Philadelphia Strategy

Buying & Selling Real Estate
12yFollow

Philadelphia Strategy

Trevor Ewen
Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes

So. We have been hitting our heads against the oft ridiculousness of the New York market. Our target has been the Bronx, but cap rates here are rough. We wish to be true to our numbers, but they definitely don't lie, and NYC is not a great cash-flow option.

This is further bolstered by the fact that we are looking to move out of NYC in 3 years or so. Philly has been at the top of our list for awhile. Cost of living is better, we love the architecture, there is more than enough opportunity for work and quality of life for both myself (Software Engineer) and my wife (Accountant). When we get nostalgic for NYC, we plan a night out, and head up.

Given all that. What's the strategy? Here has been my strategy for the Bronx, but I noticed that the single family stock seems high in Philly (narrow buildings):

2 Units $400,000 and under

3 Units $500,000 and under

Is the multi-unit play a good strategy in Philly? Or are we better to keep our eyes peeled for 2 single families in the near $200,000 range? We'll take stories, advice, zip codes, colleagues... whatever you can suggest.

0Reply
133 views

Most Popular Reply

Troy Sheets
Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
12y

MFH's *generally* cash flow better and exterior maintenance-wise you've got one facade, one roof, etc., to maintain. On the other hand, you *generally* have more turnover (families are less likely to stay in a MFH long term, singles turn into couples and need more space, couples turn into families and need more space), and tenant disagreements/noise/he's stomping around up there/playing loud music/cooking stinky food complaints are more common. 

IMHO, if you're going to manage long distance for a few years, single family is the way to go. I personally like MFH but I'm managing them myself, in the city I live in. Unless you get a great deal on a MFH and line up a good property manager, I would look to get started in SFH's. You've got a better chance of stable, long-term tenants and you have a better shot at self-managing. If you're all about the cash flow and are going to hire a property manager anyway, MFH would be my choice.

Another thought, if you have the down payment, I'd also consider 5 unit and up small commercial buildings. There seems to be less competition as most small time investors don't have the cash to put 20% down for bigger building and they can cash flow really well. Possibly mixed-use as well, storefront on bottom, apartments on top, would be a great way for you to go. 

As far as 'hoods to start investing, all above mentioned are good choices but it again depends on where you're looking to start. Pennsport, Point Breeze and Passyunk Square are hot but not fully developed, there's still a few gems to pick up. Fishtown, IMHO, is played out and has been for a couple years, at least in terms of finding a deal and it cash flowing. It's been hot for years so that means prices are pretty stupid across the board and the areas people are calling "Fishtown" has grown into areas that are definitely NOT Fishtown. 

I think you need to tell us about your goals and comfort levels so we can help you determine how best to get there, what neighborhoods and property types will lend themselves to achieving the end goal, etc.

3Reply
See this reply in the discussion

27 Replies

Jump to latestLatest
  • Terrell Brown
    Philadelphia, PA · Member since 2014 · 25 posts · 7 votes
    12y
    So you want to buy 5 properties? What is your end goal? Fishtown (19125)and point breeze (19146)are good developing areas and would be at the top of my list with that kind of money to spend.
    2Reply
  • Antoine Joseph
    Engineer · Philadelphia, PA · Member since 2012 · 75 posts · 14 votes
    12y

    I agree with @Terrell Brown and would add Pennsport and Passyunk Square. 

    0Reply
  • Account Closed
    Accountant · Collegeville, PA · Member since 2013 · 105 posts · 25 votes
    12y

    I find most of the desirable areas in Philly have already gone up in value and consequently offer cap rates well below 10 percent. Student housing around Temple University can potentially offer higher caps but you have to be selective block by block given the neighborhoods surrounding the school. Good luck!

    3Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    12y

    MFH's *generally* cash flow better and exterior maintenance-wise you've got one facade, one roof, etc., to maintain. On the other hand, you *generally* have more turnover (families are less likely to stay in a MFH long term, singles turn into couples and need more space, couples turn into families and need more space), and tenant disagreements/noise/he's stomping around up there/playing loud music/cooking stinky food complaints are more common. 

    IMHO, if you're going to manage long distance for a few years, single family is the way to go. I personally like MFH but I'm managing them myself, in the city I live in. Unless you get a great deal on a MFH and line up a good property manager, I would look to get started in SFH's. You've got a better chance of stable, long-term tenants and you have a better shot at self-managing. If you're all about the cash flow and are going to hire a property manager anyway, MFH would be my choice.

