When I recently inherited a rural property in Northeastern Pennsylvania, buried in the corner of a large barn was a hay wagon that looked quite intriguing. One of my friends who had some knowledge of antiques advised me to hang onto it because certain makes and models could fetch a nice penny. It needed some work. The bed had some missing boards, and the paint had faded. However, I’d searched the Internet and found some old wagons that looked equally as needy and still commanded a substantial asking price. I thought restoring the piece might be a worthwhile project and, rather than let it deteriorate further, maybe I could sell it when all was said and done.
A noble notion turned into a giant undertaking. Parts were hard to come by, and no one close to me did the type of work required to put the wagon back into pristine condition. When I added up the potential bill for beautifying the big cart, I would have lost money even if I were guaranteed to unload it at auction for the average sale price. So I now have a big, country lawn ornament.
The situation closely paralleled my search for investment property in Philadelphia. The City of Brotherly Love is about 90 minutes from my home and finding distressed properties in one of the largest U.S. metro markets isn’t difficult. But if you buy the wrong property, you risk owning nothing more than a lot of potential—just like my old wagon. That’s why it’s important to know where to look and how much to pay.
How to Find Investment Property in Philadelphia
With family in the Philly area, I’ve become acquainted with numerous neighborhoods and census-designated places that offer a number of opportunities to find distressed homes at below-market value. Along with some of the usual places, I put together a strategy to search for diamonds in the rough all over the city. My plan involved a multi-tiered approach to finding bargains, and I had to stick to my guns, lest I be stuck with a very expensive version of the wagon that now graces the front yard of my farmhouse rental. Let me share a few that I’ve tried.
Pounding the Pavement the Old-fashioned Way
Between visiting family and friends and carting my son back and forth to college, recent years have found me spending a lot of time in Philadelphia. Since I was already involved in real estate investment up north, I thought it a good idea to make tax deductions out of all those turnpike tolls and miles logged. So I opted for a surefire way to learn about the neighborhoods: park the car and spend the morning walking the streets. I looked for indications that the present property owners might be parting with a home at a juicy price point. The way I looked at it, the longer the dwelling sat uncared for, the more anxious a seller would likely be to unload the place at a reasonable cost.
I have to be frank, though. The only reason this was a good idea is that I actually had time to waste. Pounding the pavement to look for deals is ridiculously time-consuming, and approaching distressed homeowners can be stressful. They are not always happy to see you when you knock on the door or give them a call to chat about their situation. In fact, the first thing that often comes to mind for these homeowners is how in the world you know about their embarrassing financial situation. Believe me, you have more than a few doors slammed in your face before you find even one homeowner willing to talk. Even then, it doesn’t mean you have a deal.
Scouring the Local Newspaper
When my Philly visits became less frequent, I got in the habit of picking up the pages of the Philadelphia Inquirer or the Daily News when I head out each morning to get coffee. I’ve found that some sellers use newspapers exclusively to list homes for sale by owner. To prove it, I cross-matched several addresses listed in the paper and found that those ads didn’t appear anywhere online. So I’ve formed a practice of checking the pages daily because otherwise, I might miss out on some of the great bargains. In fact, Manayunk and Roxborough have turned out some desirable properties for me in this manner.
But just like with searching door-to-door for deals, this property investment lead generation strategy should be leveraged only if you have time to spare. If you’re going to read the newspaper anyway, you might as well glance through the classifieds. Who knows, you might get lucky like I did a couple of times. But if you’re actually trying to build a solid real estate investment business, you’ll need a better plan.
Digging into the Digital Options
Yes—the Internet is here to stay. Why not take full advantage? In this business, getting to a potential seller quickly might mean the difference between paying a sweet price and arriving after a real estate agent’s commission has raised the cost beyond my comfort level. As such, I look for life events among folks whose changes just might trigger a need to sell a property without the delay and added expense of an intermediary such an agent. Once another party hops in the middle of a potential transaction, it only raises the asking price of a home, and perhaps not even to the benefit the owner. So I try to cut right to the chase by scanning the web for obituaries, divorce decrees, and notices that may signal pre-foreclosure actions.
