam with FHA.

Then another live in flip to rent small single fam with conventional.

Along the way and in between picked up a couple duplexes, conventional (non owner occupied). And got my RE license to save commissions and help family/friends.

It has been almost 10 years now! Shoot me a PM if you'd like to discuss further.

Welcome to BP.

I can't give you Philadelphia specific information, but happy to address your questions:

SF vs MF -- Totally depends on your short-term and long-term goals. You can certainly buy a single family or a condo and rent out the spare rooms. Alternatively, depending on local regulations, you could Airbnb out rooms (short term rentals). If you're up for it, many people go for a multifamily for an investment. You can live in one unit and rent out the others. There are many options with an MF, for example you move into the worst unit, fix it up, then rent out that unit and move into another unit that needs to be updated.

Partnering with friend -- That is a personal decision, however if he is not going to live in the property, but you both apply for a mortgage, you won't be able to get favorable owner-occupant mortgage rates. If you can get traditional financing on your own, you should pursue it in my opinion. A loan from family for the downpayment or to help with rehab is worth it versus partnering with a friend.

Pre-approval -- I'm not sure what you mean about going through an agent. To get a pre-approval, you'll need to talk to a lender. Some lenders will require you to fill out a formal application and do a full credit check, while others will accept proof of income and some other basic information along with a credit report that you can obtain for free. There are online services for a pre-approval, but my preference is to work with somebody who won't pull a "hard credit" report until it's actually necessary.

Hey Thomas !  I am an agent in Philadelphia and have been investing myself for about four years now.  I can definitely take a shot at some of your questions.  

SF VS MF-  Personally I would always opt for a MF house over single family, for a couple reasons.  One, they generally cashflow better than single families you could get in the same area/price range.  Also, if one unit is vacant the other unit can usually still pay off the mortgage.  In a single family, having a vacancy means you are paying everything until it is filled.  With MF you also have the option to live in one of the units, which as you know can lead to better financing rates and a lower down payment initially.  

If you can swing it, I would forgo the partnership and go solo.  Going solo means you have full autonomy to make decisions regarding the property, and wouldn't have to share the profits.  You also never know if the partnership might take a turn for the worse.  

You don't need and agent to get pre approved, you can get a pre approval from a loan officer pretty easily.  

Definitely feel free to reach out if you have any other questions 

Thanks everyone for all of your input! I definitely lean towards the MF side so appreciate hearing the upside of that! Ideally I would live in one unit (the less attractive one) and rent out the other(s). What's the process like for finding renters? Is the way to go by posting listings on Zillow, Trulia, etc.? Or should I try to find people I know to live in the other unit(s)?

I'm also thinking about studying for my real estate license to gain knowledge and explore the other benefits it brings. Which programs do you recommend?

Lastly, I looked at some homes a couple weeks ago and the realtor connected me with a mortgage loan originator for a pre-qualification. I went through that process and was pre-qualified, and now the lender requested more documents (1099s, W2's, SS, ID, etc.) for a pre-approval. Since I'm looking for next summer is it smart to do this now? I feel pressure from the realtor and the lender to move forward as fast as possible.

@Thomas Alessandrello I'll start with your last question first, as long as you told the realtor up front that you were planning on moving next summer than yes, it definitely sounds like there putting a little too much pressure on you to get this done now.  That being said, Realtors don't get paid until settlement, so it might make sense to hold off on doing too many showings with them until your a little bit closer to ready to make a move. Remember that Realtors aren't public servants.

Your first question- I have a couple duplexes in Kensington, and have never had a problem finding decent renters by just posting on Zillow and Trulia.  I always get a ton of responses to my listings so I can be fairly selective about what tenants I put in.  

Hi Thomas, and welcome to BP! I will throw in my two-cents here, as I have been looking around Philly area for another investment property as well (right now I have a SFR in Manayunk). I have been looking in the Grays Ferry area, but what I have found is that the neighborhoods really vary block to block and street to street, so definitely drive the areas a lot and get a good feel of the neighborhoods.

My other comment is definitely do not let the RE Agent or banker pressure you, if you are not ready (next summer is a bit away).  If you can find a good lender and agent that understands your goals, they can give you honest advice that will meet your goals, rather than trying to sell you a product to meet his or her goals.  Take a look at the local investor and real estate groups (DIG, HAPCO, SJREIA, etc).  There you will have a great chance of meeting agents and lenders that you can start relationships with,

Best of luck!

@Daniel Kent I’m also looking in the grays ferry area as well. I wanted to buy a property to flip and then hold as a rental. But even shells are going for 100k+. Few short years ago you could easily have got them for half of that. Tough market but have to keep looking.  But I agree that that area still has a way to go and really does vary. I was originally turned off by that area bc of lack of retail and restaurants there but I have come around more. Would love to hear about your experience and what you’re looking to do. 

@Thomas Alessandrello a lot of comments have given good advice. I would spend the next few months learning, reading, listening and asking questions about what you’re trying to do. I am also a HAPCO member and you can meet a lot of good resources there.  I started off with an owner occupied duplex and am now looking to move on from that. Easy way to ease the transition of being a home owner and also getting experience with tenants as well. Also pre approvals are very easy to get but I would make it clear to your realtor that you are planning to stay at your current house until June. They can set you up with a portal to the mls that will send you properties that meet your criteria but he won’t have to take you around constantly if you aren’t serious about buying yet. Good luck! 

Hi @Jay Sechowicz - I completely agree that it is tough in the grays ferry area. I have even seen empty lots going for 100k. Doesn't mean it can't work, but just have to be patient and find the right deal. With the properties I have been analyzing, it seems to be a little more difficult to buy and hold in that area at this point and make the numbers work. Not sure the rents will cash flow with the amount of capital that is required to acquire and rehab the properties in that area. Very interesting to watch. Even though I have been looking in that area, my main focus is South Jersey for a SFR or small MFR that I can rehab and then rent out. I look forward to continuing this conversation-

Thanks, @Jay Sechowicz and @Daniel Kent ! Really appreciate your advice. I'm taking a look at those local real estate groups and like the services they provide. Jay, I'd love to connect with you further to hear more of your story as I'm interested in investing in a duplex and living in one unit.

Thanks everyone for chiming in and looking forward to connecting!