Buying higher-end home SF rentals in Philly Suburbs

[Thomas Meyers]

Right now I have a couple of properties in Roxborough/Manayunk, Far NE Philly and Abington that have all been good rentals. In the coming weeks I'll have about $200k in proceeds from a 1031 that I need to put to work. Rather than buying another two family or two single families in these areas I've been looking more at higher priced homes in Southeastern Montgomery County and Southwestern Bucks County.  These would be larger 3br or 4br singles or higher-end townhomes in highly desirable school districts selling in the $450-600k range.  

While competition is fierce in this price range, the rental market for these types of homes seems very strong, at least based on what I'm seeing on various rental sites.  I've also personally witnessed high-income families who are desperate to move out of Philly as their kids get to be school age and are more than happy to rent for a few years.

I know how to analyze a deal but I was just curious if people had experience in this segment of the market.  In my view the positives are good quality tenants (subjective) who may stay longer due to kids schools, no Philly red-tape, more price appreciation vs city (at least recently), less competition (i.e. fewer rental properties & more owner-occupied).  The downsides seem to be that it could take longer to find tenants and larger homes may require more maintenance.

[Thomas Meyers]

Quote from @Alan Asriants:

Hey Thomas, as a general blanket statement I will agree that the suburbs right now are far more desirable than the city. But it is a little bit deeper than that. 

I think with the properties you have: Abington, Far NE, and Roxborough/Manayunk I think that you are in a solid place right now. 

I wouldn't consider those properties as "philly"

Far NE and Roxborough are very different neighborhoods than what people consider "Philly" to be. There is still lots of demand for rentals. 

I use a FB group for rentals in NE and get about 60 calls the first day I put it up. 

I will admit however that I would prefer to stay in Far NE than Roxborough. There has been a lot of development in Roxborough and I am worried that there will be too many renter:owner.

It's possible I would consider moving those options. 

That being said, if you have 2-family in Far NE or Roxborough (Brick Twin Duplex) I would think twice before moving those to suburban townhomes

Especially in the NE, those duplexes right now have tons of value, especially the really well done ones.

If you can finish the basements of those units and add extra living space to the first floor and even an additional bathroom, you will gain a lot of equity from that.

I recently put a duplex under contract for 91k over asking in the area with a finished basement.

So if you're thinking of selling, adding a finished basement will be a good return for you. 

Plus, renting out a two bed 1 bath with a garage in NE is very easy to move.

I have a townhouse up in Jamison that is nice, and I am having some trouble moving in.

I have more info on the market and the situation if you want to discuss more! 

Feel free to reach out anytime

 Hi, that is really helpful feedback.  I bought a rental in the NE (Parkwood) in May; I had one open house while it was being renovated and the interest was overwhelming.  I had it rented within a couple of days and the work wasn't even finished.  There still seems to be some value there but I do see properties being scooped up and hitting the rental market a few weeks later.  Duplexes in particular seem to be priced much better there as compared to Manayunk/Rox.  I still like Roxborough but agree that it could get tricky because there are going to be hundreds of new units on the market in the coming years, and the area is becoming very congested.