Need your help, about a deal I'm considering in Philly:

7 Replies

Hey guys,

For you who knows the Philly market do you think this is a good deal:

Buying a house in Point Breeze, 3 bed, 1.5 bath, 1250sq ft. Really close to tasker morris station.

House goes for $250K. It think that the price is about right looking at comps. If you know the area well let me know what is your opinion. Zestimate is $315K.

Cash flow won't be great for me since I will be taking an expensive loan at 7%.

Expenses would be: mortgage+taxes+home insurance= $1300

Management fee of $100 will be waived for the first year.

There are renters in the place with a contract till June 2019 and they pay $1635.

What I'm considering is that:

Get the place, have little to no cash flow and when the renters contract ends in June 2019 have them out and renovate the place and:

1. rent it out for more or

2. if the market is higher/ home value is higher after renovation, sell for a profit.

What do you think? Thank you.

Hi Assaf,

I'm in a similar situation to you--looking at PA properties, but living in NJ/NY. This property is in a nice neighborhood, but this particular deal may be more of an appreciation play. Does the house need work? If so, what's the cost to renovate and expected ARV? I'd completely ignore the zestimate and just ask your agent for a CMA and rental comps.

I have principal, interest, taxes and insurance a little higher.. at 25% down and 7% interest, you're looking at $1250/month just for principal+interest, about $300 in taxes and insurance around $100. Add on management fee, maintenance, cap ex., vacancy and utilities not paid for by your tenant.  All in, your expenses will be closer to $2100/month. 

DM me if you have any questions about these numbers. I'd be more than happy to share my spreadsheet with you. GL!

Thanks @Sen A.

My numbers about mortgage, insurance at stuff are correct and those are the actual numbers.

The question is if to go more on appreciation like you said or just wait for a better deal cash flow that might be appreciated as well.

My agent says that if I buy for 250K now and next summer for around 20-30 in fixing up things I can sell it then for around 350K but of course it's all estimated. The place now is in fair condition, people live there, and it's decent, but not updated.

Very important question: Is your agent an investor?

Also, how close to Broad street are you?

Point Breeze home values have been going up at an incredible rate over the past several years, I bought a triplex a few blocks from Ellsworth-Federal station back in 2015 and am very happy with how it has progressed. That being said, I do not think this trajectory is a lock to continue. There is considerable risk in factoring in this appreciation to your overall strategy.

J

I am a believer in being close to transit when it comes to rentals, and that location is solid. All comes down to the numbers though. I do not love 7% for an interest rate.