Are there investors there making suburbs work? I feel like when I am here on BP and listen to the BP podcast, as well as talk to other friend investors, they are all in well known popular cities, or very proximal suburbs. I understand people are always going to need houses in the suburbs, but I am just in my head that I wouldn't be able to make investing work. For me, I want to invest in Northern Philly Suburbs. While still very close to Philadelphia, I am just telling myself "Oh this isn't a place to invest because these are just random suburb towns." I understand that there are people there right now who are renting so there is obviously some market, but are suburbs something other investors are making work? I am looking for you guys in the BP to tell me if I am being thinking about this all wrong, or can I make things work in suburbs? I just don't want to derail myself from wanting to invest because of this excuse! I am excited to start with a House Hack this year and just keep rolling from there! And I really want to make the suburbs work FYI! Thank you for any and all input!!

Do you guys invest in suburbs??

Member since 2019 · 15k+ posts · 11k+ votes

You can have rentals anywhere as long as there is demand. Most of my rentals aren't in towns big enough to have suburbs. One of my houses is what could be considered rural (half acre lots 10 minutes from the nearest town. Buy homes in areas with low vacancy rates.

3 Reply

Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

5y

I think many if not most SFR investors invest in suburbs.

If I say I have a dozen properties in Las Vegas. (Because that’s their address.). None of them are on the strip. None of them are close to the strip. I would say I’m at least 10 miles away at the closes and 25 at the farthest. That’s easily the suburbs in most towns.

My "Minneapolis property" is in a tiny town/suburb called Tonka Bay (think Tonka truck toys) but I say Minneapolis because no one's heard of Tonka Bay. I don't know that I would ever invest "in town" in a bigger city. Any SFR are going to be much older with outdated styles and layouts. Sure if you're insanely talented liek the people on TV you can change them. But that's not my gig. I want to buy a good solid attractive relatively new, low maintenance box and rent it to you.

4 Reply

Brian T.

Investor · Indianapolis · Member since 2021 · 10 posts · 4 votes

5y

Issue is with your definition of suburb. What is a suburb depends on the msa or city your are talking about. Try telling me the definition of suburb in the Seattle region

edit:

with the interest into the city cores (at least in midwest) the definition of suburb still gets murky. What was once thought of “ghettos” is now prime.

0 Reply

Aigo Pyles

Flipper/Rehabber · Memphis, TN · Member since 2020 · 758 posts · 285 votes

5y

Many investors I think invest in suburbs (depends on how you define suburbs).

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Jonathan R McLaughlin

Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes

5y

@Nick Scullin decent schools, maybe even a little downtown hub and certainly a high owner occupancy rate will mean its a very desireable and hard to afford town for renters. Small house made a little nicer and you get good quality tenants all day and great resale potential to the starter home and downsizers, two of the largest buying population out there. Wonderful strategy.

Downside? Hard to scale as you are always looking for exceptions, and your stuff will be scattered around, but for smaller mom and pops with ambitions to grow? Awesome.

1 Reply

Antonio CuccinielloPro Member

Investor · Austin, TX · Member since 2016 · 531 posts · 310 votes

5y

@Nick Scullin Rental property investing can work anywhere there are people renting. Fixing and Flipping can work anywhere where people are living.

Now, the reason a lot of these bigger name investors are investing in cities is probably because of a few different reasons:

1. They have more money. This allows them to buy more expensive properties in cities.

2. They are looking for some appreciation and cash flow. You can get both at higher rates usually in cities.

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Jimmy O'Connor

Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes

5y

Hey @Nick Scullin ! Greater Philly Investor and Wholesaler here. I LOVE THE BURBS, especially nowadays that people are looking for more space since COVID-19 exposed the ability to effectively work from home. Now people do not need to live in a 650sf apartment to be close to their profession. My team has been seeing a lot of Delco and Montco deals fly as of lately. Here are a couple of off the cuff pros and cons:

Philly Pros

-More apparent appreciation and easier to predict the path of progress.

