Newbie looking to start first deal

[Account Closed]

Hi all,

I'm currently new to Philadelphia and I'm looking to start my first deal. I'm hoping to receive some advice as I am new to real estate investing. I'm very passionate about real estate investing and now I'd like to start taking the steps to acquire my first property.

A little back ground on my current situation. As I've previously mentioned, I'm new to Philadelphia (2 months) and currently rent an apartment in the city. This would be my first purchase, as I've always rented. Since I'm new to the area Id like to rent for another year or so until I'm ready to buy a home I will live in.

I'm primarily interested in buy and hold and generating cash flow, however I’m also considering fix and flip. Would anyone have input on pros and cons of each (current Philly market)?  Cost/financing advantages? Added costs associated using contractors for fixes and or the challenges of filling vacancies with rental?

Lastly, I'd greatly appreciate any information regarding financing a first deal. FHA would be optimal, however I don't know that I would be living in the unit (ie. duplex). For a first time deal in a property I would not be occupying , what would be the best suggested way to finance? I'd obviously like to tie up the least amount of capital as possible.

Thank you all for your suggestions, I greatly appreciate any insight you can provide! I look forward to joining this BP community and hope to network with you all! 

[Jeremy Fisher]

Hi @Account Closed

For an investment property, you're going to need 15% (at least) down for a single family home, or 25% down for 2-4 unit property. In addition to that, you will also need show 6 months "reserves", which is: 
-6 months of payments for the property you are purchasing AND, 

-6 months of rent/payments for where you are personally living.

I learned this hard way at the end of 2017, and was lucky enough to bring my dad on to co-sign the loan with me in order to buy my first property because I could not show 6 months of reserves. Somehow after listening to a ton of biggerpockets and doing a whole lot of research online, I was unaware of the reserve requirement, which can obviously add up to $5,000-10,000 real quick.

So depending on your finances, some form of house hacking might be the better way to go at first; whether that be buying a multifamily, 3-4 bedroom house with housemates, or a well-planned live-in-flip. I would recommend that latter two, as reasonably priced multifamilies seem tough to come by in Philadelphia. House hacking would enable you to have a lower downpayment %, plus lowers the reserve requirement to 1-2 months. 

Hope that helped your thought process a bit, and good luck!