Newbie looking to start first deal

11 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 new to 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 (current Philly market)?  Cost/financing advantages? Added costs associated using contractors for fixes and or the challenges of filling vacancies with rental?

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! 

@Account Closed , welcome and good luck to you.

You'll see that people constantly cite a few pillars of what someone brings to the table...so which is it for you? Capital? Knowledge of trades (e.g. building, carpentry, plumbing, electrical)? Finance knowledge? Ability to procure deals?


Everyone wants to get involved, but not everyone has the means in which to do so. What can you provide based on the above (or something else if I didn't mention it)?

Originally posted by @Joe P. :

@Alex Michael, welcome and good luck to you.

You'll see that people constantly cite a few pillars of what someone brings to the table...so which is it for you? Capital? Knowledge of trades (e.g. building, carpentry, plumbing, electrical)? Finance knowledge? Ability to procure deals?


Everyone wants to get involved, but not everyone has the means in which to do so. What can you provide based on the above (or something else if I didn't mention it)?

Thanks @Joe P. - I have the capital, however i'm seeking advice on the best way to deploy it. Since this will be my first deal I'm thinking I'd like to start on the lower end range. Seeking opinions on the best ways and or areas to do so, (ie: suburbs, outskirts of city) 

Hey @Account Closed ,

Welcome to the Philadelphia market! Its a great one to get in to and there are a ton of different opportunities depending on what you want to get out of your investments. In regards to flipping vs renting either, one works but it depends on your goals, to generate some capital flipping would be ideal, look to get in and out of a property in under 6 months and make about 30% ROI. For rentals make sure you factor in things like taxes, neighborhood residents, and how much cash you are looking to make each month, that will depend on how you finance as well. To talk about markets there aren't many that you should 100% avoid there are some warzones in Philly but they're very easy to sniff out. Hot markets right now for flips are Point Breeze and Brewerytown with East Kensington, West Passyunk, and Grays Ferry coming in behind them in the future. For rentals markets in West Philly and the NW like Germantown have some great rental properties and show good opportunities for picking up multis.

In regards to financing its hard to give you general advice because it is going to be very specific for each deal, you make look for a lender that lends 10-25% of your cost, or you could look into a rehab loan, or even a landlord loan, it all depends on what you're picking up. When you look to find a contractor reach out to as many as possible to get an idea for what good work will cost you, some contractors will give you huge markups and others will be fair, make sure to let them know you're looking for long-term business. Use websites like craigslist and thumbtack to generate some contacts. The vacancy rate for Philly is floating around 7% but if you have a rehabbed home at a price that isn't crazy you shouldn't have a problem, here is an article on the state of Philly rentals from last year - https://philly.curbed.com/2017/6/2/15720382/philad...

Hope this helps!

Hi @Account Closed

For an investment property, you're going to need 15% (at least) down for a single family home, or 25% down for 2-4 unit property. In addition to that, you will also need show 6 months "reserves", which is: 
-6 months of payments for the property you are purchasing AND, 

-6 months of rent/payments for where you are personally living.

I learned this hard way at the end of 2017, and was lucky enough to bring my dad on to co-sign the loan with me in order to buy my first property because I could not show 6 months of reserves. Somehow after listening to a ton of biggerpockets and doing a whole lot of research online, I was unaware of the reserve requirement, which can obviously add up to $5,000-10,000 real quick.

So depending on your finances, some form of house hacking might be the better way to go at first; whether that be buying a multifamily, 3-4 bedroom house with housemates, or a well-planned live-in-flip. I would recommend that latter two, as reasonably priced multifamilies seem tough to come by in Philadelphia. House hacking would enable you to have a lower downpayment %, plus lowers the reserve requirement to 1-2 months. 

Hope that helped your thought process a bit, and good luck!

  @Garrett Sowle - Thanks for the insight I appreciate it! My only hesitation to house hacking right now is since I've been researching the Philly market, primarily within the city and outskirts, I haven't come across many duplex's that are in areas I would like to live. Maybe I'm not looking in the right places or using the right resources?  Would you have any resources you could suggest? Would you say there is a large supply of these properties in the city or neighboring neighborhoods? 

@Account Closed , I wouldn't say there is a large supply of multifamily properties available in the city at least at any reasonable price points but they do exist. It's just a matter of being the first to be notified when the go on the market and if it's in a location that you like and the numbers make sense to act quickly because if you don't someone else will. This is why it's important to be preapproved for financing ahead of time so when the right place comes along you can move quick!