-Population Density

-Easy to establish values since almost all Philly homes are 900-1200sf two-story legos.
-U&O are waaaay more lax than the suburbs

-Low Taxes

Philly Cons

-COMPETITION (like any metropolitian area)

-Sloth bureaucracy (permit pulling, plan approval)

-4.28% Transfer tax

Suburbs Pros

-School systems that sell homes, not blocks

-Safety of your equipment/materials not getting stolen

-less competition (unless you are by a university or the #1 school district)

-Permits/inspections are handled on micro level, usually takes a fraction of the time as it does in Philly.

-Sure you do not appreciate as rapidly as Philly, but there is value in stability. Less volatility in given markets.

-Some may take this for granted, but the ability of putting a dumpster on your property and being able to park near your projects.

-You do not need to know the intimate "block by block" details like you may in Philly. You would be shocked at how 0.15 miles changes values over here.

Suburbs Cons

-Not as heavy as an appreciation.

-Usually need more square-footage to repair

- U&O is always going to be up your case and will wack you with even the smallest chip in the sidewalk, telling you that you need to drop 5-7k just in cement before you even get approved to touch your home.

- Comping is not as cookie cutter as it is in the city, now you are usually dealing with different styles, build types, etc.

Always feel free to reach out to me! Best of Luck

5 Reply

Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Bill B. That, I think, is one of the things I needed to hear the most. That makes a ton of sense!

0 Reply

Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Jonathan R McLaughlin That's a good point. There are people who are in the proximal suburbs of Philadelphia who commute into the city because they don't want to deal with the rent of the city. From what I have read through Neighborhood Scout and knowing the areas a little (new to living here) is that the vacancy rates are very low. 2% or less. Generally because these towns can be close to mainline trains that go into the city.

Thanks for helping me get my brain turning guys! This is encouraging!!

0 Reply

Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Jimmy O'Connor This is amazing information thank you!! Things you said that really jumped out at me are first and foremost the U&O tax. A quick Google Search got me up to speed on this. From what I understand it is a 1.21% tax paid every month, but i'm confused on your sidewalk comment. Do they inspect your property before you can buy it?

The other nugget of gold that you said is that school districts sell homes. I've known how important this is, but it's nice to hear that from others.

I will be primary be looking in the Montco area actually so I will start adding a more in depth look at schools into my research and I will start asking friends who live here more about the U&O. I want to understand this before I would buy an investment to find out the this tax makes or breaks my cashflow.

Thanks for the great information!

0 Reply

Jimmy O'Connor

Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes

5y

@Nick Scullin to clarify what I mean about U&O and the transfer tax that I mentioned.

Transfer Tax: When the county/state takes a percentage of the sale of a property. In Philadelphia, this tax is 4.28%, so if you buy a house for $100,000, the government will want to take $4,280 of the action. Usually, this is split between buyer and seller but most wholesalers lock up deals with the sellers (myself included) by offering the buyer to cover all transfer tax/closing costs so the seller walks away with the EXACT dollar amount that is written on the contract (builds more into the hassle-free benefits of the services promised which is where we get a discount). In Delco/Montco the transfer tax is ~1%.

U&O = Use and Occupancy. Before you start doing work/are able to pull permits, some counties/townships/boroughs will need to evaluate specific aspects of your property that need to be fixed. The one that adds up is sidewalk/curbs. Think of it this way- since Montco/Delco aren't getting paid on the transfer tax, they get a piece of the deal by making you repair things like sidewalks/curbs so they don't have to. There are also important things for curb/community appeal-like repaving the driveway, fixing the exterior, lawn care, sewer change, etc. Some U&O's are lax, some (I'm looking at you Glenolden!) will drill down excessively.

3 Reply

Rich O'Neill

Contractor · Chadds Ford, PA · Member since 2015 · 567 posts · 460 votes

5y

@Jimmy O'Connor I have nightmares about Glenolden... PAR actually sued the township and won because they were withholding U&O's unnecessarily. Curious if that will change the dynamic there.

