A few friends and I went to Philadelphia last Saturday to check out the houses. I want to buy a house to rent out and Philly is the only place I can afford. Houses range from 120K to 160K in good neighborhoods. The prices have gone up 30K since the last time I visited Philly, about nine months ago. I feel if I wait another nine months, the houses will go up even more. Everyone seems to be buying in Philly now. When I was in the broker’s office, he was swarmed with appointments. He had to cut us short to close three houses with another guy in the middle of our appointment. The funniest thing is that my friend knows the guy closing the three houses. It turns out to be his old high school friend. What a small world. But there’s another point. Everyone is buying in Philly now. People are scooping up houses like ice cream cakes.
I have a few friends who have bought investment property in Philly and they seem to be doing well. However, they do say you have to get your hands dirty. Unlike paper investments, this is something you have to be prepared for — dealing with tenants, complaints, repairs, phone calls, etc. I guess that’s comes with any real estate investment.
There are positives and negatives for investing in Philly.
- Rent can cover mortgage, insurance, and property tax
- Tax reduction (as with any house)
- Interest rate still low (historically)
- Far from New York City (where I live)
- Too many people are buying — may be hard to rent out
- Bubble burst
- Bad tenants
- Higher interest rate for rental unit
I will have to claim the house as an investment property which means I will have to pay a higher interest rate for the mortgage as opposed to a residential property. I’m still thinking whether I should jump into this Philly real estate craze. Because so many people are buying now, I’m afraid of being left with the short end of the stick. But at the same time, I don’t want to miss a wonderful opportunity to buy a real estate property and it is the only place I can afford right now. I’m thinking maybe I should give it a try. I feel if I do this for the long term, it will pay off pretty well. As long as the rent can cover all my expenses, I’ll just let the house sit there and appreciate. Even if the value doesn’t go up, at least the rent can pay off the mortgage for me over time. At the end, I can still have a house all paid for. That sounds really good.
Feel free to share your real estate investment stories and what do you think about me entering the Philly market now. If you have purchased a house in Philly, I’d love to hear it. Since I’m new to real estate investments, feel free to give me pointers.