Looking for Feedback / Advice - Philly Area

4 Replies

Hello Everyone,

My name is Eric and I am an aspiring to get more involved within bigger pockets and the real estate community. I am based in the Philadelphia metropolitan area. I am looking for some feedback and advice as I look for properties. The goal/strategy is to find properties in the Philly area that could be rented out and generate cash flow. 

Here is one of my deals: https://www.realtor.com/realestateandhomes-detail/...

Purchase Price (Offer): $229,000

Rehab Estimate: $40,000

Closing: $3,000

Annual Costs:

Taxes: $3,000

Insurance: $1,200

Maintenance: $1,000

Monthly Rent: $3,000 ($750/per room)

Vacancy: 5%, CapEx: 5%

See image for details as well. (Mgmt Fee = CapEx % since this calc does not have that)

Hey Eric, welcome to BP! 

The main issue that you'll run into with what you've proposed is that you cannot legally rent out 4 rooms separately in Philadelphia. The most number of unrelated tenants you can legally have in a single property in Philly is 3. Even then, they would all need to be on one lease not separate leases, which is somewhat difficult to set up. While people certainly do get away with renting out each room separately, on individual leases and with more than 3 unrelated tenants per house, it is not technically legal and is a much harder rental strategy than just renting out the house to an existing family. It can also make it more difficult to finance the property and to resell the property unless you are reselling it vacant.

If you run the numbers on this one, your rent as a single family house is probably going to be more in the $1.5K-$2K/month range, so the numbers don't work that well.

Plus, this is probably your best comp, so you aren't really buying it at a discount if you are all-in for around $275K.

https://www.redfin.com/PA/Philadelphia/3811-Sharp-...

Eric, 

Ethan is right.  Legally you can only rent a house to 3 unrelated people in Philadelphia.  If you keep a low profile you'll be able to get away with 4 people.

The vacancy rate seems a little low for a rooming house.  I'd bump that up to 10%  or 12% to be conservative.

You'll also have to factor in utilities, since there is no way to know who is using what.

Let me know if you have other questions.  I've owned an operated at rooming house in Cobbs Creek neighborhood since 2015.

Mike

Hey Ethan - Thank you very much for you response, this is appreciated. Could you point me in the direction to learn more about the 4 unrelated people?