How do I determine the best place to invest in real estate?
I am looking for to buy real estate in the Philadelphia area for investment? How do I determine the best neighborhood to invest in and should I go single family or multi family? The rates are so good, where is the best cash flow?
Not only is the Philadelphia real estate market affordable, but it offers an advantageous entry point to the market. That’s because it’s one of the few most populous cities that has an affordable investment property price. Not only is the population high, but about half are still residing in rental properties. This is surprising due to the affordability of Philadelphia homes for sale. Despite this, it means high demand for rental property and a good investment for you. But sinking money into property can also be a disaster for those lacking experience and expertise. Novice investors can be overwhelmed by market fluctuations, maintenance costs and even tax considerations that can turn can’t-miss investments into money-losing albatrosses.
Investing in real estate continues to be our preferred approach to gain assets and to protect and provide for our future. Because we invest long-term, we know it’s important to look at what is happening now and what impact the trends we’re seeing today will have 20 years from now. This is an important strategy we help investors use when trying to find where to purchase their next investment property. A budget is important, but more importantly, the numbers have to work for you. Different communities will have very different costs BUT can also have very different rental rates. Always do your homework before buying to make sure the possible income from rent makes sense and can cover the expenses. Both inexpensive and high price tagged homes can be good investments if the numbers line up.
The biggest mistake is going in and not realizing what you’re up against.
We have helped many of our clients make the best choices in real estate investment.
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As a lawyer, I've found that many of my clients buy propeties they don't see before or after the purchase. This is a big issue you may wish to avoid.
Multi-family generally provides better returns but it may depends also on your personal circumstances. Single family is a good way to start and may be better than multi-family if you can find a piece of property with future value add and or density. Good luck!!!
I would speak to a multifamily expert lik Marcus & Millichap They do city reports and even micro-neighborhood reports.
The question you should ask is what area has the best CAP (Capitalization) rate.
Highest and best use will determine the answers to the remaining questions. The best qualified person for that is a certified real property appraiser.
I did a bit of research and found a comprehensive listing of some of the main websites.
Looks like there’s a lot of competition in the space already.
Joseph: It it were me, I would look at properties that could be rented to students (with their parents as guarantors) near colleges and universities in the Philadelphia area (https://en.wikipedia.org/wiki/List_of_colleges_and_universities_in_Philadelphia) that are within easy walking distance to campus or that have easy access to campus via public transit.
The market is still in the beginning stages of recovery, prices are once again on the rise, but many gems still exist. Look at each possibility individually to determine potential roi, each have their advantages and disadvantages. One may have what appears to be a great value in an affluent neighborhood, and carry a higher tax percentage or a higher susceptibility to seasonal damages which must be repaired at the owners expense. For the best return on investment, look at each factor, multi family units, duplexes, apartments etc carry a much greater potential for turn over than single family units, but may carry specific significant tax advantages to the owner over a single family home. Likewise single family units are more likely to see longevity of possession and greater percentage of on time and early payments, yet the bill to rent ready after departure can be much greater.
I have been a landlord several times and to be honest I have no interest in doing it again. That being said I would look for upscale housing to rent. That being the case go for properties in the better areas of Philly. You cash flow can be better with a multi family property but your chances of having a good tenant are better with a single family property.
Look for a property that can pay for itself and don't try to expand too rapidly. There have been a number of books written about how to become a millionaire with rental properties. Do some research on the authors and you will find that all but one either went bankrupt in the end or is or was serving a prison sentence. The one who did make and keep a few million did it in the 1960's and the world has changed. Don't put yourself in a position that a couple of empty rentals can devastate your finances.
You need to be tough and thorough to succeed as a landlord. (I am too easy going). You will get some terrible tenants and some bad tenants. Good ones come along once in a while. You will find you get calls at 3 am that the toilet is leaking and they want someone there right now to fix it. You may find that when a tenant moves out you need to spend as much as you collected to get the place ready to rent again.