Deal Analysis - SFH Philadelphia

25 Replies

Hello all,

appreciate your advice and feedback for the following deal. It is a SFH located in Philadelphia N 59TH Street.

  • Purchase Price: $74,020
  • Monthly Rent: $950
  • Est. Monthly NOI $615
  • Year Built:1955
    Bedrooms:3
    Bathrooms:1.0
    Floor Area:1150 Sq Ft
    Land Area / Lot Size:1076 Sq Ft
    Stories:2 Stories

  • Property is offered via a TK provider, would be fully renovated with new roof, plumbing, electricity etc.
  • Cap rate would be at 9.7%
  • Location wise it is a B location

What do you think about that offer? I know the area a bit and  think it is a B location. Investment wise I am looking to buy for cash flow. Cap rate looks ok, only question I have is re the offer price. I think there is not much equity build into and that relates to the point of exit strategy, e.g. selling it after 5 years.

thx, Andreas

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Originally posted by @Mary B. :
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

 ok, so I am obviously not an Philly expert and appreciate your view. if that location is a C in your point of view, what example can you provide for a solid B location? I just want to understand the difference.

thx andreas

Originally posted by @Mary B. :
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

 LOL!!! My thoughts exactly!! $950/month for rent is waay optimistic too...unless it's Sec 8, you may get that with Sec 8 but that's the only way you'll ever see that much in rent. 

Originally posted by @Andreas F. :
Originally posted by @Mary B.:
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

 ok, so I am obviously not an Philly expert and appreciate your view. if that location is a C in your point of view, what example can you provide for a solid B location? I just want to understand the difference.

thx andreas

As far as West/SW Philly or does it matter? There are plenty of B areas in Philly. 44th & Walnut St is a B area. Oh wait! Gotta take that back -- 59th St & Woodbine Ave is a B area but once you cross the tracks going towards Cobbs Creek park its C and below. Stay close to St. Joesph Univ and you're in the A / B areas. Oh and Univ City the closer to Drexel and Univ of PA is A / B also. As far as West Phila goes...

Kudos,

Mary

Originally posted by @Troy S.:
Originally posted by @Mary B.:
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

 LOL!!! My thoughts exactly!! $950/month for rent is waay optimistic too...unless it's Sec 8, you may get that with Sec 8 but that's the only way you'll ever see that much in rent. 

Exactly. Yet maybe Andreas is going on what the seller is telling only. I see the NOI was mentioned but no expenses listed. She has to be careful because people will overprice and try to reap the rewards of an A / B area on their property sale being a few miles away yet knowing that they are a C / D area.

Kudos,

Mary

I've a business at 63rd and Haverford. A few block one way it's nice go the other direction it's the third world where there are shooting every few days. I think you really need to visit the location several times at different times of day to really understand the block. 

Looks like you might be getting skewed information from a turnkey rep. We have seen this many times before. The good news is you are doing your home work. If you like you can post or pm address and I can drill this down more. Keep seeking the BP Phiily peeps opinion as they are on the actual streets and can determain best what is up here. My guess from afar is there are signs this might be a pass entirely. Thanks,  Matt

Originally posted by @Andreas F. :

Hello all,

 Cap rate looks ok, only question I have is re the offer price.

What are you comparing the cap rate to to come to the conclusion that it looks OK? And then in the next sentence you are questioning the offer price which you are using to "come up" with an OK cap rate. How does that make sense? And why are you trying to use a cap rate on a SFR?

I was just looking at a couple of places in that area... I'd agree that it is a biiiiig stretch to call this a B area, or even a C+. It can appear pretty rough out in some of those parts. College rentals, which can happen up to a few blocks away are not going to happen that far out anytime in the near future. That said, I'm personally surprised that that West Philly part of Girard is not changing... it is a convenient location, out near the zoo and close to 76. 

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@Mary B.  

The costs include tax, insurance, 5% maintenancem 7% vacancy and 10% mgmt fee.

The location is really difficult in philly as it changes so much from block to block and I am an out of country investor. That's the reason I am raising basic questions here in the forum and appreciate all the priceless input,

5% maintenance is low in my opinion.  That is less than 50/month.  I like to keep my number at $150/month minimum.  It will take you 100 months to save up for a new furnace,  assuming NOTHING else goes wrong during that entire time.

