Rental Property Investor · Philadelphia, PA · Member since 2019 · 27 posts · 7 votes
I live in philly and wanna start my real-estate investor journey. I own two homes outright as I live in one and the other is my parents home. I want to begin creating my investment portfolio by using this home. I thought about going in the section 8 direction but willing to hear from those who have insight and can point me in the right direction. I'm definitely looking for a mentor who can guide me in this journey.
Rental Property Investor · Philadelphia, PA · Member since 2021 · 774 posts · 501 votes
9mo
@William T parkerIii - If you have an interest in jump starting your real estate investing journey by tapping into the equity into your existing homes that definitely makes sense. You can consider either refinancing one or both of them with a loan or HELOC. Since you mentioned BRRRR strategy are you also thinking of renting them out to others? That would mean you and your parents would need to find another place to live. I've done BRRRR in the Philly suburbs and would be happy to talk. Just let me know!
Lender · Member since 2022 · 1k+ posts · 508 votes
9mo
You could pull out money from either home through a HELOC or cash out refinance if you were looking to do the full BRRRR cycle. A HELOC rate will be tied to the Fed Funds rate and the cash out refinance more closely tracks the 10 year treasury (if you google 10 year treasury, you'll see which direction it's going in). With the same borrower profile (credit score etc), the cash out refinance will most likely have the better interest rate but varies on other loan factors such as loan to value (LTV) on the loan.
For the cash out refinance part of BRRRR, many investors use DSCR loans due to various reasons including shorter seasoning or waiting periods between each loan or waiting period between a purchase and the next loan to pull out cash on the new appraised value after the rehab.
More on DSCR loans: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Setting up a HELOC makes a lot of sense here. Check with your current bank or local credit union. They tend to offer the best HELOC rates, usually in the 6's or 7's. The beauty of a HELOC is that once you complete the BRRRR process, you can replenish what you borrowed then the balance becomes available to you again.... and again... until the line term ends. If you were only doing cash outs on the BRRRR property, those funds get locked up in equity.
Section 8 can be quite lucrative, but be sure to consult with some other Section 8 operators. There are many added challenges that come with Section 8 versus a traditional tenant, but as long as you are well in the know and know what to expect, then all is well. In terms of financing, more and more lenders are beginning to reduce LTV on cash outs when having Section 8 tenants in place. Not ideal if you intend to max out cash out proceeds. But this only reduces the max leverage allowable... if you are already looking for a lower leverage, then there may be no impact.
Be sure to have both your HML and Perm lending determined before diving in. I save quite a few deals where folks find the HML but don't explore perm options before hand and realize they did something that hurts them when getting perm financing. Easily avoidable if you discuss with both sides of the deal.
Are you working with a mortgage broker at all? Be sure to find one that specializes in investments as more and more are retail or wholesale lenders trying to work in this space and have no idea what they are doing... Investment brokers will vet your deals all the way through final exit and ensure you are guided throughout the entire process and not just one part of it. Keep in mind, I've yet to see a HML that does DSCR well or a DSCR lender that does HML well... you will almost certaintly need two different lenders for each side of the transaction.
Rental Property Investor · Philadelphia, PA · Member since 2019 · 27 posts · 7 votes
9mo
@Greg Kasmer thanks for responded and sadly my parent are nolonger with us but the plans for financial freedom remain the same. The idea is to definitely put the needed repairs in both homes and rent them out. Thus putting us in a position to purchase another home for ourselves. Some small and simple like a moduler home in Lancaster preferably lol....gotta get out of the city brotha lol. The newly formed investment properties would then pay for the new inexpensive home. I'd love to connect and learn more.
Rental Property Investor · Philadelphia, PA · Member since 2019 · 27 posts · 7 votes
9mo
@Nick Belsky I'm not currently working with a mortgage broker. Just trying to gain wisdom in the space and learn from you guys so I can lessen the blows that will inevitably be taken lol
Flipper/Rehabber · Philadelphia · Member since 2024 · 42 posts · 20 votes
9mo
If you already own the property outright, you’re in a strong position — but BRRRR only works if the refi value and rents justify pulling capital out responsibly.
A few things to think through first:
Get a realistic as-is vs after-repair value (don’t assume top comps).
Run rents conservatively — Philly can vary block by block.
Talk to lenders before rehab to understand LTV, seasoning, and DSCR requirements.
Section 8 can work, but it’s operationally heavier — make sure the numbers justify the trade-off.
Many first-time investors over-leverage on the first refi. Capital preservation and flexibility matter more than max cash-out.
If you want, happy to point you in the right direction or help you think through whether the BRRRR actually makes sense on that specific property.
Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
9mo
I would recommend you go to investor meetups and ask a local landlord and a property manager to look at your exact zip code and tell you what rent, repairs, and tenant demand really look like.
Rental Property Investor · Philadelphia, PA · Member since 2015 · 479 posts · 362 votes
9mo
IMO your best shot at doing this well is to work with some highly experienced investors who can guide you in everything from analyzing the financial opportunity that you have, deciding how to best go about leveraging your properties - given their condition, location, your abilities and risk tolerance... and navigating the complexities of owning rental property in Philadelphia (there is nothing intuitive about how things work here :-) ) Invest in learning and then move forward from a solid foundation. Otherwise you will inevitably make costly mistakes. Feel free to reach out for some recommendations - folks I wish I had been able to get guidance from when I started in Philly 10 years ago.
Real Estate Agent · Philadelphia, PA · Member since 2019 · 1k+ posts · 1k+ votes
9mo
I will first happened to the equity of your investment property not the one that you currently live in. I would see what the rates are for a cash out refinance and then try to understand what your cash would be after you pull the money out. For a solid multi family in the Philadelphia area you need at least 350 K. typically this is a duplex that requires some sort of cosmetic rehab.
No need to reinvent the wheel or do anything crazy. If your current property that's owned outright will cash flow and I mean truly cash flow - because what's the point of pulling money out of the property for it to struggle financially - then use that money that you pulled out as a down payment for a solid rental, preferably multi family (2-4 UNITS).
This is the most straightforward non- BS approach.
And I would highly advise against going into section 8 rentals and trying to chase crazy numbers you have the ability right now to put your money into a solid location. Listen to Ken Mcelroy podcast on the ice coffee hour. You cannot outmanage a bad neighborhood - location, location, location
Rental Property Investor · Philadelphia, PA · Member since 2019 · 27 posts · 7 votes
8mo
@Michaela Hayes , thank you for imparting your insight into my situation. The current valuation on the property for 2025 was 100k. Based on the walkthrough I had with my contractor, I am looking at between 15k-20k in updates to the property ( all cosmetic) and focusing on higher upgrades in the bathroom and kitchen. Do finished basements and outdoor spaces raise the value of the property at all? I would love the help, thank you.
Rental Property Investor · Philadelphia, PA · Member since 2019 · 27 posts · 7 votes
8mo
@Sheryl Sitman thank you so much for that advice. I definitely want to lean on the experience of some amazing investors. I believe that experience is the best teacher, not just my own, but the experience of others who have done it before.
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