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Wednesday, August 17, 2005

Philadelphia Investment

A few friends and I went to Philadelphia last Saturday to check out the houses. I want to buy a house to rent out and Philly is the only place I can afford. Houses range from 120K to 160K in good neighborhoods. The prices have gone up 30K since the last time I visited Philly, about nine months ago. I feel if I wait another nine months, the houses will go up even more. Everyone seems to be buying in Philly now. When I was in the broker's office, he was swarmed with appointments. He had to cut us short to close three houses with another guy in the middle of our appointment. The funniest thing is that my friend knows the guy closing the three houses. It turns out to be his old high school friend. What a small world. But there’s another point. Everyone is buying in Philly now. People are scooping up houses like ice cream cakes. I have a few friends who have bought investment property in Philly and they seem to be doing well. However, they do say you have to get your hands dirty. Unlike paper investments, this is something you have to be prepared for -- dealing with tentants, complaints, repairs, phone calls, etc. I guess that's comes with any real estate investment. There are positives and negatives for investing in Philly. Advantages:

  • Affordable
  • Rent can cover mortgage, insurance, and property tax
  • Tax reduction (as with any house)
  • Interest rate still low (historically)

Disadvantages:

  • Far from New York City (where I live)
  • Too many people are buying -- may be hard to rent out
  • Bubble burst
  • Bad tenants
  • Higher interest rate for rental unit

I will have to claim the house as an investment property which means I will have to pay a higher interest rate for the mortgage as opposed to a residential property. I'm still thinking whether I should jump into this Philly real estate craze. Because so many people are buying now, I'm afraid of being left with the short end of the stick. But at the same time, I don't want to miss a wonderful opportunity to buy a real estate property and it is the only place I can afford right now. I'm thinking maybe I should give it a try. I feel if I do this for the long term, it will pay off pretty well. As long as the rent can cover all my expenses, I'll just let the house sit there and appreciate. Even if the value doesn't go up, at least the rent can pay off the mortgage for me over time. At the end, I can still have a house all paid for. That sounds really good.

Feel free to share your real estate investment stories and what do you think about me entering the Philly market now. If you have purchased a house in Philly, I'd love to hear it. Since I'm new to real estate investments, feel free to give me pointers.

17 Comments:

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At 8/18/2005 12:33:00 AM, Anonymous Sue said...

Make sure you know exactly how much you can rent it for. Lots of people think rent it out for more than it's worth.

 
At 8/18/2005 12:35:00 AM, Anonymous Sue said...

comment spam pisses me off, maybe you want to let registered users leave comments.

 
At 8/18/2005 12:37:00 AM, Blogger Smarty said...

Why all of a sudden I'm getting comment spammed?

 
At 8/18/2005 07:21:00 AM, Blogger JLP said...

Ah, the good ol' American comment spam. My blogs have been getting it for a while now. It stinks doesn't it? I mean, here's YOUR blog and these people come on and post stuff that has nothing to do with the topic at hand. My advice is to delete them. If in doubt, delete!

JLP

AllThingsFinancial

PS - The "if I don't buy it now, I'll pay more later," syndrome is a warning sign of a bubble. Just make sure you have figured out all aspects of this investment idea. There's going to be a lot of people getting burned on real estate.

 
At 8/18/2005 09:15:00 AM, Blogger savvy saver said...

comment spam is horrible. I try to delete it as soon as it gets posted.

Don't feel pressured into a big investment just because you are afraid of being left out. Buying an investment property with a mortgage is very similar to buying stock on margin... you will have to pay up in the end.

Also, I didn't think rents in Philly were that high.

 
At 8/18/2005 12:15:00 PM, Blogger your math teacher said...

Do "other" and "Anonymous" users have to register as a blogger to comment?

Maybe that's why you are getting so many comment spammers.

 
At 8/18/2005 12:22:00 PM, Blogger Smarty said...

If I receive more comment spams I will allow only registered users to comment.

 
At 8/31/2005 06:58:00 PM, Blogger Jonathan said...

Are you going to hire a property manager to manage this house, or do it yourself? Good luck and keep us updated!

 
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