BRRRR in Philadelphia, your thoughts?

27 Replies

Hi guys,

Hope everyone is staying safe and warm.

What are your thoughts on the BRRRR strategy near the Philadelphia area or suburbs?

Been thinking about taking a mini-road trip to PA to check out some distressed properties over the next few weekends after browsing through properties listed in NJ, NY, and CT and coming to the conclusion that the numbers don't make as much sense for investing up in these regions (either the property taxes are too high or the rent-to-price ratios are too low).

What would be a reasonable price range to target? Anyone have success investing in this market?

Many thanks in advance!

@Michael Gabriel would be my go-to guru for anything Philadelphia.  He's a local-homegrown product and experienced not only as an investor in that market but also as a top producing realtor. He carries that USMC energy into RE. 

I am a CA resident who invests almost exclusively this point in Philadelphia. I'd be happy to discuss my experience with you at some point (DM me). 

I look for buy and holds out there, so typically am looking for something all in around 120-150k for SFH, 200-250k for duplex/triplex.


You can definitely hit the 1% rule if you buy correctly. Rents are pretty great in that market, although the political environment is very tenant friendly at this point (like most of the country, but even more so there). It is also an extremely competitive market right now, so be prepared for a fight to find good deals!

@Ross Yeager

That’s awesome, it must be a pretty decent market if you’re investing all the way from California. Glad to hear you were able to make it work. Hope you don’t mind me asking, have you faced any challenges up to date, (in particular with it being a less landlord friendly city)?

Hi @Chiwei C. , with all the appreciation that so many markets have seen in the last 12 months, combined with the lack of supply, BRRR deals are becoming less and less easy to find. You can't just throw a dart at a map and fine one like 5 years ago.

If you're finding a lot of distressed properties in one area, that probably says a lot about the region. You want to find the ONE distressed property in a good area to be successful in the BRRR front.

What kind of returns are you looking for in the rental market, and what areas of CT were you looking in? The difference between southern Connecticut and northern Connecticut can be pretty substantial even though it's such a small state. 

@Filipe Pereira

This is insightful, thanks for sharing! I haven’t considered that thought before: finding the 1 distressed property among a sea of great properties, that sounds like a great idea. Any insight on what makes that a better investment vs buying in an area with lots of distressed properties?

I’ve mostly looked near the southern parts of CT last time I browsed. I’m curious what parts of CT you would recommend?

Thanks!

@Filipe Pereira

As for returns, I have heard there’s a sweet spot in every market, so maybe as close to the 1% rent to price ratio after rehab is all done while still being in a pretty safe neighborhood. I also realize the lower crime there is we’re looking at closer to 0.8 or 0.9% to rent to price ratio which is probably ok as long as there’s profit to be made on the flip.

Originally posted by @Chiwei C. :

@Filipe Pereira

This is insightful, thanks for sharing! I haven’t considered that thought before: finding the 1 distressed property among a sea of great properties, that sounds like a great idea. Any insight on what makes that a better investment vs buying in an area with lots of distressed properties?

I’ve mostly looked near the southern parts of CT last time I browsed. I’m curious what parts of CT you would recommend?

Thanks!

If you are finding a lot of distressed properties in one area, it's probably a region known to be less desirable, typically due to crime, violence, gangs, etc. That's why you don't want to go into those neighborhoods unless you're buying up the entire block. You can't control the neighborhood, so it doesn't matter how nice of a house you have, you will be capped by the quality of the area. 


Check out Hartford county. We're above the 1% rule here (for properties straight off the MLS). Definitely better than southern CT.

Hi Chiwei. We work in both Philadelphia and Pittsburgh, Our investors are seeing a bit better returns and deals in Pittsburgh. Pittsburgh is a little more landlord friendly especially when we are talking evictions and such. If you think about looking into Pittsburgh I would highly recommend Austin Daniel. He is wonderful and really knows the areas! We have some areas at the 1% rule and areas that are even better returns then that.

Philly has some nice areas. I recommend @Christopher Schink if you are looking out that way. There are some good markets there as well but in the last 6-12 months in particular we haven't seen as good deals.

Great, thanks Elise and Filipe! Really appreciate the insight. Sounds like Pittsburgh is more investor friendly. I'm still leaning a bit more towards Philly only because it is within a 2 hours drive from where I'm currently located. But it sounds like there's a lot of different options to explore at this point and this is all really great info.

Hey @Chiwei C. ,there are tons of deals on the MLS in Connecticut where we invest.

I believe the key is to act quickly, know your numbers and your buying criteria .

If you know you want single families with 3 bed 2 bath, set up an alert for that and get your paperwork ready to offer once you find one that matches.

-Craig

@Ross Yeager Hi Ross - I just renovated a primary residence in South Philly (East Passyunk) and will be looking for an investment property soon. What areas of Philly are you investing in?