I looked at a place in this area of Philly for 30k.  It didn't appraise for that.  I can't speak to the rent in your place, but the woman was paying 700/month.  Check rentometer and craigslist to see what the going rates are in that area.

Originally posted by @Andreas F. :

@Mary B. 

The costs include tax, insurance, 5% maintenancem 7% vacancy and 10% mgmt fee.

The location is really difficult in philly as it changes so much from block to block and I am an out of country investor. That's the reason I am raising basic questions here in the forum and appreciate all the priceless input,

Did you run rental comps on the area? I take it that you were an international buyer ergo Frankfurt as in Germany. Yet you stated that you are familiar with the area. Have you lived here before? Any plans on returning? You are correct in that the change in value can drop / jump significantly real fast within 2 or 3 blocks at times or just one block. Try not to think of the SFR in the same way you would a commercial property. Find out why the owner is selling. Find out the amount of equity if any. You can do a chain of title search to check for possible liens. The asking price is for when its fully rehabbed or as-is? The price may be negotiable...how much remains to be learned.

Kudos,

Mary 

Originally posted by @Mary B. :
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

Mary, 

Seems another post of yours in this same thread actually contradicts this quoted post of yours, when you mention that blocks of N 59th Street closer to St Joseph's U are better than C class ... so knowing the block DOES actually matter ...

Originally posted by @Steve Babiak :
Originally posted by @Mary B.:
Originally posted by @Steve Babiak:

What block of N 59th Street? Might not be a B area ...

Doesn't matter which cross street of 59th St. Its a C+/- area at best. IMHO.

Kudos,

Mary

Mary, 

Seems another post of yours in this same thread actually contradicts this quoted post of yours, when you mention that blocks of N 59th Street closer to St Joseph's U are better than C class ... so knowing the block DOES actually matter ...

Yes, Steve and I mentioned that in the post to follow. Most of the block on 59th St are C / D areas and I was thinking of a few at the time I wrote it. Then I caught myself and retracted it when I was thinking of areas in West Phila that are B areas. 59th St & Woodbine being one. Finish reading go ahead...

Kudos,

Mary  

@Mary B.
U r right, I am not from the area. I visited philly really recently checking different locations and properties. So certainly not a detailed knowledge about the town but got some impressions. So once I buy a property it will or must be managed by a local company as I am coming to US one to twice a year. That is the reason why it am after the turnkey concept.
The price is after rehab for sure.

Originally posted by @Andreas F. :

Mary B.
U r right, I am not from the area. I visited philly really recently checking different locations and properties. So certainly not a detailed knowledge about the town but got some impressions. So once I buy a property it will or must be managed by a local company as I am coming to US one to twice a year. That is the reason why it am after the turnkey concept.
The price is after rehab for sure.

Alright, I checked on recent comps within a 1/2mile of 59th & Media St that sold within the last 90days and the price ranged from $58K to $79K. I'm not saying you should go by these numbers as I don't have full details but it is around the price that you've quoted and the 4 properties that I checked looked to be in good condition. If you don't want to use a r.e. agent then you will have to perform your own CMA for sales & rental houses that best fit the description of the subject property. My thoughts are stay within 1/2 mile radius for reasons we've discussed previously. Hope everything works out for you.

Kudos,

Mary

Hi Andreas, I think i visited a turnkey provider there recently (if it starts with the first 3 letters of the alphabet then it may be the same one). They showed me southwest philly. eg 2543 south carroll st. Similar kind of deal you reference above. My impression was that the areas they showed me were C- areas at best (though they told me they were B). A next door property to the one they had showed was listed by owner in good condition somewhere in the high 30s before the turnkey company bought it themselves. I assumed they did this to avoid negative comps. I felt that when you came to resell you would struggle to get the price you paid unless it was another investor. I didnt feel homeowners would pay anywhere that price. I also got the impression they were filling with section 8 tenants a lot. Meaning that eventually there would be a lot of likely turnover costs.

YIKES. This might be one of the cheapest areas in Philly. The b hood quote is pretty far from reality. If they are going to misrepresent hood status what else is misrepresented? I am still waiting for the duration numbers. It could still produce well and the taxes seem  very low. I thought Philly was 6%. Would you seek this area out from other Philly hoods? Look at everything 85k and under across the city and see how it compares hood wise. It is uber important that you can minimize turnover at these lower levels.

thanks,

Matt