Philadelphia, PA · Member since 2015 · 17 posts · 6 votes
My wife and I are stumped on a decision to purchase a SFH with a VA loan with intent to move-out and rent in two or three years. The home was built in the mid-60s and located about 20 miles north of downtown Philadelphia. Totally rehabbed by owners less than five years ago, nice three bedroom, two and a half bath, very good shape and a reasonable sales price of $155K. The hang-ups: the home has been on the market for over 13 months (if good deal, why not bought?) and there is a not-for-profit, 260 unit low income public housing/apartment complex a few blocks down the street. Home was recently assessed for $170K and comps in the area above the going price. Crime stats and reports are above average with burglary and smash-and-grabs at the top of the list. Tenant satisfaction within the complex is low. Is the home worth buying with a mortgage of $1,200 monthly and potential rental price of $1,300 monthly? And, what does the future hold for home appreciation in 10 to 15 years? Thanks in advance for your comments and wisdom.....
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
10y
Good deals don't last, lousy deals only last a bit longer.
Almost all the good deals in my area are gone in 72 hours or less.
That said, ask the neighbors why the house hasn't sold. Are any other people looking to dump their homes? If everyone else is content with the area than maybe it's a different reason the house isn't selling (at that price). You need a bit more information I think as to WHY it's lasted so long, then you can make the correct decision.
Real Estate Agent · Cedar Creek, TX · Member since 2010 · 161 posts · 63 votes
10y
I'm not from Philly but my guess would be that you answered your own question. The low income housing complex will probably not go away and will continue to be a drag on the property values, also with the not in my backyard mentality if future low income units are to be built it will probably be there. Crime rates are higher than average which usually means that the best tenants will want to live somewhere else. I'm all for buying into gentrifying areas but I don't think this home will appreciate much. If I were you I'd keep looking.
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
10y
Good deals don't last, lousy deals only last a bit longer.
Almost all the good deals in my area are gone in 72 hours or less.
That said, ask the neighbors why the house hasn't sold. Are any other people looking to dump their homes? If everyone else is content with the area than maybe it's a different reason the house isn't selling (at that price). You need a bit more information I think as to WHY it's lasted so long, then you can make the correct decision.
From my understanding, the good deals typically go quick. The deals that last for a while, you will usually be dealing with a more motivated seller, so you would probably have more negotiating power, which might be able to help you make the numbers work. I would also make sure to include all the other expenses (taxes, repairs, capital expenditures, utilities, etc) in your analysis. It does not seem like this property will cashflow if the mortgage payment is 1200 and you will only get 1300.
There is a lot of potential for appreciation all over Philadelphia. I would be careful when accounting for appreciation though. Appreciation is never a guarantee, and in my opinion, should not make or break a deal. Also, I have heard that lower income, and areas with more crime, do not appreciate as well. Feel free to connect or message me anytime
Real Estate Agent · Philadelphia, PA · Member since 2013 · 167 posts · 64 votes
10y
@Ron Gosling - after reading your post, my thought is that with a monthly mortgage of $1200 and potential rent of just $1300, you are only netting $100 a month. That amount is very low in the event of a surprise repair or a tax increase.
BiggerPockets members typically recommend to have a monthly profit of around $300-500 per unit or per property.
Obviously it is very important to know your numbers and ensure that you are cash flow positive.
I'm a licensed real estate agent as well as investor, let me know if I can be of any assistance. Best of luck!
You can not carry a property with only $100 per month. You will be throwing cash at the place at a rate of thousands per year for all the expenses above and beyond mortgage.
If you are not aware of the costs associated with owning a rental property you need to educate yourself before you think any further about being a investor.