What are realistic Cap Rates in Philadelphia?

Question

Hi, I'm putting together financing and doing research for my first investment purchase.  I'm in Philadelphia, my realtor told me that a 5%-6% cap rate is what most properties here see.  That seems a good bit lower than the 10% outlined here...

http://www.biggerpockets.com/renewsblog/2010/06/30...

I'm wondering if anyone has any specific experience in Philly and what kind of numbers I can hope to expect.

Thanks for your time!

Patrick Martone · Answer

What kind of cap rates are you guys getting in south philly now?

Jay Hinrichs · Answer

@Chris Clothier

Mr. Chris It would be very interesting to see comparisons of actual cash flow or net rents received over a 3 to 5 year period from 8 caps from tK or 12 cap from tK

I will wager you a ride in my new jet... that the 8% wins out.

See below this is the ride you need to go from Memphis to TX... I had a deposit on one until the GFC  LOL>  But I could pilot this for you no problem.!!

http://www.cirrusaircraft.com/vision/

Chris Clothier · Answer

@Nathan Flanigan -

When you are reviewing the possibility of going Turnkey, be sure and read some of these BiggerPockets.com blog articles.  Know what to look for and what to ask and you may find that Turnkey is a really good option.  Sometimes an 8% consistent return may be better than the initial 12% you were quoted on paper.  Just for the sake of education, read before you go the Turnkey route.

http://www.biggerpockets.com/renewsblog/2014/12/17...

http://www.biggerpockets.com/renewsblog/2014/05/02...

And this one has more to do with management than actual Turnkey investing, but more turn key properties come with some form of management in place.  Property Management will the the difference in your property performing and not performing up to your expectations.  There will always be ups and downs, but bad management can kill a great investment.

http://www.biggerpockets.com/renewsblog/2014/03/12...

Best of luck to you -

Chris

John Matthews · Answer

Sorry for reviving an old thread, but I've got the same question

@Andreas F. were you able to find the webinar? I'm looking for similar 10% cap rate properties, and was thinking that I was limited to buy fix and rent properties, but I'd be open to turnkey concepts. My only concern is getting it with a bad tenant. Can you PM me with more information? To Account Closed were you able to find additional info on realistic (but lofty) cap rates in our market are?

Thanks

Account Closed · Answer

I think if you are looking for a 10 cap you would be in a little dicier neighborhood. Maybe SW Philly or K&A area.

Matt N. · Answer

What are ya'll investing in! I'm in B- to C- areas (Brewerytown (3), Germantown (1), 54XX Market st (1)) .

Here's my cap rates: 19%, 16% and 11%, then 25%, then 8% (way below market rents). All buy/fix/holds. I started buying in 2015.

My NOI is calculated with 8% vacancy rate, 10% repair rate, and 6% management fees + Water/sewer + tax + insurance... I have almost no vacancy so that's extra cake, and I self manage 3 of them... more cake. (I said I would accept nothing lower than 15% CAP but some inherited tenants are dragging down two of my homes.)

My cap rate = NOI / (Cost to buy/to close/ to fix/ to stabilize)

"You make your money when you buy."

(sorry for bragging i guess, willing to share more if you reach out)

Jay Hinrichs · Answer

@Chris Clothier

there ya go.... I have a SR 22... next time I get out your way I would be happy to take you and your son up for a run around Memphis !!!  Once your son gets the bug watch out!!

I had a deposit on this one.. in the day it was going to come out at 950k and I could have swung it... ... but now its 1.9 ... so I won't be upgrading anytime soon.

But for MI to buy a corporate ride this is a very nice safe plane ....

Happy holidays and wishing you the best in 2015..

Chris Clothier · Answer

My oldest son will flip out when I show him this picture Jay.  He has wanted to be a pilot since the age of 5 or 6 and flies this plane on his computer simulator.  He is only 13, but is pretty set on learning to fly.

Nathan Flanigan · Answer

Hey G Nice, I think there's some truth to that.  I've been surprised at what some of the rents are around K&A.

I'm not looking for 10% per se, right now I'm really just looking to understand my local market in relationship to all of the available info and advice here.

Nathan Flanigan · Answer

Hi Andreas, if you can find that webinar info please pass it along.

I'm looking to keep things simple right now.  I'm an experienced contractor, I have the skills to do rehabs but not the time or the cash really.  I'm comfortable taking on a project that needs sprucing up, painting, tearing up carpet, that sort of thing.  Under what circumstances would a 10% cap rate be likely?  Meaning where should I be looking?

Thanks!

What are realistic Cap Rates in Philadelphia?

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