Picking a market as a new Real Estate Investor

Multi-Family and Apartment Investing
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Picking a market as a new Real Estate Investor

Austin Craven
Newark, DE · Member since 2019 · 6 posts · 2 votes

Hello Bigger Pockets!

This is my first post on Bigger Pockets and I was looking to introduce myself. I am an aspiring Real Estate Investor who is looking to purchase a Multi-Family property to House Hack as a first time home buyer.

I am from the Philadelphia, PA area and am contemplating whether to get started in Philly or Wilmington, DE. In Philly it appears Fishtown, Northern Liberties, and perhaps even Kensington areas are beginning to gentrify a bit due to the new construction of I-95. Any other up and coming areas in Philadelphia to know about?

In regards to Wilmington, my girlfriend lives in Delaware and we've noticed the new construction along the River Front and some new restaurants/bars popping up in Trolley Square. I also noticed Wilmington has a comprehensive plan for 2028 city development regarding mild restructuring of public transportation that may enhance the city a bit.

Does anyone have any thoughts regarding which market might be better to tap into as a new investor? Does anyone on Bigger Pockets invest in both Wilmington and Philly? Any insight would be greatly appreciated, thank you!

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Michael Reilman
Rental Property Investor · Cleveland, OH · Member since 2019 · 67 posts · 37 votes
6y
Originally posted by @Austin Craven:

Hello Bigger Pockets!

This is my first post on Bigger Pockets and I was looking to introduce myself. I am an aspiring Real Estate Investor who is looking to purchase a Multi-Family property to House Hack as a first time home buyer.

I am from the Philadelphia, PA area and am contemplating whether to get started in Philly or Wilmington, DE. In Philly it appears Fishtown, Northern Liberties, and perhaps even Kensington areas are beginning to gentrify a bit due to the new construction of I-95. Any other up and coming areas in Philadelphia to know about?

In regards to Wilmington, my girlfriend lives in Delaware and we've noticed the new construction along the River Front and some new restaurants/bars popping up in Trolley Square. I also noticed Wilmington has a comprehensive plan for 2028 city development regarding mild restructuring of public transportation that may enhance the city a bit.

Does anyone have any thoughts regarding which market might be better to tap into as a new investor? Does anyone on Bigger Pockets invest in both Wilmington and Philly? Any insight would be greatly appreciated, thank you!

 Austin, welcome! Hope these forums bring you a ton of value. 

As far as where to buy, and as @Erik Hatch stated, higher % Population Growth, higher % job growth are two easy metrics that can be found at http://www.city-data.com/ Other things to consider are median income growth and rent growth. There's data all over the internet

I saw you mentioning "gentrifying" areas. I primarily invest in Cleveland, OH and brokers tell me everywhere is gentrifying! I have to laugh since it takes a personal understanding of the area if it truly is. I think 2028 may be too far out to consider, unless you plan on holding this property for a very long time. 



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  • Erik Hatch
    Rental Property Investor · USA · Member since 2018 · 325 posts · 222 votes
    6y

    Where are the jobs?

    Population growth?

    Low unemployment?

    Good mix of employers?

    That will answer some questions 

    3Reply
  • Michael Reilman
    Rental Property Investor · Cleveland, OH · Member since 2019 · 67 posts · 37 votes
    6y
    Originally posted by @Austin Craven:

    Hello Bigger Pockets!

    This is my first post on Bigger Pockets and I was looking to introduce myself. I am an aspiring Real Estate Investor who is looking to purchase a Multi-Family property to House Hack as a first time home buyer.

    I am from the Philadelphia, PA area and am contemplating whether to get started in Philly or Wilmington, DE. In Philly it appears Fishtown, Northern Liberties, and perhaps even Kensington areas are beginning to gentrify a bit due to the new construction of I-95. Any other up and coming areas in Philadelphia to know about?

    In regards to Wilmington, my girlfriend lives in Delaware and we've noticed the new construction along the River Front and some new restaurants/bars popping up in Trolley Square. I also noticed Wilmington has a comprehensive plan for 2028 city development regarding mild restructuring of public transportation that may enhance the city a bit.

    Does anyone have any thoughts regarding which market might be better to tap into as a new investor? Does anyone on Bigger Pockets invest in both Wilmington and Philly? Any insight would be greatly appreciated, thank you!

