Philly low income houses

[Meshael Eady]

I have been looking at the Philly market and correct me if i am wrong but a 60k house that is move in ready can rent for around $900 a month? Thats a pretty good return, my math says its above 12% after all things considered. My question (before asking where do i sign up) is what is the catch, what am i missing? I understand managing the tenants may be a headache, but I am confident the information i've been consuming here on the site, from the book (on managing rental property) and the bp podcast that i along with my "core 4" should be able to tackle most if not all issues in regards to undesirable tenants. All advice is welcome! Thank you!

[Neal A.]

This type of property makes up some of our portfolio in Philadelphia. 

Your numbers on paper are correct but there is a catch.

Expect to spend more time and effort screening tenants. It’s critical to being successful with this type of housing. Expect higher vacancy rates and the occasional eviction which can wipe out a quarter of potential rental income. Factor that in and a strong argument could be made for investing in higher quality housing. 

Also in my experience the 60k houses will typically need 10-15k of repair to pull in a respectable tenant that’s capable of paying 900 dollars a month. If you don’t do any repairs and leave it in poor condition you could likely rent it at a discount but be wary of the type of tenant you move in. 

Know that plenty of people will be interested in renting, but you need to put in enough money to make it nice enough to pull in a quality tenant that will stay for years.