New Investor Seeking Advice for First Deal

8 Replies | Philadelphia, Pennsylvania

Hi all, 

I'm currently new to Philadelphia and I'm looking to start my first deal. I'm hoping to receive some advice as I am not only new to the Philadelphia market, but also real estate investing.  I'm very passionate about real estate investing and now I'd like to start taking the steps to acquire my first property.   

A little back ground on my current situation. As I've previously mentioned, I'm new to Philadelphia (2 months) and currently rent an apartment in the city. This would be my first purchase, as I've always rented. Since I'm new to the area Id like to rent for another year or so until I'm ready to buy a home I will live in. 

I'm primarily interested in buy and hold and generating cash flow, however I’m also considering fix and flip. Would anyone have input on pros and cons of each in the current Philly market? Cost/financing advantages? Added costs associated using contractors for fixes and or the challenges of filling vacancies with rental?
 

Further, I’m seeking any direction on zip codes/areas in Philadelphia where people are having success. Areas that are on the rise. Through my research I’ve seen Fishtown and the Brewerytown to be popular. Would anyone recommend exploring further out into the suburbs?

Lastly, I'd greatly appreciate any information regarding financing a first deal. FHA would be optimal, however I don't know that I would be living in the unit (ie. duplex). For a first time deal in a property I would not be occupying , what would be the best suggested way to finance? I'd obviously like to tie up the least amount of capital as possible.

Thank you all for your suggestions, I greatly appreciate any insight you can provide! I look forward to joining this BP community and hope to network with you all! 

Hi Alex,

Our team is doing a lot of work in Brewerytown. Happy to give you some insight on the area and talk about how investors have used the growth to their advantage.

I forgot to include, has anyone encountered advantages/disadvantages to purchasing apartments/condos versus single family homes for rentals?  

Hey Alex,

Have you thought about using hard money to finance your deals? This could be a good method if you are buying properties that need to be rehabbed. You could refinance to a traditional loan and hold the property after the rehab or simply sell the property if you're working on a flip.

Alex,

You can buy a single family home to buy/hold on a 30 year term mortgage with 15% down. Rates are at todays rates based on your credit score, no higher than perhaps 5.75%. You get the low payment of a 30 year term without the worry of having to find financing out of Hard Money after a year. hard money guys may charge up to 35 of loan size in fees and up to 12% in annual interest. True there may no down payment but that 3% is wasted money in some context. Hard Money is great for short term needs but it gets expensive. It has its place of course but be carful not to over extend your self.

Alex, my personal advice is that there's no better way to learn the market than fix and flip...assuming you can stomach the roller coaster and risk. In my opinion, you'll learn a lot more over 2-3 years doing a handful of flips versus managing a couple of units. But if this isn't a full-time job, then cash flow properties is a better place to start.

Regarding rentals, Philadelphia is an interesting market where the cap rates vary drastically from one mile to the next. We can find a stable 5 cap in Rittenhouse Square or drive a mere 2 miles into North Philly - for example - and easily get 15 caps, albeit much riskier. If you're set on cash flowing, then take on some risk and go after larger caps. If you're willing to play the long game and see value through loan amortization and appreciation, then get into a more stable market like Point Breeze, Fishtown, etc.

Hey @Account Closed ,

Welcome to Philly, it is a great time to get into real estate investing out here! I think a great strategy I see a lot of investors use is flipping properties to gain capital and then putting that money into some income producing properties. I think both flips and rentals work in the Philly market its just about finding the right deals. As long as you do a good rehab I wouldn't worry too much about vacancy rates unless you're getting into rougher areas, you shouldn't have a problem with a nice rehab in an A, B, or C neighborhood. 

If you're looking into hot flip markets right now the biggest two are Fishtown and Brewerytown right now, some emerging areas are parts of East Kensington (around American street to Frankford), West Passyunk, Grays Ferry, Germantown, and a few more in the pipeline after that. You won't get great prices in areas like Fishtown or NoLibs cause there has been so much done there already. Suburbs do have some good deals but there is enough in the city to give you great returns. 

I also have a great lender most of my investors use that can bring 90% of the cost to the table with about a 9% interest rate and no prepayment penalties, Id love to tell you more about them!

Let me know if you have any more questions!

Originally posted by @Sam Flannery :

Hey @Account Closed ,

Welcome to Philly, it is a great time to get into real estate investing out here! I think a great strategy I see a lot of investors use is flipping properties to gain capital and then putting that money into some income producing properties. I think both flips and rentals work in the Philly market its just about finding the right deals. As long as you do a good rehab I wouldn't worry too much about vacancy rates unless you're getting into rougher areas, you shouldn't have a problem with a nice rehab in an A, B, or C neighborhood. 

If you're looking into hot flip markets right now the biggest two are Fishtown and Brewerytown right now, some emerging areas are parts of East Kensington (around American street to Frankford), West Passyunk, Grays Ferry, Germantown, and a few more in the pipeline after that. You won't get great prices in areas like Fishtown or NoLibs cause there has been so much done there already. Suburbs do have some good deals but there is enough in the city to give you great returns. 

I also have a great lender most of my investors use that can bring 90% of the cost to the table with about a 9% interest rate and no prepayment penalties, Id love to tell you more about them!

Let me know if you have any more questions!

 To add to Sam's point, I would look into Point Breeze, Cobbs Creek, and West Oak Lane as these are also big-time flip markets. Days on market in these areas are great and inventory is steadily decreasing as the year goes on. Let me know if you need help finding or anaylzing any deal!

Hey @Sam Flannery,

I am working on a possible BRRR property and looking for hard money lenders. I see you mentioned you have a lender, I'd be really intertested if you'd like to connect. Shoot me a message