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John Smith
  • NJ
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Buying a fixer-upper for my first main residence in Philly

John Smith
  • NJ
Posted Dec 25 2022, 19:56

Hi all, 

I'm moving to Philly next summer. 

Looking at the properties available publicly on Zillow, Redfin, etc., I concluded that the house I like to live in is at least 850-900k somewhere around Ardmore, Narberth, Chestnut Hills, or similar areas (I do not like to live in a townhouse).

I have a 10% downpayment available for this amount but I am also qualified for a mortgage (5.7% interest) with no downpayment and no PMI. However, even with a 10% downpayment, the monthly mortgage payments + home insurance + property tax + maintenance fee for an 850k house is a bit out of my comfort zone since it's my first house (I have the money, but I really want to be conservative on the first house).

Therefore, I'm considering buying a fixer-upper of around 500k instead of a turnkey and spending ~80k on the renovation (I have no experience in flipping and this is my first home purchase ever). 

I know it will take at least 4-6 months for me (with no experience) to renovate, and will cost more than usual, but I'm counting this as the price I pay for the learning experience. 

 I have two questions for you: 

1) Do you think it's a bad idea in this market given my lack of experience? 

2) Is it safe to assume that a fixer-upper in areas like Ardmore, Narberth, and Chestnut Hills that is negotiated around 500k in this market after an 80-100k renovation will be in the same shape as a turnkey that is worth 850-900k? 

I highly appreciate your input. 

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David Ramirez
Pro Member
#1 Wholesaling Contributor
  • Wholesaler
  • Tampa, FL
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David Ramirez
Pro Member
#1 Wholesaling Contributor
  • Wholesaler
  • Tampa, FL
Replied Dec 26 2022, 07:13

Hey John, 

I'm not familiar with the Philly market but with my experience, I would definitely recommend looking for a fixer-upper. We are entering a buyer's market right now so I think you can find a good value fixer-upper by sending several offers a week. 

Always estimate the worst when flipping. 

Good luck, 

David

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Saaj Patel
  • Investor
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Saaj Patel
  • Investor
Replied Dec 27 2022, 06:50

John, 

1. It is not a bad idea to start now. Yes, there may be a better entry point into the market in the near future, but that does not mean that there is not money to be made right now. Full-time real estate investors never stop buying when the market in inflated like this, they just slow down their buying to a reasonable rate that allows for a better risk profile. The key is to find a great team and manage the project well.

2. Your budget is super reasonable. These are markets that you can easily break into with that type of money. The good thing about the suburbs of Philadelphia is that is often much cheaper than the suburbs of other cities. However, you may need to dampen your expectations slightly on the ARV in my opinion (if it is worth anything).

I am an investor and local in the area and would love to chat further if you have some time. 

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Nashid Ali
  • Realtor
  • Philadelphia
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Nashid Ali
  • Realtor
  • Philadelphia
Replied Dec 27 2022, 20:48

John,

To answer your questions:

1-In my opinion, it's not a bad idea renovating with no experience. The beauty of this is that you're learning at your own pace and will be the wiser for it, especially when others will be seeking your advice on this topic in future conversations. In addition to this, you'll be saving money doing it yourself. However, know when you're over your head when it comes to certain repairs and call in a professional when needed.

2-Each community is different with its own submarket, any kind of generalization wouldn't do you justice. Definitely speak with an agent who is willing to work with you and willing to do some research in these areas of interest. Ideally an agent who's familiar with working with investors and renovations and willing to crunch numbers with you.

Wish you luck

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Matthew Niemynski
  • Wholesaler
  • Philadelphia, PA
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Matthew Niemynski
  • Wholesaler
  • Philadelphia, PA
Replied Dec 29 2022, 07:14

Hey John, 

I don't think buying and renovating in this market is a bad idea given you will be living in the property (if I am understanding this correctly) as you are rehabbing. As long as the scope of work and your payments make sense, I think its a great start.

As you mentioned, it will be a great learning experience. My recommendation is to team up with a realtor who can provide you comps and data for a property you would be interested in purchasing, so you can see how homes are trading and what values they are trading at based on condition. Also, having a contractor/inspector in your back pocket always helps. 

As David mentioned, definitely plan for the worst. Things are going to go wrong and that is just part of the business. The more you plan, the better you can maneuver over obstacles. 

As far as those locations you mentioned. I work frequently in Ardmore and find properties below $500k, these prices range based on condition and comps of course. 

Would be happy to chat more.

Best of luck,

Matt

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Eric Greenberg
  • Investor
  • Philadelphia, PA
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Eric Greenberg
  • Investor
  • Philadelphia, PA
Replied Dec 30 2022, 04:32

Hi John,

Its a bit too broad of a question to answer if a $500k home with a $80-100k reno will be worth $850-900k. 

I dont think itll be trivial to find a home that undervalued in those three areas as they are sought after areas (parts of Chesnutt Hill less so). The Philadelphia suburbs, especially those with great schools are still very hot markets. Id think youd have to go off market/direct to seller to get those type of deals. 

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Juan Serano
  • Contractor
  • Philadelphia
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Juan Serano
  • Contractor
  • Philadelphia
Replied Jan 3 2023, 04:47

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