let’s talk : PHILADELPHIA

let’s talk : PHILADELPHIA

Good morning!

Taking a break from “real world real estate investor problems” and doing a market deep dive this week. For the past 6 months I have really pushed you all on the Greater Binghamton area. Well, the day has come where we have decided its officially time to expand our investing horizons! Last week we took a trip down to the city of brotherly love – PHILADELPHIA. Philadelphia is full of history, charming architecture, and most importantly – cheesesteaks, so naturally I LOVE it! Let me walk you through what I have learned about the city and what it has to offer, and YOU can tell ME what you all think!

So, as we do, let’s talk Real Estate, let’s talk PHILADELPHIA…

FIRST, GIVE ME THE STATS
Just to keep this all consistent I visited trulia.com

Median Sales Price: $179,000 (Trulia)
Median Monthly Rent: $1,350 (Trulia)
Population : 1.5 million (Trulia)
Market Trends : Recent trends show a median 2% YOY increase in sales price, and a 4% median increase in rent
Demographics : essentially – the majority of the population within in the city is made up of millennials in their mid 30s, with a median household income of ~$35,000 – thanks Trulia!

OKAY, SO NOW FOR SOME PERSONAL BACKGROUND – WHY PHILLY?
Living as a 25-year-old “thousand-aire” in New York City, I am forced to think outside the box, aka outside of my neighborhood walls, when it comes to investing. I have looked into different parts of the city suburbs in New York, New Jersey, and Connecticut but the real estate was still just too $$$. I wanted to invest somewhere “close” so that we could start focusing more so on flips and rehab projects, BUT I also needed that “close” location to be somewhere we could  afford to invest- and that’s when it hit me…PHILADELPHIA (…personally, hit me personally, I am not claiming to have discovered that New Yorkers could invest in Philly).  Philadelphia, should have been obvious for me… it’s 90 minutes away from the city (via Amtrak), a lot of my friends from college grew up and currently live there (so they can fill me in on what the locals are doing), and every time I visit I am happily reminded that the cost of living there is do-able (at least when compared to NYC)!

ASIDE FROM THE EMOTIONAL STUFF ABOVE – WHY PHILLY?

Steady Economic Growth
Well, aside from certain neighborhoods of course, the city of Philadelphia as a whole, has been growing at a steady rate since 2010. This steady growth is attractive to investors – comes off as less risky. 

Accessibility
The city of Philadelphia is sandwiched between TWO major U.S. cities. Just two hours north of Washington, D.C. and 90 minutes south of New York City – Philadelphia is a super easy hop, skip and a jump away from both, making it a perfect place to do BUSINESS. Oh, and not to mention it has AMTRAK and an INTERNATIONAL airport…so basically you could say it’s the center of everything. 

Business
It’s funny because normally where companies move PEOPLE follow, BUT in the case of Philadelphia it looks like people moved there first and the companies followed. Shared work spaces, and gateway offices are continuing to pop up all over the city. One thing I will note though is the overall trend of less square footage needed per company due to the rising popularity of telecommuting. There are rumors that many of the older office buildings may actually begin to be converted into residential space as the population increases and the need for office space decreases. Which leads me to my next point – the population…

Population Influx
Philadelphia has experienced a huge influx of millennials since 2010. According to an “Emerging Trends in Real Estate” 2018 study, Philadelphia has experienced the second largest millennial influx among the 10 largest U.S. cities, only second to San Bernardino, CA. Everyone wanted to move into the “thick of it all” and made their way to Center City. The market in Center City, while still healthy, has become increasingly competitive and more expensive over the years, and has started to force people to make their way north and south of “Center City”. So, that’s where we looked…

TELL ME MORE, TELL ME MORE

….South Philadelphia. Over the course of the day we saw 13 different properties mostly in South Philadelphia neighborhoods (Point Breeze, Pennsport, Bella Vista, and my favorite East Passyunk). Our goal is to get in there before South Philadelphia turns into the dream that Center City has become. While we are definitely not the first movers here, I felt like there were still PLENTY of deals to be had. That being said, we definitely need to act sooner rather than later. Let me walk you through one of MY favorite potentials…

We call this one…STINKY HOME

Listing Price : $250,000

Property Description: 4 bed, 3 bath with GREAT bones BUT a front door that looked like it belonged in a prison horror movie, a cock roach, and the worst smell you could ever imagine in your life – seriously we walked out of the place and I wanted to immediately throw away the clothes I had on, shower, and brush my teeth.

Rehab : 
Fix #1  DEEP clean the ENTIRE place (est $600) : purchase sewer cap, deep clean home & potentially sand and definitely re-paint walls to rid the house of stench
Fix #2  Update 3 bathrooms (est $7,000) : new tile, new paint, new toilet seats (cleanliness is key)
Fix #3 Update kitchen (est $2,000) : new countertop, paint cabinets
Fix #4 Replace the front door (est $2,000)
Fix #5 Backyard updates : put the back door back on the hinges (est $100) AND fix one of the gutters on the back part of the smaller roof ($1,000)

…that was IT. So, maybe $13,000 worth of work? And that is if we do NONE of it ourselves! I know I am WAY oversimplifying this here and if we do go through with this deal I will ABSOLUTELY walk you through what we end up fixing and the actual numbers attached to the project; but seriously, the house was in great condition otherwise! I will NOTE that there is the potential that there are lots of fixes needed that we did not see ourselves, as we are absolutely not professional home inspectors – so if we do put an offer in TRUST me, we will be getting an inspection done.

SO, WHAT’S OUR NEXT MOVE HERE?

Well, this is just 1 of 4 that we LOVED that day. This home was on the “less expensive” end of the spectrum so I am hoping that means we have a good amount of room to add value. We have requested further data on comps and rental rates.  In the event we are able to build a big enough buffer between the Purchase Price & After Repair Value – then I am ALL IN. Even, if we can fix this place up and rent it out for a few years at a minimal return, I am STILL IN – happy to wait for the forecasted market appreciation (fingers crossed). I am reading more and more on the Philadelphia market upward movement and I seriously want to be a part of it.  

ANY DOWNSIDES?

YES  – a few for sure! First and foremost is the very fact I just mentioned above –  “I am reading more and more on the Philadelphia  market upward movement” which may mean I am “too late”.  Furthermore,  rental rates are still pretty low at the moment, making it hard to justify high rehab and construction costs in the event we wanted to hold on to the place.

 BUT, only time and application will tell! 

Feel free to comment on the blog post HERE and let us know what YOU think!

OH, and DON’T FORGET – I added two new features to the blog recently. Check them out…

Preferred Vendors : Here you will find businesses WE like to work with and support!

Book Store : Summer is just around the corner, THANK GOODNESS, which means it’s time to sit yourself down on the beach and catch up on some reading. I have reviewed a few of my favorite business reads! In case of interest, I have linked them on the Book Store tab for you!

Happy Wednesday!

-Erin

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Data Sources for today’s content:

https://www.trulia.com/real_estate/Philadelphia-Pennsylvania/

http://www.philly.com/philly/business/real_estate/philadelphia-real-estate-housing-buyers-market-20171220.html

https://philly.curbed.com/2017/12/4/16721252/philadelphia-real-estate-trends-2018