Is Buying the Block Worth It?

Question

Hi guys, I'm a longtime BP fan and newbie investor wondering about the feasibility and profitability of buying a row of properties surrounded by land lots. I'm gearing up to buy my first MFH home in Philadelphia, where there are lots of twin and row homes that may be the only remaining property on their street.

I recently came across a listing for three twin (semi-detached) homes surrounded by land lots; not quite a city block but a sizeable amount of space. All three were being sold together. So my question is, would there be any advantages around buying these three SFH instead of a triplex or quadplex of comparable size?

I can think of mostly downsides; three mortgages instead of one, 3x the CapEx, and the task of buying up the surrounding lots.

However, I'm wondering if owning half of a city block would come with its advantages? Would it affect comps? Would it open you up to large development opportunities in the future? Could you have the most epic block parties ever?

Nyle Emerson · Answer

Thanks Moises! I'd never try and pull off something like this for my first deal. I'm looking for a small duplex.

I'm just very new and wondering if there are any advantages from an investor's perspective. Perhaps someone could establish a Community Land Trust?

Eric Greenberg · Answer

Hi Nyle,

For me it comes down to how good of a deal it is, what your goals are, and where the properties are in philly. Ill assume if they are the only 3 properties on the block its in a C/D area but if its in the right part of Kensington/Brewerytown/ect it could be a good long term play. I dont think id go into that deal expecting to be able to buy all the surrounding lots unless you already know the owner(s)

Moises R Cosme · Answer

Nyle, if its your first deal keep it simple.  There is a lot of downside risk to making this kind of move.  If I were in your shoes I would make this kind of purchase after I had an investment portfolio that protected my potential downside risk.  Treat this business as if you were Warren Buffett, maximize your upside & protect your downside.