Philadelphia investment property advice

[Joe S.]

Hello,

I have an opportunity to make an investment purchase in an A neighborhood in Philadelphia. Zip code is 19127. I would like to get some input from experienced investors in the Philly area. Thank you. 

Description: This is a 2,300 sq ft duplex featuring 1 bi level unit that is rented for $1,400 and another unit with a projected rent of $1,300 (but I would occupy this unit). The building is a new renovation from 1 year ago and features brand new everything including hvac, plumbing, electric, roof, kitchens, baths....everything except the foundation is new.

Purchase price: $315,000 using FHA 3.5% down payment. Total PITI is about $2,150, including PMI.

My thinking is this: I can acquire a very nice building in a great neighborhood right now for a low down payment. To start the cash flow would be low, but eventually when I re-fi I should be able to cash flow $1,000/month. 

Here is where I would like some advice from experienced investors in Philly...Is it worth paying a little more for the new renovation? The alternative is to get an older property and pay less and get more cash flow right off the bat. But it would need updating eventually. Also, renovation is not my strong suit.

Thank you in advance. If you need more information about the property just ask and I'll respond. 

[Igor Messano]

House hacking is a great way to start your investing journey and Manayunk can be a great place to own property as long as you are not over paying. Living in Manayunk with more than half your mortgage being covered by the tenant is great but if you are truly looking at this as something you will eventually move out from and keep as an investment I would take a closer took at your numbers and assumptions. Your total gross rent is $2700 and your PITI is $2150. Unless you are buying at a huge discount that you expect to refi in 6 months and lose PMI you aren't going to get rid of it for a while so keep it in your calculation.

Even if you get rid of PMI, let's say $300, your PITI will be 1850 (assuming the interest rate doesn't go up) which gives you a $900 surplus on the income side. Nowhere here have you calculated maintenance for the property, potential vacancies, the cost to turn over a unit (painting, flooring, appliances, etc.), or any of the many costs of owning a rental. An investment might not have a major bill for several months or a year but when it finally does it might wipe any profit you might have thought you had. Just make sure you are analyzing this with realistic numbers if you are thinking investment. Newly rehab properties aren't immune to maintenance.