     Austin, welcome! Hope these forums bring you a ton of value. 

    As far as where to buy, and as @Erik Hatch stated, higher % Population Growth, higher % job growth are two easy metrics that can be found at http://www.city-data.com/ Other things to consider are median income growth and rent growth. There's data all over the internet

    I saw you mentioning "gentrifying" areas. I primarily invest in Cleveland, OH and brokers tell me everywhere is gentrifying! I have to laugh since it takes a personal understanding of the area if it truly is. I think 2028 may be too far out to consider, unless you plan on holding this property for a very long time. 



    3Reply
  • Sheryl Sitman
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 482 posts · 362 votes
    6y

    @Austin Craven  I can only comment on Philly (drove through Wilmington a short while ago out of curiosity but not more than that). What type of investing are you interested in? Fishtown and Northern Liberties and part of Kensington are already "done". If you are looking to catch the early part of a wave than you need to go where you do not see much happening because by the time YOU can see it, it is already late in the game. Once construction is started and you see dumpsters filling up outside of rehabs, it means the prices are already adjusted. With that said, getting in late - when bigger investors have already created a less risky situation, is also legitimate and can be a smart investment as well. There are many areas well worth investing in in Philly and countless strategies -- what are you hoping to do?

    1Reply
  • Austin Craven
    OP
    Newark, DE · Member since 2019 · 6 posts · 2 votes
    6y

    @Sheryl Sitman Thank you for your input! I'm looking to buy and hold Multi-Family properties. I would like to House Hack my first property. In total, I would like to own 3 Multi-Family properties before purchasing a mixed use property in which I would like to use as a Physical Therapy cash practice space for outpatient orthopedics (I am a Physical Therapist as well). My ultimate goal is to use buy and hold REI to provide some semblance of passive income while funding my Physical Therapy practice. Many of my Physical Therapy colleagues seem to lease space for their practices, but I would prefer to purchase an asset to accumulate equity in a space rather than having the liability of paying rent each month, which would ultimately increase the overhead for the Physical Therapy practice.

    0Reply
  • Ronan DonnellyPro Member
    Investor · New York City, NY · Member since 2012 · 332 posts · 385 votes
    6y

    Hi @Austin Craven, there are many ways that we can reduce the risk of a real estate investment and selecting a good area is one of those, but not the only one. When selecting an area to invest in we look for population growth, wage growth, employment growth, employment diversity and a balance between supply of rental units and demand. Most of this data is available from the US census bureau or some of the many sites that aggregate that data. Whilst this data can help you with selecting a MSA, you will also need to do sub-market due diligence. This can be a bit more subjective e.g. is there a Whole Foods nearby, is it in the path of progress? Getting this right will set you up for success but don't forget about the importance of being able to source, analyze and due diligence the deal itself, the management company, potential tenants, financing etc. You will find help on all of these topics and more on BP. Good luck!

    [email protected]
    0Reply
  • Lars T.
    OH · Member since 2019 · 1 post · 0 votes
    6y

    @ronald. What is the significance of a whole foods in the neighborhood?  Thanks.

    0Reply
  • Sheryl Sitman
    Rental Property Investor · Philadelphia, PA · Member since 2015 · 482 posts · 362 votes
    6y
    @Austin Craven:

    Sounds like a really well defined goal/path - good for you! Now finding those multi-families in Philly - not easy. So if you want to househack then you want to be in a an area you feel safe today I presume. A good agent should be able to help you with that (DM me for ref if you want). Depending on budget, timeframe and other factors, you may want to seek large SFH that can potentially be split - legally....

    0Reply
  • Erin Crotty
    Realtor · Wichita, KS · Member since 2019 · 8 posts · 7 votes
    6y

    Have you looked at the midwest? I live in Wichita, KS and know of several turnkey investment properties that are SFH and Multi. Investors in my area have had great success with them. Would be willing to chat more with you on the market here if you're interested.

    0Reply
  • Austin Craven
    OP
    Newark, DE · Member since 2019 · 6 posts · 2 votes
    6y

    @Erin Crotty For right now, I think I might stick with a local investment first to get my feet wet. But I'm open to pursuing turn key in the future once I have more experience. Thanks for the recommendation!