    Another thought, if you have the down payment, I'd also consider 5 unit and up small commercial buildings. There seems to be less competition as most small time investors don't have the cash to put 20% down for bigger building and they can cash flow really well. Possibly mixed-use as well, storefront on bottom, apartments on top, would be a great way for you to go. 

    As far as 'hoods to start investing, all above mentioned are good choices but it again depends on where you're looking to start. Pennsport, Point Breeze and Passyunk Square are hot but not fully developed, there's still a few gems to pick up. Fishtown, IMHO, is played out and has been for a couple years, at least in terms of finding a deal and it cash flowing. It's been hot for years so that means prices are pretty stupid across the board and the areas people are calling "Fishtown" has grown into areas that are definitely NOT Fishtown. 

    I think you need to tell us about your goals and comfort levels so we can help you determine how best to get there, what neighborhoods and property types will lend themselves to achieving the end goal, etc.

    3Reply
  • Trevor Ewen
    OP
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    12y

    Hey Guys -

    Thanks for the quick responses to start. So a bit more about our goals.

    Our end line goal is to get to cash flow $6,000 / month in the next 12 years. It's ambitious, but we both work hard, and that's where we get our starting capital.

    In the short term. We have a couple domestic goals that can either help or hurt this initiative. No kids, and we are probably about 5 years out from that (which is good for urban areas). Like most New Yorkers, we rent. We have a good rent deal for the location, but any purchase (that we live in) can reduce our cost of living, and effectively: cash flow. Our money is largely in ETFs and the stock market. We have done well, but we are over leveraged in a portfolio that I see as being 50% physical real estate, in the ideal case.

    While I would love to get in on the commercial game in Philly. It's a lot of money to throw at a place that is still at the whim of our managers and local trends of which we may be less hip to. Sadly, I can give you good details on any neighborhood in NYC and the Burroughs, but I lack the 1.5 Trillion Dollar down payment and taxes.

    My gut reaction is that single families in Philly would be a good target. We are even willing to take a slight hit on the numbers for the right place (not lose money, but lower cash flow). Just because we are planning to move there, and if we took over the space we would want to like it, or at least have the ability to make it great. The rest of our money can go to turnkey stuff in solid markets that we already like (Memphis, Kansas City, St. Louis).

    We can deal with edgy from a comfort perspective. Many New Yorkers (read: Manhattanites) (incorrectly) are convinced the Bronx is a chaotically dangerous place. It has its rough spots, it has the lower end, but it's also a place where families and communities (of all kinds) have been for generations, so we don't mind the stigma, as long as there is some real positivity in the area.

    0Reply
  • Account Closed
    Philadelphia, PA · Member since 2014 · 66 posts · 3 votes
    12y

    well I live in northeast part of philadelphia. I'm 3 minutes outside if the suburbs and just like anywhere else it's block to block in parts of Philly. The far northeast (which is my area) generally is very safe for investing. 19154. 19114 19116 all good zips.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    @Trevor Ewen I don't know the Philly market at all, but like @Account Closed says. it varies neighborhood to neighborhood which is typical of a lot of cities, so be careful and really know the area. Then it comes down to numbers. I don't know what kind of rent you can get for the price you pay there but if you're living in it (I presume you're looking at multi family) that of course helps a lot. Let me know if I can help you with Kansas City, I do know that market.

    Mike

    0Reply
  • Account Closed
    Investor · NY · Member since 2014 · 74 posts · 49 votes
    12y

    @Trevor Ewen sounds almost exactly like what I've been thinking of doing. Philly seems like a great option for us New Yorkers. The prices and cap rates are so much better than NYC and it's under a 2 hour drive so it's doable to go look at properties on the weekends. I've been focusing my search on multi-families around Temple University, UPenn and Drexel as they look like they cash flow pretty well but I need to get down there check out the neighborhoods soon, possibly this weekend. I'm also just starting to do some research on if SFH flips make sense there; there are a lot of sub-$100k properties available but I'm not sure if the neighborhoods they're in are suitable for flips.

    Good luck with your search and keep us updated!

    0Reply
  • Carlos M.
    Developer · Philadelphia, PA · Member since 2013 · 68 posts · 13 votes
    12y

    @Account Closed do you have someone that is going to help you navigate through your target areas? Philly is a city a neighborhoods where one pocket is great but just a few streets down the area may not be so good. 

    1Reply
  • Account Closed
    Investor · NY · Member since 2014 · 74 posts · 49 votes
    12y

    @Carlos M. I haven't reached out to anyone yet. I think the next time I take a drive down there I was just going to spend a day or two driving around the city to get a feel for what areas I would feel comfortable investing in. Then once I have that general feel for the city I would want some more in depth advice from locals.

