Curbed University delivers insider tips and non-boring advice on how to buy, sell, or rent a home or apartment. Additional questions welcomed to email@example.com.
When it comes to buying an investment property, there are basically two options: buying an entire building (whether a rental building or townhouse with multiple units) or buying an apartment that’s easy to rent. Going the rental route allows much fewer responsibilities for you, but no matter what sort of property you’re going to be adding to your family, you have decisions to make.
The main thing is location. Figure out where you’ll be buying and what sort of things are located around there. The price range and size of the apartment will also narrow down the types of renters you’ll have. Are you renting small units in Passyunk Square? Perhaps you’ll have a music journalist, I mean a waiter, on your hands. A two-bedroom on North Broad? I hope you like Temple students. If you’re looking to rent long-term to families with younger children, you might want to consider buying a place in a good school district.
If you plan to rent out a place, you're going to have to learn certain things about your obligations, tenant rights and fair housing laws. It's less fun than you might imagine when you first think about the extra income. When beginning the process, you (and your broker) have to be incredibly careful. There are words you obviously can't use in a listing because they're considered discriminatory—anything pertaining to race or religion. There are other words that you might not think of, though, which is why you have to educate yourself. Granted, many are common sense. Who's going to say, "No cripples, please"? But take a look at some others:
Board approval required
Employed, must be
Soc. Sec. Ins., no
You may notice that many listings violate these laws all the time. "This apartment would be best for a single person ... " Or, "Perfect for empty nesters ... " The full list is here.
No matter who you end up renting to, the most important thing is finding a property that balances your financial situation with a good profit margin without unnecessary hassle. Some tenants who seem like they'd be low-maintenance turn out to be problematic. Learn what you are and aren't allowed to request of them, and in a worst-case scenario, what you can do if they stop paying rent. You'll be surprised by how long it may take to resolve a bad situation. (On the flip side, if you're a renter, your rights are far more expansive than you probably know.)
Philadelphia has a good number of investment properties right now. Some are expensive but have a fair assurance of continued occupancy, like a six-unit building near Penn ($699,000). There's a building at 16th and South that has two two-bedroom apartments as well as a dance studio. A few years ago, no one would want to buy a building at 16th and South, but these days, it looks like a better bet (especially this one, if you want to teach yoga or dance). In Fishtown and NoLibs, you can generally find properties for around $325,000, some of which are already tenant-occupied. University City, too, has big Victorian houses with Penn kids already there, waiting to give you rent money.
Also, take a look at proposals before the Zoning Board. For instance, you might think a particular neighborhood looks depleted and unappealing. But if the Zoning Board approves development there—either retail or residential—it could increase the value of property (which is exactly what frightens many longtime residents, but that's another story).
Of course, it's all very unpredictable, but if you're set on trying, go to Zillow.com and under filters, type in the key word "investment." It's fun to imagine what you could do as a landlord—er, property owner.
As far as financials go, take a look at this handy dandy calculator. It's just to get a sense of things, though. If you’re a first time investor, speak with a broker or someone who can help you decide what’s best for you. Do not go it alone.