Recently speaking with some investors who have been flipping and renting in Clifton Heights in Delaware County, right outside of Philadelphia. Heard the market has been great, but no personal experience in the area. Has anyone seen success in the area recently?
Hey Roman, I'm a big fan of Clifton Heights for rentals, not necessarily flips, though I am sure good ones exist. I am buying one in neighboring Glenolden on Friday and it should generate some nice cash flow. I have several in Collingdale which is not far from there but definitely a different area. Cash Flow is great on those but tenants are a little bit more difficult.
@Rich O'Neill . Have a possible deal on an end unit row home in Clifton Heights. Are you interested?
@Roman Melnyk . Have a possible deal on an end unit row home in Clifton Heights. Interested?
Delaware County has become a favorite for local real estate investors in the Philly area. My firm has seen success in moving both single family flips and rentals as well as multifamily properties all over Delco as the area continues to grow and appreciate. Personally I'm a big fan of Aldan, Lansdowne, Collingdale and Glenolden but the county as a whole has been ripe for investment this year.
@Alex Uman . just closed on a duplex in collingdale about to rehab. My first outside of Philadelphia. I'm wondering how people are cashfloing single family rentals with the higher property tax in Delco.
Also been hearing about reassessment of values planned for the county.
@Eli B. Multis are definitely the way to go when looking to cashflow in the area. Due to the higher property tax it is more difficult to get higher net incomes on SFR in Delco. Many investors I work with prefer multis for rentals and single family homes for flips in the county as opposed to renting out single family homes. Regardless, there is always something to be said about a safe investment. Even if the cashflow is lower, rents tend to be more consistent in homes that carry a solid amount of value that will continue to appreciate as the county grows. Never a bad idea to have a smaller cashflow on a safe investment that can be sold for even better returns in the future.
@Rich O'Neill what rents are you getting for single family rentals in glenolden? Collingdale?
Also, what level rehab and finishes do these areas demand?
Thanks in advance!
Hey @Eli B. , I get roughly $1325 for a 3 bedroom done fairly nicely with LVT flooring, granite countertops, and generally fairly nice finishes in Collingdale. A touch more in Aldan or Clifton Heights. By no means top of the line, but I try to put durable materials in to reduce turnover costs.
@Rich O'Neill cool.
Are you brrrring these properties?
@Eli B. yes. Getting harder to make the numbers work lately as values climb but that's how I built my portfolio.
@Eli B. check out the blog post I wrote about the reassessment on the blog: https://www.biggerpockets.com/... Hopefully this helps you understand a little more about what is happening. Happy to answer any other questions about it as I understand it.
@Alex Uman I actually partially disagree on the SFR vs Multi topic in Delco, at least in SE Delco. I always had a hard time wrapping my head around multis in the area because the unit economics rarely made sense. I could usually buy SFRs for a lower per unit cost than multis, and I could get higher rents. Taxes per unit were a little lower in multis but it was more than offset by the lower rents. Granted, I have a few multi's that made sense. That seems to be shifting in the last year or so but I still think it mostly holds true. I also find my multi's to be a little more management intensive. Grass and snow are usually landlord responsibility. Tenant squabbles happen. Most Delco multis share water, therefore can't easily be billed back. Often heat is landlord responsibility, and it's hard to forecast that expense and make sure temp remains reasonable. You can lock the thermostat, but tenants hate that. Outside of tenant specific problems, my SFR's are usually pretty self sufficient.
@Rich O'Neill Fair enough. My office is more so focused on Philly than Delco and I base my knowledge off of what we sell/what my investors are often looking for. Glad to hear you're having luck with SFR in the county.
@Alex Uman yea of course. I'm sure some investors prefer that. And like I said, it has been shifting. Ive had a hard time finding decent deals in either SFR or multi for a while based on the criteria that I used to use, so this could be a dated perspective.
@Rich O'Neill thanks for that info. Great stuff
@Rich O'Neill Good deals in DelCo certainly have been harder to find it are definitely out there. I’ve seen many cash flowing multi units lately that beat the 1% rule by a mile. Not sure what your criteria is and how these match up but there are deals out there for sure.
Hey @Roman Melnyk , I've had a good amount of experience flipping in the Clifton Heights area. When I acquired them they were all supposed to be sold at 70-75% and they all hit that mark so I was happy with the return. I've seen a good amount 3 bed rentals in Clifton Heights rent for $1500, but also surrounding areas like Aldan. But I have to agree with @Rich O'Neill the surrounding areas of Glenolden and Collindale are really good for rentals but it does boil down to your level of comfortability for dealing with tenants.
But for multis overall in Delco I've had and seen great success, while the taxes might be higher, for the higher purchase price properties its sometimes made up in the transfer tax for that year as its 1/2 of philly. Also, the majority of the multis ive seen move have not needed major for done to them, simply cosmetic stuff such as paint and carpets, really livening the place up goes a long way especially to get market value tenants in there.
@Eli B. in regards to your statement about cash flowing. For a SFH analyzing the cashflow if not the best metric. Generally cashflow is good for a duplex and up, while cap rate is a better metric for really a triplex and up.
Dan Powers - Real Estate Agent
@John Erlanger Can you clarify your question? What does paying so little mean?
@John Erlanger in this case it's because some of the other expenses that are not captured by the rule are higher than those in some other areas. Taxes are high here so that needs to be factored into the equation. Properties are also generally older, so they often require a higher maintenance reserve. Because of that I usually won't look at something unless the ratio is 1.75% or higher.
As for people being tricked by the "rule", it is just a quick and dirty analysis to see if the property warrants further analysis. If people are making decisions based on one calculation then they are asking for trouble, regardless of what the calculation is, this one especially. It is also hyper local and asset type specific as to what the threshold should be. If you told me you were buying a property for $1mm and it met the 2% rule, I wouldn't have any idea if it was a good investment or not.
@Rich O'Neill spot on
@John Erlanger I guess I am foolish then.
Most of the properties I end up buying are in the 2%+ range. If someone is pricing at 1.75 or less I don't find it worth my time to try and convince them they are overpriced. That's an uphill battle that I don't find valuable to fight.
I have my metrics and you are entitled to yours.