@Chiwei C. One of my 15 units has decided not to pay during The past few months, and we’ve had our eviction claims pushed out until May 2021. It definitely comes with its risks. Outside of that one unit everyone else is all squared away so I can’t complain too much.

@Chiwei C. I continue to invest in Philly mainly because of the systems and team I have there, not necessarily purely for the market itself. There are plenty of other more tertiary markets that are less tapped and still cash flow, so might be a better place to start. Philly can be great if you do it right, but IMO now more than before it’s harder and harder to find deals, and people are overpaying significantly when it does seem good.

@Ross Yeager

Thanks! 14 out of 15 rent paying tenants doesn’t sound too bad :) must be a pretty decent area. Sorry to hear that you won’t be able to collect from one until after the middle of next year, that must be costly.

Ah you would recommend other markets? I have invested in Memphis before but haven’t scaled it up too much and it seems to be doing pretty well, but from what I heard it can be a hit or miss there.

What other markets would you recommend?

@Chiwei C. If you’re looking for cash flow, Midwest is always hot. I also invest in secondary markets in Texas as well. I have some connections out there if interested, DM me.

Originally posted by @Chiwei C. :

Hi guys,

Hope everyone is staying safe and warm.

What are your thoughts on the BRRRR strategy near the Philadelphia area or suburbs?

Been thinking about taking a mini-road trip to PA to check out some distressed properties over the next few weekends after browsing through properties listed in NJ, NY, and CT and coming to the conclusion that the numbers don't make as much sense for investing up in these regions (either the property taxes are too high or the rent-to-price ratios are too low).

What would be a reasonable price range to target? Anyone have success investing in this market?

Many thanks in advance!


Short Answer - Yes. Philly is a great market for BRRR.

Longer Answer - A number of strategies work in Philadelphia, ie. BRRR, Fix and Flip, Buy and Hold, New Construction, Land flipping, wholesaling. You name a strategy and there is an opportunity to make money.

I've been having success for a number of years in West Philly.

Take a look at my profile for a proof of concept.

Cheers.

Thanks Ross and Michael!

After talking to a few people in and around the area, I'm leaning more towards the suburbs in Delaware County (Delco). I've heard that property taxes are higher though, but there must be some pros there if the home prices are slightly higher, right? I don't believe I saw a lot of property management companies in that area so that might be a risk. Any thoughts on that region?

I like delco alot for rentals. When compared to multis in Philly, I think it is harder to get a complete BRRR out there. Alot of the multis I see are pretty well maintained so there is less potential to add in that forced equity. At the same time, I come across more multis in the suburbs than Philly. As for SFH rentals, there are a ton of options that fit great for cash out refi. You are right when it comes to the taxes, but that doesn't necessarily mean the cash flows are worse, but it is a factor that turn a lot of investors off at the start.
I'd like to echo @Michael Lenahan , West Philly is a great spot for all sorts of investment strategies right now. 

The Philadelphia market is extremely hot. We fund rehab. bridge loans as well as the cash out refinance piece. Before, you buy a rehab. property in Philadelphia be certain that it works on debt service coverage for the refinance. Be aware the Philadelphia's neighborhoods can be tricky. We work with Keller Williams Philly Team Live Love Artemus and they are thoroughly familiar with the inner city neighborhoods. A few blocks either way makes a huge difference. Try Jennifer Paullin at 215-783-4433. She is a very active distressed property and estate agent who has the resources and experience to aid your long distance search. Good Luck!

the BRRRR strategy leverages debt very heavily, which can be awesome- yet risky when your dealing with the amount of non paying renters there are right now in Philly.

If you need a Delco property manager, I recommend RentWell. I have all of my units with them and they do a great job. 

I personally invest in Delco because of the political climate, returns are good, decent tenants, and slightly less competition, though that has been changing for a little while now. 

I also run a construction management business in and around Philly, so if you need any help with that feel free to reach out. Best of luck! 

Hi @Chiwei C. welcome to the community! Philadelphia and the surrounding suburbs is a fantastic market to get into, while it is becoming a little more competitive to find deals, that is in no means a deterrence. I will say in looking for the BRRRR method Delaware County is the best fit. While there are plenty of deals in Philly that make sense for that, there is much more extensive inventory out in Delco compared to Philly.

In terms of multis, I compare finding a good multi in Philly to finding a unicorn, very rare. But, in Delco they are more common. I have also seen the majority of multis come with good mechanicals which is always a large part of the rehab needed in these types of properties.

I agree completely with @Ross Yeager in his numbers for SFH and multis as a good benchmark to shoot for. There are plenty of deals in Delco that you can refi out all your money, just takes a little to find the right one.

I hope this helps and certainly reach out if you have more questions.

Dan Powers - Real Estate Agent