All Forum Posts by: Art Perkitny

@Michael B.

Buy and hold may be good idea in this market. As @Justin MacIsaac stated, people are migrating into the area and the data backs that claim up. Population has increase from 136k to 168k from 2010 to 2018 according the the Census Bureau. So market growth seems likely. 

SFH are currently renting at about 0.75% of their value. So positive cash flow is definitely possible.

As for the areas, the link below is to map with risk scores for various location within PSL. 

As stated above, the area near the airport is the riskiest, while most other places are at a C/B level. 

Risk Map Link

Hope this helps! 

@Joshua Kitlas, very cool tool!

The census fact finder website defiantly makes spacial querying very difficult 

Curious what you are using the zip code tabulations for?

Is it just to get a better understanding of the zips within a specific MSA or are you looking at other data points? 

@Maricruz Romero 

Philly can be block by block. That being said, there is alot of autocorrelation between areas, that is areas of similar rank tend to cluster together. 

The general rule is that higher ranking areas will attract a lower risk tenant profile.

So if you are looking for higher quality tenants, I would focus on B areas.  

To help with your research I have included a link to a map showing the risk scores for various blocks in Philly.  

Map Link

Hope this helps! 

@Thomas Richardson

As others have stated, employing a repositioning strategy can yield very desirable results. This is assuming you can locate properties of lower class in higher rank areas.

As to weather B or C area is better, the way I look at it is the following factors:

Yield: What are my investment return goals, naturally higher risk, C areas will produce better yield. 

Hassle Factor: Am I looking for a truly passive investment or am I good with dealing with some headaches. Riskier areas will create more hassles and hinder the property from being truly passive.

Reserves: Can I handle negative cash flow occasionally. For example vacancies can be higher in lower rank areas and can I go one or two months without any income while also servicing the properties carry costs. 

Experience:  Do I have the expertise to take on a higher risk property in this market. The higher risk areas demand more attention and intuition for them to work well.  

Hey @Jordan Yefriadi

I would start by looking at the market's fundamentals, that is the population, job and income growth over time. 

After that, I would look to see what the rents and home prices are and how those are trending as well. 

Also, scrutinizing risk indicators such as vacancy, educational attainment, and poverty rates will give you an idea of what the average tenant profile will be like.

Hope this help  

@Ali Radoncic I am also having the same issue.

Started about the same time you posted this

I have reached out to BP customer support twice and haven't heard back other than to clear cache and try different browser.

Are you still experiencing this problem as well and have you had any success with BP customer support? 

Read this the other day regarding Donald Trumps recent executive order on examining the affects of regulatory barriers at the Federal, State, local levels on the availability and development of affordable housing. 

https://www.whitehouse.gov/presidential-actions/executive-order-establishing-white-house-council-eliminating-regulatory-barriers-affordable-housing/

The order states that the council endeavors to encourage State, local, and tribal governments to reduce regulatory barriers to the development of affordable housing.

Which in turn, aims to increase the supply of affordable housing.

I asked myself what effect will the have on the REI space and my first thought was that the increase in supply will cause rent and values to slow down or possibly even stagnate all together.

Then I considered the question, is affordable housing even really affordable without government subsidies?

To say, will reducing regulatory overhead really drive down the cost of new construction so much that private owners will be able to make adequate returns while charging affordable rents?

The White House states that more than 25 percent of the cost of a new home is directly related to federal, state and local regulations and up to 42 percent for some new multifamily constrictions.

If the above is factual, then the a dramatic increase in low priced rentals should occur and drive supply up. If demand is met or exceeded, then this policy could have the potential to increase vacancies, lower rents and reduce property valuations for lower end real estate. 

if not, then the policy (if abused), may only serve to speed up the development of high-end rentals and consequential leave the low to mid end market largely unscathed. 

Curious what other BP members think about this? 

@Steven Ko, that's interesting! 

There is a strong coloration with investment risk and crime so it's not surprising that the areas that have high crime are priced low to reflect that risk. 

@Michael Magnell 

The raw data is sourced from the Census Bureau, more specifically the American Community Survey 5 year Data-sets.

The different colors on the choropleth map correspond to location grade on an A to F scale. (The link below explains what location grades are if you don't happen to know) 
https://www.biggerpockets.com/blog/2015/12/09/class-a-b-c-d-real-estate/

I like to think of the grade as a risk score, similar to how lenders grade borrowers based on FICO or how bonds are given bond ratings. 

Green = A, Light Green =B, Yellow = C, Orange = D, Red = F

The grade is a composite of nine key performance indicators for each area.

It's calculated using an algorithm that I developed. 

The maps above show the same location five years apart and the resulting changes in the areas risk.

Hope this clear everything up

@Philip Claessens this area looks like it's mostly D grade. 

I would be look for high yields to offset the risk if I were to buy there.