    0Reply
  • James MasottiPro Member
    Rental Property Investor · Washington Township, NJ · Member since 2015 · 1k+ posts · 976 votes
    6y
    Originally posted by @Austin Craven:

    Hello Bigger Pockets!

    This is my first post on Bigger Pockets and I was looking to introduce myself. I am an aspiring Real Estate Investor who is looking to purchase a Multi-Family property to House Hack as a first time home buyer.

    I am from the Philadelphia, PA area and am contemplating whether to get started in Philly or Wilmington, DE. In Philly it appears Fishtown, Northern Liberties, and perhaps even Kensington areas are beginning to gentrify a bit due to the new construction of I-95. Any other up and coming areas in Philadelphia to know about?

    In regards to Wilmington, my girlfriend lives in Delaware and we've noticed the new construction along the River Front and some new restaurants/bars popping up in Trolley Square. I also noticed Wilmington has a comprehensive plan for 2028 city development regarding mild restructuring of public transportation that may enhance the city a bit.

    Does anyone have any thoughts regarding which market might be better to tap into as a new investor? Does anyone on Bigger Pockets invest in both Wilmington and Philly? Any insight would be greatly appreciated, thank you!

     I invest in Wilmington and not Philly. Buying a multi-family building is going to be hard as the city is really cracking down on the majority of their zoning variances awarded to the single family properties. So it's very important if you look at buying one that you check the original zoning, whether it has an approved variance, and how long it's been vacant (according to the City's vacant property registry) because the property will lose its variance after a year. I would also say that in the neighborhoods that have multi-family they trade a higher multiple than single family does, even though you'll get lower rents so just make sure you're paying attention to that when shopping around if you do consider Wilmington instead of, or in addition to, Philly. 

    Podcast Guest on Show #312
    0Reply
  • Chris Salerno
    Rental Property Investor · Charlotte NC · Member since 2019 · 306 posts · 183 votes
    6y
    Originally posted by @Austin Craven:

    Hello Bigger Pockets!

    This is my first post on Bigger Pockets and I was looking to introduce myself. I am an aspiring Real Estate Investor who is looking to purchase a Multi-Family property to House Hack as a first time home buyer.

    I am from the Philadelphia, PA area and am contemplating whether to get started in Philly or Wilmington, DE. In Philly it appears Fishtown, Northern Liberties, and perhaps even Kensington areas are beginning to gentrify a bit due to the new construction of I-95. Any other up and coming areas in Philadelphia to know about?

    In regards to Wilmington, my girlfriend lives in Delaware and we've noticed the new construction along the River Front and some new restaurants/bars popping up in Trolley Square. I also noticed Wilmington has a comprehensive plan for 2028 city development regarding mild restructuring of public transportation that may enhance the city a bit.

    Does anyone have any thoughts regarding which market might be better to tap into as a new investor? Does anyone on Bigger Pockets invest in both Wilmington and Philly? Any insight would be greatly appreciated, thank you!

     I would agree with Erik hatch.

    I would also say invest in the area you know well. Just because you see new construction in that one area shouldn't mean to go there and start investing. Spend time in the market, study the market, and make sure you know it very very well before you invest there. 

    That is my opinion on your questions. 

    1Reply
  • Michael Reilman
    Rental Property Investor · Cleveland, OH · Member since 2019 · 67 posts · 37 votes
    6y
    Originally posted by @Lars T.:

    @ronald. What is the significance of a whole foods in the neighborhood?  Thanks.

     Large chains like this mean that a big company with a lot of resources spent a whole lot of time researching the area and determined that for the LONG TERM, this is a place where they THEY want to invest a store. You can use this as reassurance that the area that you are looking at is a good idea, since something like Whole Foods probably wants the same things like a growing population. It's not the only thing you should consider, but definitely a metric.

    Next level is to get ahead of the curve and learn where big chains like this will build in 6-12 months since those companies predict growth and demand there.  

