Single Family Vs Multi Philadelphia

5 Replies

I have 10 single family rental properties in Philadelphia and am thinking about getting a small multi, most likely around 2-4 units. What are the pros and cons to a multi in Philadelphia? What type of extra regulations are required? (Such as fired code, etc) 

Hi @Dan Red,

How are you.

Sounds like you are building up a good portfolio.

The answer all depends - Buying cash or Mortgage Buy In Availability. If you have 10 Mortgages you will need to go the direction of Portfolio Lending so FNMA would be out as an option. Inventory is very tight for 2-4 units currently due to the movement of House Hacking and out of state buyers attacking that market.

Hope this helps. Let me know if you have any questions.

Regards

Joe Scorese

@Dan Red

The cons is most likely you will have bigger tenants turn over in a multifamily than in a single house. The pros you will have better return on your investment. It all depends on the type of the property and the area you are in.

As far as regulations you will have to pay city refuse fee $300 a year per property (for any property 2-4 units). Also if it’s a 3-unit property and up you will have to have hardwired fire alarm with a station and fire extinguishers in some areas. The fire alarm has to be inspected every year as well as the extinguishers (about $200-$250). Also you will have to have one electric meter for common areas in a property with 3 units and more, that you will be paying for. If you are planning on having section8 tenants you will have to be paying for water since there is no separate water meters for each unit. 

Here in “partners for good housing” pamphlet you can find some information about regulations for multifamily properties https://www.phila.gov/li/Documents/partnersinhousing.pdf

Here you can find city codes and regulations http://www.phila.gov/li/codesandregulations/Pages/codes.aspx

Hope this helps. 

Originally posted by @Yuriy Skripnichenko :

@Dan Red

The cons is most likely you will have bigger tenants turn over in a multifamily than in a single house. The pros you will have better return on your investment. It all depends on the type of the property and the area you are in.

As far as regulations you will have to pay city refuse fee $300 a year per property (for any property 2-4 units). Also if it’s a 3-unit property and up you will have to have hardwired fire alarm with a station and fire extinguishers in some areas. The fire alarm has to be inspected every year as well as the extinguishers (about $200-$250). Also you will have to have one electric meter for common areas in a property with 3 units and more, that you will be paying for. If you are planning on having section8 tenants you will have to be paying for water since there is no separate water meters for each unit. 

Here in “partners for good housing” pamphlet you can find some information about regulations for multifamily properties https://www.phila.gov/li/Documents/partnersinhousing.pdf

Here you can find city codes and regulations http://www.phila.gov/li/codesandregulations/Pages/codes.aspx

Hope this helps. 

That must be a recent change -- for some reason I thought you could have regular fire prevention in place up to and including 3-family buildings. Once you hit the 4-or-more threshold, that requires the "fire system" mentioned.

@Joe Papp

I'm not sure how recent it is. It was in effect since I bought my first triplex which is a few years back. If you do not maintain your fire alarm inspection you will get fined and a violation. Also the city will post a notice at the property.  

@Dan Red --> @Yuriy Skripnichenko hit the nail right on the head (codes/fees wise).  Also as @Joseph Scorese mentioned.. inventory for MFHs are super tight now, especially in Philly.  I've been looking for the last 2 years and have yet to find a great deal that can be snatched up (most are off market or bidding wars drive up the price ridiculously).  You may want to search outside of Philly for deals (and those still go quick sometimes). 

Speaking from experience, I used to own a duplex (I BRRRR'd out of it, sold it last year). Easier having a duplex in terms of permits needed for construction/alteration, fire codes, etc. For me at the time, the 1 bedroom unit paid 2/3 of my PITI payment and I was happy with that. I was also in Passyunk Square area, so it was the 'place to be' and rentals were hot in recent years there. Now, however it can be hard to find a good cash flowing duplex as you're limited to 2 units and if 1 is vacant.. can put you in the red. Location, condition, etc.. it all adds up as you know.

If you're at 10 SFHs currently (and kudos on that!), my suggestion would be to even broaden your horizon, looking at commercial places.. 5 units+, or perhaps buildings with commercial on 1st floor and 2 units (or more) above.  If you sold some SFHs, you could do a 1031 exchange, to get a larger commercial property.  Then renovate, raise rents, manage appropriately to force appreciation on the commercial property. 

Finally, on a personal note.. I originally wanted larger, multi units, but having not found any, I decided to focus on niche areas of Philly, acquiring SFHs to flip-to-rent (BRRRR) in appreciating (or potential anyways) areas.

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