All Forum Posts by: Derek Badgley

Thanks for the replies. I have a very wide search radius across four counties in and around Philly, so I'm thinking the entire Philadelphia market is just too seller-friendly. Now I have to consider taking a worse deal, maybe one that just breaks even, or continue renting. 

To be honest, I'm not sure how to find the homes that aren't listed on MLS besides driving around. How do you guys usually find these properties?

The thing that confuses me is that most of these houses are still getting sold. I figured being in the multi-family market would insulate me from higher prices and from buyers making emotional purchases when the numbers just aren't there. But again, these houses with high GRMs and negative cash flows are still selling. So I'm wondering if these investors are really ok with just a 4-5% cap rate, or if they are maybe banking on appreciation? Supply vs demand certainly is pushing the prices up, but I didn't think it would push the prices to this point. 

Hello all,

I'm a first time home buyer looking for a duplex/triplex around Philadelphia, and I'm becoming very confused as to how many houses will leave me with a negative cash flow. It's becoming next to impossible to find a house that will net me a positive cash flow while also being located in a somewhat decent area. 

Take this property for example:

Asking price:  $230,000   Rents: $1,400

Expenses:

• P & I (based on 5% down): $1,100
• HO Insurance: $90
• Mortgage Insurance: $130
• Property Tax: $220
• Vacancy and Property Management: 10% of rents each
• Repairs: 1% of purchase price per year 

This leaves me with a whopping negative $615 per month, and a cap rate of 3.5%. I realize MLS numbers are typically high, but this seems ridiculous. I would have to offer 55% of the asking price to even have a positive cash flow.

This is a more extreme example, but almost no houses I have looked at have had positive cash flows, and I've been looking for months. Also, houses are still being sold. 

So, my question is: is the market really this over-saturated and seller-friendly, or am I doing something wrong? Are my estimates too conservative?

Any help would be very much appreciated. Thanks!

Derek