    0Reply
  • Jimmy O'Connor
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    6y

    Hey @Austin Craven! I do all of my business here in Philly and I actually live on the border of Norlibs and Fishtown. As far as investments, these two neighborhoods are past starting to be gentrified and are actually fully saturated with almost no inventory left outside of the locals that have been living here for generations and keep their properties in the family. If you are looking for a multi to house hack in these parts, you will likely be looking at a turn-key property where you will not be cash flowing but will be paying cheaper than rent in those parts. As a result of Fishtown and Norlibs blowing up and running out of inventory, Kensington has seen a rapid boom, especially over the last two years, simply by the principle of proximity. Be careful of what part of Kensington you are talking about though. New Construction is popping up left and right in East and Olde Kensington, West Kensington due West of Front/Frankford and above Lehigh leading up to Allegheny places you would likely not want to house hack quite yet unless you are cool with rougher areas with higher crime rates. As an investor where I would not need to live in that pocket, I would by all day and hold onto to see the fruits a few years down the road.

    2Reply
  • Austin Craven
    OP
    Newark, DE · Member since 2019 · 6 posts · 2 votes
    6y

    @Jimmy O'Connor Thank you for the information, it's greatly appreciated! I could definitely see why Fishtown and Northern Liberties would be oversaturated, makes sense.

    I think for me, I would prefer to find a cash flowing property rather than bet on appreciation, at least as a new investor. Would it be fair to assume most of the cash flowing properties in Philly are in opportunity zones?

    Do you find that Multi-Family properties are few and far between in general in Philly? There's row homes all over the city, would it be unreasonable to convert a row home into a Multi-Family property in your experience?

    Other areas of the city I'd consider would be Manayunk/Roxborough or East Falls. I would presume the climate would be similar in these areas as compared to Fishtown/Northern Liberties in regards to oversaturation.

    Do you feel the areas towards Strawberry Mansion towards Kelly Drive are making a turn around at all? Even though Strawberry Mansion would likely represent the same issues with West Kensington.

    Sorry for the bevy of questions, I appreciate your insight!

    0Reply
  • Jimmy O'Connor
    Real Estate Agent · Philadelphia, PA · Member since 2018 · 428 posts · 484 votes
    6y

    @Austin Craven I'll answer these in the order asked! Great Questions.

    1) When you say opportunity zones, do you mean D-C class neighborhoods or actual "Opportunity Zones" that are specific pockets of the city where you receive insane tax benefits if you invest long and frequent enough? Either way, yes, if your goal is cashflow, the lower end neighborhoods often provide the best cashflow on paper (although you have different headaches with them)

    2) True duplexes as they sit at fair prices are few and far in between. Part of this, in honesty, is from Bigger Pockets since every podcasts preach the same product (multi-family that you can do cosmetic rehabs as your first property that you can house hack). Part of the rarity of multis comes from the zoning overlays the city did a while back to preserve parking and limit too much of a population boom (usually the ZBA and neighborhood councils are the hurdle in that equation. My guy @Troy Sheets can tell you some painful stories from those committees). It is, in fact, easier to find properties that are zoned RM1 that you can either convert to a multi via the layout of popping off the roof and adding a third story.

    3) Manayunk, East Falls, Mt. Airy, or any other pocket that borders around Wissahickon are strong markets. Over there, you have an incredibly strong college student and recent college grad population where parents will likely cosign on the leases and secure your investment and cash flow. 

    4) Rule of thumb currently with the Mansion is the closer to Cecil B the better (values and population pushing from Brewerytown) and as far west towards Fairmount Park. For reference, I sold a three-story ROUGH SHELL for ~75k to one of my investors just got under contract for ~400k on the 32nd block of Cecil B Moore which blew my mind.) You'll see a big drop off in value with the Mansion above the "Magic Triangle" which is everything below Where Ridge and Sedgley intersect. 

    Always feel free to ask as many questions! I used to be a teacher so providing info is what I do!

    2Reply
  • Austin Craven
    OP
    Newark, DE · Member since 2019 · 6 posts · 2 votes
    6y

    @Jimmy O'Connor

    Thank you very much for the insight!

    1) By Opportunity Zones, I meant C/D class neighborhoods, although I can understand in these types of neighborhoods there could be some significant challenges with other extraneous circumstances.

    2) That makes sense about the zoning and is very good input, thank you!

    3) That's true, there are many college renters in that area, that would be something to consider.

    4) That's very helpful information to break down Strawberry Mansion some. It seems cash flow could be nice in this area, however, I'm not sure as a first time investor I should wonder that way.

    I appreciate your help! I feel I can certainly continue to study the Philly neighborhoods to extract where value might be.

    1Reply
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