Investing in Philadelphia real estate can be an exciting and lucrative line of work to get into.
However, it is not as easy as some people make it look. There is a lot that could potentially go wrong; there is room for loads of mistakes, and there are many lessons to be learned.
Thus, we sat down and chatted with a client of our at at Bay Property Management Group who has been investing in Philly rental properties for nearly 5 years.
With this chat, we gathered insider information which will be helpful to new investors, as well as answering questions for those who are considering Philadelphia real estate investing.
Take from this discussion some key information that will help you to make better informed decisions, and understand the answer to the question: “Why invest in Philadelphia Real Estate?”
Questions (and Answers!) to Ask Before Investing in Real Estate
How long have you been investing in property in Philadelphia?
In order to gather useful knowledge about real estate investing, you must have been in the business for a number of years. Though the investor we interviewed has a few years of experience under his belt, he is still considered a newbie in the world of Philadelphia real estate investors.
“I’ve been investing in small multi-family properties up to 8 units as well as single-family townhouses and condos for about four and a half years. Which means I’m pretty new to the game.”
However, one of the reasons this client of ours is considered to be a “fresh face” on the scene of real estate investing is because he has other avenues of investing.
“Real estate is not my primary investment, but I am starting to invest more because I want to spread my portfolio of investments across different kind of industries.”
It is no secret that investing in real estate is a smart and sound decision to make, and this client is making some great moves to build up a portfolio that will prove to be profitable.
What led you into the real estate investing industry?
It is not new news that the real estate industry is one worth investing in if you have the capital to do so.
“Real estate is always a good asset. It always tends to appreciate over a 30-year span (albeit the housing bubble from 2008).”
This is especially true as the younger generations are turning to renting rather than purchasing. It is also the case when you plan on keeping the properties in the family.
“If you have a long term goal of holding onto the properties for 40-50 years and passing it on to your heirs, that is going to be very sound investment. It’s a lot more stable as opposed to possibly some stocks in the stock market. Everyone always needs a home. The stock market could crash and you could lose all your money overnight. The housing market is always going to bounce back.”
What do you wish you knew when you started investing in real estate?
Regardless of what line of work you go into, there is a learning curve involved.
And, with industries such as real estate investment, that learning curve can be quite large. One of the major lessons the investor we spoke with learned was in regards to the upkeep of the property.
“A lesson I learned the hard way is that what you may think in terms of maintenance or repairs or capital improvements is more expensive and happens more often than it would if you were just owning the house yourself and living there.”
Why is this the case?
“Mainly because tenants don’t take care of the property as if it was their personal equitable place. It obviously is still taken care of (more often than not), but as far as things such as changing the furnace filter to make sure it lasts another 5 years, that gets lost with tenants.”
You can avoid rental property problems happened by regularly checking “all minor items to make sure that the house is being maintained and is going to last longer and not cause headache and heartache with the checkbook.”
What successes have you had in investing?
Finding success in real estate investing is not across-the-board the same for all investors. Different paths lead to different successes, and the investor we spoke with has found great luck with a specific type of investment.
“The most successful part that I’ve come through is investing in fringe areas where things are not gentrified just yet. If you get in at a good time, then you can get good prices on the purchase of it and the renovation costs aren’t that bad.”
He described that by choosing property in an area that is already highly desirable, not only will you be paying higher prices for the property itself, “chances are good the contractor costs are going to be higher as well.”
However, if instead you “invest in areas that are beginning to gentrify or you know are going to based on the city plan over the next 30 years or so, you will see your asset appreciate much quicker than if you purchase in an already desirable area.”
What failures have you had in real estate investing?
Real estate investors in Philadelphia can’t reach the point of success without some mistakes along the way.
And our client is no exception to that. His failure came in the form of him opting not to hire a professional property management company.
“Originally I had a family friend manage my properties for me and it just didn’t work out because property management was not his full time job — he was a realtor.”
Though the investor said the friend was doing a good job, his attention was focused elsewhere — primarily on what steps he needed to take to become more successful and grow his own business.
“The downfall was that my portfolio was unorganized — some of the documentation was missing, some items that should be in documentation form were in email form. It was something you could bring to court if needed, but it was up to the judge whether he would grant the email as an acceptable a document.”
A number of other things were also sources of problems for this investor with his realtor/property manager.
“There was the issue of certifications not being in proper compliance — things such as rental licenses, sprinkler tests, fire extinguishers, etc. All major items that needed to be done and passed (on an annual basis) were incomplete or hadn’t been done in years.”
This is a major liability — if insurance claims or the city discovered he didn’t have the correct certifications, that meant serious fees, or even worse: the shutting down of his business.
“We had issues with things you just can’t let go by the wayside, otherwise you’re going to be paying a lot more money and in a tougher predicament afterwards.”
What real estate investing tricks have you learned along the way?
Philadelphia real estate investors reach their goals by learning tricks to help them get there.
“The number one trick I learned is to hire a realtor that is very familiar with the market and what areas are going to gentrify. That way, I can buy low and see my asset appreciate very quickly and exponentially over the course of 30 years or so.”
What advice do you have for new real estate investors?
Though new investors will inevitably hit some roadblocks, it’s nice to have input from investors who have gone through the hard parts and reached the point of success.
This client shared with us a great piece of advice: “Make sure you have a good infrastructure. You’re going to need a property management company if you are not in the property management industry already because trying to learn a whole new industry is almost impossible.”
If you are a new or aspiring investor in Philadelphia real estate, heed the advice above from the established investor, and give Bay Property Management Group a call to help you keep your portfolio organized, growing, and profitable. As a Philadelphia property management company that is a cut above the rest, we are here to help you manage everything with your properties, from tenant screening to rent collection; from handling maintenance issues to handling tenant conflicts.
To start your foray into investing in Philadelphia real estate, give us a call today.