Hello Everyone ,
In your opinion what is the best pocket of the city for a 40-50k profit on a flip?
I’ve heard everyone talk about strawberry mansion however that pocket Of the city isn’t selling as quickly as other sections of the city.
Great question and if anyone has an answer I'd love to hear it. I think it comes down to less about the area in which you're flipping specifically and more so what your cost of rehab is going to be. I think if you have the right crew who can do good work at a favorable price, and you understand what your crew is going to charge you for the rehab, then you'll probably see a better profit because you'll buy right, regardless of the neighborhood. It can allow you to filter out some of the ridiculously overpriced investment properties you're seeing listed, and can allow you to concentrate more on the ones that deserve your time. I don't think that comes down to being neighborhood dependent necessarily.
That being said Strawberry mansion is one of those areas where you may still see some fair priced properties that you may be able to purchase for under 50,000, rehab for 50-70 (which is probably an underestimate honestly) and sell for up to 150-75. Either way that's a bit ambitious, but is possible. The lower purchase price can reduce your fixed + carrying and get you closer in line with that 40-50K profit margin you're looking for, but ultimately it's pretty difficult to come by in this market.
Curious others thoughts on this though.
Ryan, I agree with you. It all comes down to your rehab and holding costs which can make or break a deal. The way I was looking at it was that the better neighborhoods usually have a a better DOM than others.
In this current market that we are in, it is very difficult to even find a house that’s fairly priced without being outbid by someone else willing to make a smaller profit or maybe almost breakeven.
I was curious as to where the philly investors are having better success at right now.
You nailed it. It is very difficult to find a deal today regardless of the neighborhood. The combination of high market prices and high rehab costs makes for a challenging environment. My philosophy has always been the profit you make is based on your purchase price. That being said, I'm on the sideline right now until things cool down. Instead, I'm investing in the cryptocurrency space and I'm riding the Bitcoin and Etherum wave.
It's definitely a sellers market right now. A lot of my friends are liquidating their assets and waiting for things to turn around. Plus, yeah the costs of materials alone are up over 300% from what they were a year or so ago. I still think it's possible to find some good deals in the rougher spots.
Some of the neighborhoods in Philly are so inexpensive to buy and cover (taxes & insurance-wise), I've also thought to buy these types of houses just to board up & wait for things to change. For example, in the area in Kensington a lot of homes I've looked at are bought for $15-20K in 2015 & were resold in the last year for $70-100k-- as they were purchased / with no work put into them so sort of like long-term wholesaling... It's not the greatest strategy, but it's a decent turnaround for minimal effort. Or you can always put your money in bitcoin because, yeah, @John ODonovan, crypto is pretty lit right now too!
I agree with your post as well! Just though to time a market. I was also thinking since it’s a seller’s market that means that houses are now selling easier than they will sell when it’s a buyers market right?
Like wouldn’t it be the same thing ?
I would have to say the best pocket to profit 40-50k on a flip would be west Philly, specifically Cobbs Creek. There are other areas where your able to make that kind of spread but then you run into inventory issues. From what I've seen Cobbs is one of the few places where there's still consistent inventory and the numbers still make sense.
In regards to material prices shooting through the roof, the majority of the price hikes are for 2x4, plywood, and joists from the contractors I've spoken to. The projects I've mostly affected by this are new construction or other massive projects such as completely gutting a triplex. So your standard full gut or smaller projects haven't been affected by nearly such increases. @Kate Stoler As a contractor do you agree with what I've been told, or have you seen increases in other areas.
While I will agree it is a seller's market, my investors that are flipping have the mindset that once they finish their projects they will most likely be setting the new benchmark for the market they're in. I wouldn't let the market discourage you from moving on an opportunity.
It's Funny I actually held the same perception previously about my concern and skepticism for selling rehabbed homes in some of the lower income neighborhoods in the city. That's why I focused primarily on areas that had already turned or on the cusp of turning when I was searching for my first project. I've noticed now that as long as things are priced right comparatively (yes it is cliché but still reigns true) and designed in a matter in which a buyer would like, it'll go.
I know someone very close to me who has been investing for a long time who has absolutely made a killing investing in Frankford, Juniata, Hunting Park, Kensington and a select few NE neighborhoods. He's been doing this for YEARS and has had minimal (albeit probably some) issue selling his rehabs. Just comes down to price.
@Dan Powers completely agree. I think there's been a ton of momentum moving into some of these West Philadelphia neighborhoods that I've been seeing and I think I'm going to transition some of my analysis over there. I like them because you can find > 1000 sq. ft. SF with sustainable comparable to justify a > 240K price point on the resale but still be viable as a purchase in the sub 110-15 price range.