    Are there any areas I should absolutely stay away from? I have no reservations about B or C neighborhoods, but want to completely avoid areas with higher violent crime. From the city-data maps I've looked at, west Philly and pockets of north Philly are the places to avoid but I could be wrong.

    0Reply
  • Troy Sheets
    Developer · Philadelphia, PA · Member since 2013 · 1k+ posts · 902 votes
    12y
    Originally posted by @Account Closed:

    @Carlos M. I haven't reached out to anyone yet. I think the next time I take a drive down there I was just going to spend a day or two driving around the city to get a feel for what areas I would feel comfortable investing in. Then once I have that general feel for the city I would want some more in depth advice from locals.

    Are there any areas I should absolutely stay away from? I have no reservations about B or C neighborhoods, but want to completely avoid areas with higher violent crime. From the city-data maps I've looked at, west Philly and pockets of north Philly are the places to avoid but I could be wrong.

    IMHO, yes to avoiding North and West, however, there are profitable neighborhoods bordering these areas. For nailing down an area to start looking, these are probably good guidelines though. 

    0Reply
  • Carlos M.
    Developer · Philadelphia, PA · Member since 2013 · 68 posts · 13 votes
    12y

    @Account Closed  You approach is a good idea however I highly recommend once you being your search you have someone with you that is familiar with the city. As for Temple the area I would say is a good pocket to within Diamond Ave (North) Oxford Avenue (South) 11th St (East) 17th St (west) if you stay within that square you will be in good shape. As for Drexel there is lots of activity going on in Mantua and Powelton Village. Both areas border Drexel's Campus. As for UPENN I am not the most familiar with that area but I do know that there is alot of opportunity in the Gray's Ferry area as UPENN plans to extend its campus towards that way. If you need more information please let me know. Good Luck.

    1Reply
  • Hilary Karaman
    Realtor · Philadelphia, PA · Member since 2014 · 51 posts · 11 votes
    12y

    @Account Closed 

    Lots of emerging markets in Philly, but like everyone has mentioned Philadelphia is a city of neighborhoods and one block's distance can make a big difference.  Francisville, Old Kensington, Port Richmond are also areas to consider.  Some NE markets have become pretty stagnant, too, despite having lower crime rates, etc.

    0Reply
  • Account Closed
    Real Estate Investor · NYC, NY · Member since 2014 · 44 posts · 8 votes
    12y

    Greetings All,

    Does anyone have any thoughts on Norristown or Bridgeport? I'm looking at some multi families there, a 4 unit and 2 unit that have cap rates btw 11-13%. They are not in war zones but definitely low income or C properties. They are also across the street from a school.

    All the best,

    Willie B

    0Reply
  • Michele FischerPro Member
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    @Account Closed , I don't know your area, but I focus on C class properties.  Takes more energy, but the earnings are there.  Across the street from a school can be really good in a low income area.

    Podcast Guest on Show #79
    0Reply
  • Jim HoganPro Member
    Investor · Malvern, PA · Member since 2014 · 108 posts · 42 votes
    12y

    Willie, B,  

    Bridgeport is the better of the 2.  Bridgeport school district is Upper Merion and Norristown is Norristown School district.  There are parts of Norristown that are not as desirable, but there are some nice parts of Norristown, too.  In fact I am finishing a twin in Norristown that I will be listing in the next couple of days.  I think both areas are good investments.  I just haven't timed it for Bridgeport yet.

    0Reply
  • Josh K.
    New York City, NY · Member since 2014 · 7 posts · 1 vote
    12y
    Originally posted by @Troy Sheets:

    MFH's *generally* cash flow better and exterior maintenance-wise you've got one facade, one roof, etc., to maintain. On the other hand, you *generally* have more turnover (families are less likely to stay in a MFH long term, singles turn into couples and need more space, couples turn into families and need more space), and tenant disagreements/noise/he's stomping around up there/playing loud music/cooking stinky food complaints are more common. 

    IMHO, if you're going to manage long distance for a few years, single family is the way to go. I personally like MFH but I'm managing them myself, in the city I live in. Unless you get a great deal on a MFH and line up a good property manager, I would look to get started in SFH's. You've got a better chance of stable, long-term tenants and you have a better shot at self-managing. If you're all about the cash flow and are going to hire a property manager anyway, MFH would be my choice.

    Another thought, if you have the down payment, I'd also consider 5 unit and up small commercial buildings. There seems to be less competition as most small time investors don't have the cash to put 20% down for bigger building and they can cash flow really well. Possibly mixed-use as well, storefront on bottom, apartments on top, would be a great way for you to go. 

