Philadelphia Investment Properties: 4 Tips to Assess Value !
Show me the Money ! Residential, Multi-family and Commercial Mixed Use Philadelphia properties typically have one main purpose for a buyer. INCOME (cash flow) !! Mixed Use and multi-family properties are typically considered more valuable to an investor and have higher price tags than the regular residential row homes located in the very same neighborhood. Mixed Use and Multi-family properties are more expensive and more valuable to the investor because they can produce multiple sources of income. The exact amount will depend on how many rental units there are in the building. Multiple sources of income that create a cash positive outcome equals a valuable property for an investor.
It is important not to compare the prices of residentially zoned sales with the mixed use and multi-family sales. They are apples and oranges.
$100,000 Duplex row home (Two 1 bedroom apartments) bringing in 2 rentals $500 + $500 = $1,000
$80,000 Single family row home (Two Bedroom) bringing in 1 rent $650
Thus each property has it's own cash flow analysis which would include many other factors but the income that it generates is a great place to start !
The condition of the property is an important consideration. It is a good idea to assess the cost of rehabilitating a property. If the rehab cost exceeds the property's ability to recoup that improvement over a projected period of time, then the value is poor. If you can recover your improvement costs within a projected period of time then that scenario makes the investment a good one. Do not forget to consider the potential appreciation of the property. Though Location is the subject of the next paragraph... If the property is located in an area that will continue to gain value over time then the appreciation potential coupled with rental income will define value. On the same note, if the property is located in an area that is not appreciating and may be in fact declining or static, that is a consideration which will equally affect value.
What, Who, Where ? For what will the property be be used ? By who will the property be used ? Where is the property ? The answer to these 3 questions will help you determine the value of a commercial mixed use property. In the neighborhoods located just outside the Center City Philadelphia Metro Area, there is an enormous sprawl of residential communities and subdivisions. Within these small communities, the mixed use properties typically have stores on the 1st floor and apartments above. These neighborhood commercial spaces accommodate small to mid-range renters such as convenience markets, pizza/sandwich shops and so on. These commercial tenants serve the immediate needs of the neighborhood. They typically bring in lower rents compared to a higher rental districts in the Metro Philadelphia Area. But, they are affordable and without the complexities in the commercial center closer or within Center City.
An example of a higher residental and commercial rental district can be found at Northern Liberties. The New Piazza at Schmidts, for example, is a complex developed in Northern Liberties by Bart Blatstein / Tower Investments. It is a community that will accommodate higher rents, higher property values and higher appreciation value for the future. In areas like this, the commercial leases can be more complex than those that are found outside the metro Area. Leases may include fit-outs costs, credits, and other nuances depending on the tenant uses. In neighborhoods more aligned with a Metro-like sector, the demographic is much broader encompassing an aspect of tourism as well as local consumers. Thus a higher rent amount is in demand and the property value is much higher compared to those areas outside of the bustling commercial center.
And finally we have the issue of financing. In the "fringe" neighborhoods outside the Metro Philadelphia Area, many of the people looking to buy in those areas are "First Time Home Buyers". Many more these days are First Time Investors. The First Time Home Buyers are looking to use the FHA or PFHA loan products since it requires a very low down payment and a low interest rate. If the property is zoned commercial on the first floor, then that buyer would not qualify. Commercial zoning requires a minimum 20% down payment. Many people do not have that much available cash. In that case, a Multi-family property without commercial zoning would be and even greater value these days because the First Time Home Buyers would be able to qualify to purchase it.
First Time Investors looking for Cash Flow properties of any sort can make a killing right now during this "Buyer's Market". We reccomend using these 4 tips for investors assessing the value of a property in Philadelphia.
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If interested in buying or selling investment properties in Philadelphia, contact Chris and Stephanie Somers at firstname.lastname@example.org or 215-400-2612 . You can connect with us on Facebook and Twitter . Also, check out our new Philadelphia investor site at Philly Investor Hub and ask us about Philadelphia Foreclosures and Short Sales .
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