@Kate Stoler hit the nail on the head with cost of rehab. It's killer and sidelining quite a few investors at the moment. I don't necessarily see it dying down in the immediate future because I think increased interest amongst new investors will continue to drive demand for both acquisition and for rehab moving forward.
So funny. To be honest it doesn't matter what the hottest neighborhood is, unless you bought there before it was the "next big thing".
Everyone that does this ends up settling into a nitch. When I was flipping, I did some high end and did some low end. Ended up feeling comfortable with rehabbing for first time home buyers that bought somewhere in the middle.
I've been investing for a long time, and following bigger pockets for a short time. The overwhelming feeling I get is that everyone is looking for the "magic formula". Buy in this neighborhood, spend this much per square foot, wash and repeat.
Serious lack of creative thinking in my book. I can name half a dozen ways to find and make deals just off the top of my currently beer in soaked brain.
1: I don't see anyone asking for seller financing right now. Interest rates are ridiculously low, everyone wants to be a real estate investor and banks are only lending to well qualified buyers. If I was a seller, I might not need to cash out my house when I'm moving because I locked in a 30 year mortgage at 3%. Getting someone paying a monthly payment for my old house at 7% sounds kinda cool though.
2: No evictions in over a year. Besides sending out a bazillion spam text messages, I don't see anyone going after distressed landlords offering to help out with tenant problems. You may or may not be able to help, but you just dipped your toe in a pool of distressed home owners.
3: Instead of buying houses, in a tight market,rehabbing them and then looking for a buyer. There are a crap ton of buyers out there that are looking to rehab the new house they just bought. If you have a portfolio of houses you rehabbed and a roofer, plumber, electritian, hvac guy ect in your back pocket you can call. Go make a killing selling your services. You can be like a tv show guy.
4: While residential real estate is going gangbusters, commercial is taking a poop. Not one word about anyone working commercial deals.
5: Just heard on the news again about Philly's problem with stolen deeds, which is a problem I've had to deal with over the years. They are easy to find with some legwork. Anyone reach out to those home owners? Little know how, and a good pitch on returning properties to the rightful owners and you can get houses under contract for pennies on the dollar.
6: The flyers and the spam emails and the never ending calls from "I'm Ted! I work for a local real estate investor and we want to buy a property in your neighborhood!" Back when I got started, it was almost ridiculously easy to walk a neighborhood and talk to some neighbors and find out. Oh yeah, Ms. Betty just went to a nursing home, her son was just talking about selling her house. People are freakin lazy anymore, can't be bothered to get off the couch.
Not to troll the beer-soaked troll, but to respond to your mic-drop @Paul Schemm, most of us haven't been investing and flipping for a long-time. I think BP is good for newbs to network, build energy, and yeah--to an extent, to rip off and duplicate the "magic formulas" stumbled upon by others.
1. RE: seller financing - It's is a lot easier said than done. I'm based more in blue-collar areas where the folks that sell their homes need the lump sum from settlement in order to move on & survive.
2. RE: distressed landlords - good luck getting close enough to a house with an eviction situation going on to even make an educated guess at the situation you are inheriting by "taking the problem" off of the current owner's hands. The evictions I have dealt with often require full-gut rehabs in addition to either forcefully bouncing squatters from the property or waiting out the 9-12 months it takes our city to follow through with these court cases.
3. RE: selling your services- this requires proper licensing & a whole shitload of energy and resources to do properly.. and doesn't really fit into what our the conversation was about in the first place.
4. RE: commercial real estate- the pandemic devastated the brick & mortar economy. Commercial real estate is "taking a poop" because in order to finance a commercial property, you need to have either a fully leased building that you're buying (99% of owners with a fully leased cash-flowing commercial property aren't going to sell), or have your own personal business that has been successfully up and running, cash flowing and making money for at least 2-3 years which you can claim will fill the commercial space. Again, for newcomers to real estate with smaller portfolios, less liquid cash & experience, this angle of the market is next to impossible right now (believe me-- I've tried it from multiple angles over the past year and a half.)
Thanks for sharing your pointers on how we can all hustle a little more in the creativity department. Definitely food for thought, but I just had to counter with some reality from my experiences so far.
Sorry, didn't mean to be a troll.
Hey @John Baker ,
These are the zips and spots I would recommend 19122, 19133, West Philly, 19145, 19146 . I am a philly native Investor and lender, so let me know if you would like to chat further about this.