    As far as 'hoods to start investing, all above mentioned are good choices but it again depends on where you're looking to start. Pennsport, Point Breeze and Passyunk Square are hot but not fully developed, there's still a few gems to pick up. Fishtown, IMHO, is played out and has been for a couple years, at least in terms of finding a deal and it cash flowing. It's been hot for years so that means prices are pretty stupid across the board and the areas people are calling "Fishtown" has grown into areas that are definitely NOT Fishtown. 

    I think you need to tell us about your goals and comfort levels so we can help you determine how best to get there, what neighborhoods and property types will lend themselves to achieving the end goal, etc.

     Sounds like solid advice

    0Reply
  • Beverly Buella
    Investor · Philadelphia, PA · Member since 2010 · 56 posts · 22 votes
    12y

    @Account Closed, I agree with @Jim Hogan, Bridgeport is better between the 2 if you're not very familiar with either town. Bridgeport is smaller and generally has a similar look and feel for the entire town (blue collar Philadelphia suburb) whereas Norristown is larger and is definitely more block to block.  You'll definitely be able to find cheaper properties in Norristown.  I just wholesaled a property in a decent section of Norristown for $75k but houses in another section of Norristown go between $300-$400k.  Good luck!

    0Reply
  • Account Closed
    Real Estate Investor · NYC, NY · Member since 2014 · 44 posts · 8 votes
    12y

    @trevor ewen

    I've been doing some marketing in Middlesex and Union County NJ bc I live in Manhattan and it's a closer commute than PA. I have found some MF opportunities with 8-14 caps all under 300k which has been challenging due to the tax rates in NJ but they do exist.  If you are still considering MF's I'd be happy to share the details. If your end goal is cash flow have you considered notes? They provide cash flow without the 3 t's and you can buy them nationwide. 

    All the best,

    Willie B

    0Reply
  • Raymond B.
    FL · Member since 2009 · 2k+ posts · 357 votes
    12y

    @Account Closed,

    To make the @ work, do the following:
    Hold down the shift key and type @?
    Look below this Window, and you will see a list of names of people that have posted in this thread.
    Click on the name of the person that you want notified via an email, that you responded to them.
    If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.
    Then look below this Window and click on that person's name.
    Raymond

    0Reply
  • Account Closed
    Real Estate Investor · NYC, NY · Member since 2014 · 44 posts · 8 votes
    12y

    @Trevor Ewen 

    I've been doing some marketing in Middlesex and Union County NJ bc I live in Manhattan and it's a closer commute than PA. I have found some MF opportunities with 8-14 caps all under 300k which has been challenging due to the tax rates in NJ but they do exist. If you are still considering MF's I'd be happy to share the details. If your end goal is cash flow have you considered notes? They provide cash flow without the 3 t's and you can buy them nationwide.

    All the best,

    Willie B

    0Reply
  • Account Closed
    Real Estate Investor · NYC, NY · Member since 2014 · 44 posts · 8 votes
    12y

    @Raymond B. 

    Thanks Raymond!

    0Reply
  • Trevor Ewen
    OP
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    12y

    @Account Closed 

    Haven't looked a great deal into notes. At the moment, I am moving forward on a private placement, but may have some more bandwidth for that in the upcoming year.

    0Reply
  • Weis Sherdel
    Investor · Washington, DC · Member since 2014 · 57 posts · 13 votes
    11y

    @Troy Sheets 

    Troy - Sounds like you know Philly really well.  I appreciate if you could offer me some advise on the following neighborhoods:

    1) Stanton (Intersection of West Berks & N. 20th)

    2) Port Richmond (Intersetion of E. Allegeny Ave and East Wishart St)

    3) Carrol Park (W. Girard Ave, N Robinson)

    I am looking for a SFR with caps of 9.0% or better. Most important to me is neighborhood. I would rather have a stable-income neighborhood with young professionals or stable income families versus financially struggling single mom's working 3 jobs for example. In return, I would take a lower CAP rate.

    Just curious if 1 and 2 are considered 'North Phily' while the 3rd is "West Philly" - two areas I am told have major trouble spots.

    If others have any advise, please pitch in!

    -weis

    0Reply
  • Andy C.
    Rental Property Investor · Upper Darby, PA · Member since 2014 · 43 posts · 19 votes
    11y

    Be prepared to deal with L+I, inspections, setting up a business and paying BPT.

    Most people who are looking to have rentals in Philly don't understand the importane of the License.

    https://business.phila.gov/Documents/Licenses/part...

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free