So I've read some of the previous blogs about this, but wanted to get peoples current perspective. I live in Philadelphia and been looking at multi family homes (to rent as a landlord) now for a couple years, I've probably seen over 30 properties and made a couple offers, but have not had luck closing a deal yet. My initial min CAP rate I was willing to accept was 6.5, but I'm feeling like this is going to be unrealistic in this market and honestly, if I find a good property that's well taken care of in a good location I'm thinking 5.0 isn't horrible and still gets me in the game of someone else paying off my mortgage. Curious for people's feedback?
Investor · Montgomery County, PA · Member since 2020 · 255 posts · 238 votes
5y
In Philly it all really depends on where you're looking to buy multis. I've seen investors buying properties with lower cap rates (3%-4%) in prime areas with better prospects for appreciation. You can achieve significantly higher cap rates in less desirable areas but need to be prepared to deal with slower appreciation and the potential for problem tenants and the headaches that can come with them.
Sounds like you're looking to find that sweet spot between income and appreciation which can come in very specific pockets of the city. That being said with the current market we're experiencing, you'll likely need to pay a bit of a premium as multis have become tougher to acquire in the city as of late.