Philly Market High Level

5 Replies | Philadelphia, Pennsylvania

I started investing at the beginning of 2021. I've done a few deals but feel like i'm missing opportunities because there is still a lot I don't understand. It's easy to see what investors are paying for properties but I need a better fine tuned formula for the Philly market. Are people using 70% ARV minus repairs here or is it very neighborhood specific? Also, I know philly is street by street so I use a .1 mile radius. Is that to conservative? Lastly I use 100-110 a square foot for repairs for full guts in a lot of neighborhoods but i'm doing a gut in port richmond that is much less than that.

@Jason Forman first off congrats on starting your investing. In Philadelphia it is very much block by block for the ARV spread. Some neighborhoods like Northern Liberties and University City demand a higher premium. That's definitely a safe spread to look for but some places will get as tight as 80%-90% or you could get some places for 60%-65%. One of my colleagues did a really good piece on this that breaks down each neighborhood by how investor friendly they are that I've linked to this. If you have anymore questions feel free to reach out.

@Jason Forman Congrats on getting in the market it's a fun world to get into. Right now the MLS is averaging 80-85% of ARV, while most off-market inventory is hovering around 72-78%. 70% is a great benchmark to shoot for but in this market finding plentiful inventory at that margin is an unrealistic expectation. Philly is a very block-by-block city so sticking to 0.1 miles for comps is a good rule to stick to, but it's not unreasonable to use 0.15 as well. For repairs, it's very dependant on the neighborhood as well as if you're using the property as a flip or a rental. A full gut in Port Richmond or West Philly is not going to cost the same as a full gut in South Philly even with an identical sqft. house, and a rental rehab will cost significantly less than a flip rehab.

@Dan Powers and @Jason Forman I would argue that a rental rehab and a flip rehab shouldn't be too far off in terms of cost. We generally advise our clients to do some of the things that might not have to be done, but could cause you problems later. For example, if it has knob and tube wiring, it will likely cause issues later and you should consider rewiring it now while you are doing major work. The end result is usually that we end up with a similar rehab. We might make different finish choices (cosmetic vs. durability) but the price is often similar. Of course some clients choose not to do some of those things and that is fine, but we advise it either way. 

Best of luck and please let me know if there is anything I can do to help! 

In Philly, a radius is often not useful. There are very distinct areas that can provide you with comps for a given property. 1 block south of your property could sell for $380k and 1 block north could sell for $180k - same layout/sq ft etc. That is not at all an exaggeration. There are many factors that contribute to that phenomena. But you really better know the micro environment  and market around each of your properties in Philadelphia.

@Bradley Hubbard wow that link you sent me is insanely detailed.  I can't believe that guy put so much detail into it.  I think that helps clarify things.  When looking at deal I'll reference that.  Happy to connect another time as well.  Always like to talk to local real estate people