2 Reply

Cory PflipsenBusiness Member

Property Manager · Twin Cities, MN · Member since 2020 · 10 posts · 12 votes

5y

@Nick Scullin, I use to look for deals in the city thinking it's where the renters want to be. (but that was based on my point of view as a young single business professional with no kids who rented) I recently started working at a Property Management company here in Minneapolis (@Bill B. love Tonka Bay and laughed at the Tonka Truck analogy!) and we specialize in managing properties in the Suburbs. (SFH/Multi/Townhomes) It has definitely made rethink my investment strategy.

The properties we manage do have a higher price tag, but that comes with higher rent price and therefore tenants with higher income levels. Benefit we have here in Minneapolis is there are lots of Fortune 500 companies (Target, United Health, Best Buy, 3M, General Mills, Polaris to name a few) who hire corporate employees from around the US. They move here for work, rent a few years in the burbs, see how their career path plays out and either buy/rent/move home. And like @Jonathan R McLaughlin mentioned, schools here in the suburbs are higher quality. So many families look to rent in the burbs for that reason alone.

Minneapolis Suburb market could be different from Philli, but I'd for sure analyze a few deals. Might be surprised. Search for good Schools, Corporate Offices, and good city plans. I've called suburb City Planning offices to see if they have plans for new shopping centers/main street clean up projects coming over the next 5-10 years. If they're investing in their city, I'm interested.

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Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Cory Pflipsen That is a great point. I'm also a young single investor so that is most likely where my mind is going. Not towards what families are looking for. I have started to analyze at least 1 deal a day in the surrounding burbs and plan to keep this up for a couple months until it is clockwork.

I haven't thought about calling City Planning officers, but that makes sense. That makes me think of something I heard years ago about buying real estate. The point was made to look around and see where new chains were popping up. For example, a town/suburb could seem not so special, but then one day they start building a Chipotle. The advice was that these really profitable businesses have teams of experts who do a TON of market research to find up and coming areas. If they are starting to build there, they have some reason to believe that the surround area is going to boom in the near future and bring in money. So to go with your point Cory, calling and seeing if anything new is popping up in the area is a very smart move!

0 Reply

Jonathan Oh

Investor · Las Vegas, NV · Member since 2019 · 499 posts · 259 votes

5y

@Nick Scullin I specifically target SFH in suburbs. That's where you typically get longer tenants rather and less transient tenants. It's also safer in general and appreciation is usually better.

0 Reply

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

5y

@Nick Scullin Nick, you may be overthinking it a little bit. Investors invest urban and suburban and in-between.

I think the more important question: where do you prefer to invest in?

Now, there are some tools and website that you can use to zone in on areas. Check out: city-data.com and look at the % of renters here. This number gives you an idea of the number of renters in that area.

Basically, this is a good start to let you see the investors' activity based on the % of renters in the area.

Hope that helps.

2 Reply

David BarnettPro Member

Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes

5y

@Cory Pflipsen A very interesting perspective and thanks for sharing. If you don't mind me asking, where are the majority of the rentals in the suburbs. I was wondering if it was the west metro where prices seem to be a little higher.

0 Reply

Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Ola Dantis That's a good way of thinking about things. I'll check out that website.

Do you have any other websites you recommend, or anyone else in here, for market analysis? I currently will look at Niche.com, Rentometer, neighborhood scout, and the MLS (Realtor, Zillow etc) to get a feel for an area. I will look at prices of the neighborhood, to see if I can even start there, look at school ratings, and rent to buy ratios.

Any other resources you guys have would be super helpful!! Or other big things I should look for.

1 Reply

Gregory H.

Real Estate Agent · Philadelphia, PA · Member since 2013 · 451 posts · 369 votes

5y

Yes, I have 15 properties in Bucks County, suburban investing has many positives, a big one is less government regulation than Philly.

1 Reply

Ola Dantis

Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes

5y

Originally posted by @Nick Scullin:

@Ola Dantis That's a good way of thinking about things. I'll check out that website.

Do you have any other websites you recommend, or anyone else in here, for market analysis? I currently will look at Niche.com, Rentometer, neighborhood scout, and the MLS (Realtor, Zillow etc) to get a feel for an area. I will look at prices of the neighborhood, to see if I can even start there, look at school ratings, and rent to buy ratios.

