How to invest in expensive market- 125-150K per door...

Question

Looking for some advice for a newbie trying to grow my investments

I’ve got about 60-70K to invest...

Around where I live (45 minutes NW of Philadelphia PA) multi families are going for about 125-150k per door-  putting a decent duplex at around 250-300K (my entire budget 60K cash needed).

Seems expensive to me to “get started.” As it will take me some time to re-accumulate more $ for future investments because I’ll blow through so much purchasing just 1 2 door property.  Too slow in my mind- but I’m new to this...

Am I missing something?  Is this “just the way it is” when you get started or is my market just expensive and takes more capital to get rolling.

Perhaps there is a better strategy to get started in my market...

My concern is- at the clip of 60k cash needed for just 2 doors- it will take me forever to acquire # of doors to build monthly cash flow and long term wealth.

Or, I could wait- continue to save- say 100-200K and purchase a much bigger property down the road if prices drop?

Any suggestions about how I should be approaching this- from a mindset/strategy/long term planning perspective? What would you do?

I’ve been analyzing properties in my area- and can “make them work” from a ROI standpoint - but will require a huge chunk of money that will drain my investment funds...

Thanks so much.

Also, anyone in the southeast PA area?  I’d love to connect and learn.

Thanks everyone.

Rich O'Neill · Answer

@Charlie Johnson it sounds to me like you need to really define what your goals are and how you are willing to get there. If cash flow is the goal, are you comfortable putting $60k down on a duplex then waiting to save up another $60k to buy another one? Keep in mind, there is a compounding effect to this. Cash flow from the first will help save to that next 60 faster. Then the 2 properties will help save to the 3rd even faster, and so on. This is a perfectly legitimate strategy! Especially if you make a good income that allows you to save and you like what you do.

If that sounds frustrating to you, you can always look at lower priced markets like mentioned above. I built my portfolio BRRRRing SFR's in Delco. It is a much more active process but I was able to build a nice sized portfolio quickly.

Keep learning on here about the different strategies available and pick one or 2. It just takes persistence!

Aaron K. · Answer

Yeah it goes relatively slowly at first and PA is not that expensive of a market, you can expand your search out by an hour or two driving distance and find all kinds of inexpensive properties.  Keep in mind you can invest in SFRs as well in some places the multifamily properties make worse investments than better quality SFRs.

Joshua Bacon · Answer

@Charlie Johnson I believe you can make this work with your 60-70k if you get creative and find “real deals” the numbers you listed above are closer to retail.

I’m coming at this from a wholesaler perspective but a duplex worth 125-150 and needs a little work (25k or less) we’d buy this for ~50k or less and sell it for around 70-80. If you can figure out the direct to seller model you can make those numbers work easily but if you’re short on time it may take a little longer to find a real deal.

To that point last year we picked up an occupied duplex in delco for $53,500 and sold to @Rich O'Neill in your ballpark I’m not sure what the appraised value was at the time but if I had to guess it was ~125-150.

If you’re looking in the city for a Duplex you’re acquisition is lower and depending on the area your rents can be pretty healthy with lower taxes. I say all that to say it’s possible at your numbers you may just have to get more creative when looking for a deal and figure out what your plan of attack will be and work it.

Charlie Johnson · Answer

@Rich O'Neill I’d agree with you- need to lay out my plan.  I own my own business and do enjoy it/make a strong income- but, do I want to do it forever- no.  So, goal is 10k month from REI... have a duplex currently where I live upstairs and my business is downstairs- paying my wife “rent” with pretax dollars.  I could leverage it more as I’ve moved most business online and plan to go that way... so considering renting out to a commercial tenant (if I can find one with Covid).

Anyways, multi-families just seem like a suuuper slow way to get there. And, I’m all about speed.

Appreciate the advice. As a newbie I get the concept of BRRR but would need to dive much deeper- sounds interesting and faster.

Would love to connect, if you’re open to it. Always looking to learn and grow.   Appreciate you taking the time to offer some guidance. 👊🏼

Thanks

Charlie Johnson · Answer

@Aaron K. Good points. Had been fixed on multi family- mostly because I’m sorta househacking/and business hacking my first duplex. My Biz pays my wife rent (we live upstairs).  So, just planned on continuing down that path.  Will look into SFRs.  Thanks so much

Brendan McAllister · Answer

Are you interested in flips at all? If you have 60-70k liquid right now doing a quick flip could help you get up to about 100k or so. There are a lot of flips out there that have splits of about 95/55/215 give or take, which could help you get more cash in a couple of months. That's just one example, but flips are a great way to generate income. But if you are only looking for rentals, expand your search. I'm assuming you're looking the in montco or berks county, but look in delco or Philly. You can definitely find houses for less than what you are looking for. A lot of my houses I've come across have been selling for about 40k/door, which would be in your price range.

Victoria Pham · Answer

@Charlie Johnson, I think 60-70K is not bad. You can always find properties in C neighborhood with that price. Look into Darby area. I've sold a lot of properties in Darby with that price range for a door. Some parts of Philly like Port Richmond or North Philly could be a good fit for your criteria as well. If you're willing to take some risk, you can consider hard money lending as well. Best of luck!

Alex Uman · Answer

Morning @Charlie Johnson, it seems as though you're looking more for turnkey investment. With $60k available liquid have considered buying value-add properties? My firm has sold many small-medium value add multis all over Philly/Delaware County recently that would better fit your price point if you were looking to buy something that needed a bit of work. Finding good condition as-is multis in this area would require more capital as you said but this area is nowhere near as expensive as the rest of the northeast if you're willing to get your hands a little dirty. Additionally SFRs may be a good place to get started to buy, rehab, refi, rent and repeat with the longer term goal of renting more multis. Feel free to reach out if you have any questions. I'm most familiar with Philadelphia County, Delaware County and some areas of Montgomery County. All the best!

How to invest in expensive market- 125-150K per door...

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