Philadelphia Strategy

Buying & Selling Real Estate
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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.

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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.

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  • Nancy L.
    Philadelphia, PA · Member since 2014 · 178 posts · 64 votes
    11y

    @Trevor Ewen and @Weis Sherdel I have duplexes in the Mt. Airy and Germantown neighborhoods (19119 and 19144). These areas fly a little more under the radar, and in my experience, have better prices relative to rental income because there is less competition and attention driving up prices. Both neighborhoods have a lot of upper-middle class residents, low-income residents, and everything in between, depending on the particular section. The areas are continuously improving, with bigger developer interest now moving into Germantown. They also have great historical architecture, shopping districts etc. If you start looking in these areas, feel free to ask me about which sections are considered the better ones... I actually live in Germantown myself.

    My tenants have been a mix of young professionals and solid blue collar. I've had a social worker, vet tech, teacher, personal trainer, crossing guard/retired postal worker, and so on.

    Weis, from your list, you may find the kind of tenants you're looking for in Port Richmond. I'd nix the other two locations. Port Richmond is its own neighborhood and is too far east to be "North Philly." West Philly has a lot of good spots, but those sections are typically referred to as "University City." 

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

    @Nancy L. - Thank you very much for a helpful answer.  I am going to write you directly to further pick your brain on Philly.

    -weis

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