Any other resources you guys have would be super helpful!! Or other big things I should look for.

There are a bunch of tools to use for Market Analysis. One of the best tools in the market is CoStar.

0 Reply

Jim HoganPro Member

Investor · Malvern, PA · Member since 2014 · 108 posts · 42 votes

5y

@Nick Scullin Nick I prefer the suburbs mainly because the transfer tax in the city. Plus i commuted to many years into the city and don’t want to do it anymore back when I worked in the corporate world. I prefer Chester, Montgomery and Berks Counties. Mainly they are close to home for me. Berks can be a ride but the houses are affordable, taxes low and rent is comparable to the other areas. Let me know if you want to meet up and talk. There is a part of me that thinks you are over analyzing (no offense).

I just had a buyer that is buying a house in Phoenixville. He is a first time home buyer with a mortgage. The house was being sold as is and had several offers. They were all cash offers for more then his offer. He won the deal because he was going to live in it. The house had been in the family for over 100 years. They wanted it to go to someone that was going to live there and not turn it into a flip or rental. They wanted to give someone starting out a chance to get ahead. So for you first time buyers there is a shot that you can buy something and beat us full to me investors out on a good deal. He is going to probably house hack it for now.

So point is don’t analyze it to much. If the numbers work for a cash flow then jump in to investing. Every house will rent for some dollar amount and every property will sell.

1 Reply

Cory PflipsenBusiness Member

Property Manager · Twin Cities, MN · Member since 2020 · 10 posts · 12 votes

5y

@David Barnett our company is located in the western suburbs of Minneapolis (Hopkins to be specific) So naturally with google searches using geographical locations, a lot of our clients do find us due to proximity of our office. (Maple Grove, Plymouth, Wayzata, Eden Prairie, Saint Louis Park, etc.) However we've been seeing a lot more interest/calls/doors coming from the south metro. (Bloomington, Richfield, Shakopee, Eagan)

And I'd agree prices are a higher here compared to other areas of the Twin Cities. However, they're very desirable locations and I'd assume prices will continue to go up for both Home Values and Rent. Maybe people are starting to look south metro vs. west due to the price difference. Lower $/sq' averages. Just my 2 cents.

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Karen HigginsPro Member

Minneapolis, MN · Member since 2017 · 83 posts · 89 votes

5y

If you run the numbers and the deal makes sense, you can invest anywhere! We are in the Minneapolis area and with our portfolio, we like to do a combination of investing closer to the city where the rents are higher, and there is greater likelihood of appreciation, as well as investing in tertiary markets where it is more of a blue collar based tenant, who is less likely to move, and treats the property as their own. If this is your 1st property, don't over think it! If the deal works, move forward and then you can really learn what you like or don't like about the specific market. Good luck!

1 Reply

Nick Scullin

OP

Rental Property Investor · Philadelphia, PA · Member since 2020 · 41 posts · 10 votes

5y

@Jim Hogan You are totally right, I am most likely over analyzing. I'm getting to the point where I am consciously ignorant about the subject and just being a sponge learning as much as possible. It seems scary to jump in without knowing everything, but I get that that isn't possible. I have been practicing running the numbers and just need to get buy when the numbers make sense.

I'm glad you mentioned Montgomery County because that is where I would start. Trying to learn as much as I can about the market so that I can find where to jump in based on what I am looking to get out of an investment.

0 Reply

Rich O'Neill

Contractor · Chadds Ford, PA · Member since 2015 · 567 posts · 460 votes

5y

@Nick Scullin, we are actually making a push to do more business in the suburbs with our project management company because the Philly is a NIGHTMARE to deal with when it comes to permits and zoning. We have a job that got delayed 5 months due to a permit issue. We have another one that got delayed 2 months due to a zoning issue. That's another factor to consider.

I love my Delco suburbs. Most of the inspectors want to work with you to improve the areas, the townships are often easy to deal with, and the prices are lower in most cases.

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Do you guys invest in suburbs??

Do you guys invest in suburbs??

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