Naturally, such delicate times call for a non-threatening means of contacting a prospective seller. In most cases, I’ll mail a handwritten, stamped letter to the affected parties immediately, not referencing the specific life event but announcing that I am in the business of buying homes, avoiding red tape, and closing the transaction as soon as possible. But I’ve found that when people are in the midst of change, they don’t focus so much on the small things—especially when it’s another piece of mail, just like all the other mailers from investors. More often than not, my little outreach effort goes straight into their wastebasket. It’s all part of a numbers game, though. If you have some extra marketing money, this strategy might turn something up.
Finding Deals at Foreclosure Auctions
I haven’t been averse to traveling down the Northeast Extension about once a month to participate in the frenzied buying events known as foreclosure auctions. Purchasing homes at auctions requires some homework and foresight. When I was bent on landing a home in this way, I found out as much as possible about the property before pulling the trigger. Prior to the sale, I can’t get inside the dwelling, but I do a thorough examination of the place before I place it on my short list.
Foreclosure auctions are not for the faint of heart. Buying homes at Philadelphia sheriff’s sales, for instance, can be quite competitive, and new investors might find the whole process somewhat intimidating. I can only liken the auction to the trading floor on the stock exchanges, where one must know their way around to submit a bid and acquire an asset for the desired price. Even when the price has been right, sheriff’s auctions provide one further wrinkle. If the property is owner-occupied within 90 days of a tax sale, the debtor has nine months from the date of auction to remedy amounts owed on the property. So even if you win at the auction, you still risk losing big.
Looking at Land Bank Property
The Philadelphia Land Bank presents investors with the chance to scoop up properties that have been uninhabited for extended periods of time. Essentially, the organization seeks to clean up blighted properties. The Philly Land Bank assures buyers that any existing liens are cleared before the sale, which is a huge benefit when you are taking on a Philadelphia investment property with a potentially checkered past. In addition, the small out-of-pocket dollars you spend can be expected to be at least equal to the value of the property itself. So you’re not forking over a big chunk of capital to get started. I have found properties through this organization and paid only a few thousand bucks, but buyer beware becomes even more crucial through this pursuit.
In almost all cases, what I’ve found is that the properties for sale present no more than a hollowed-out structure, and a complete interior renovation is mandated. When presented with properties like this, I tread very lightly, because any miscalculation in rehab costs could put a huge hole in my budget. If you choose to buy a land bank property, your valuation skills become mightily important in the equation. If you don’t have access to some of the best real estate investment valuation tools, like ValueChek™, to give you a leg up on knowing the pricing sweet spot for best returns, I don’t recommend you get involved in with land bank properties at all.
Finding the Best Philadelphia Investment Property
Just like when I set my eyes on that old wagon wheel in the barn, finding an investment property in Philly can make you see only the upside. I imagined all the potential returns from selling—until I started adding up the costs in both time and money. As a professional real estate investor, I’ve definitely made some dumb purchases in my day, and I’ll tell you from experience: It’s critical to buy the right house at the right price. And to do that, you need a lead generation method that brings in the right kinds of deals. Sure, you could spend your time hobnobbing in neighborhoods, sending mailers, scrutinizing online databases, or trying to buy from the land bank. But why would you when there’s a better option?
As an independently owned and operated HomeVestors® franchisee, I can spare my time and money. Qualified property investment leads all around Philadelphia come to me as a result of the nationally-recognized “We Buy Ugly Houses®” advertising campaign. And when distressed homeowners reach out, I can evaluate their property on the spot with the proprietary valuation tool, ValueChek™, and give them an offer that makes sense. It’s a straightforward process that helps me minimize risk to my business’ bottom line.