Are Multi-Family Properties a Good Investment?

a white multi-family property building

Philadelphia has always attracted real estate investors searching for good cashflow. The multi-family property market in Philly has long since been known as a good way to build up a portfolio and seek a good return on investment. However, not every multi-family property is as profitable as it seems. There are key factors to consider when buying to ensure you make money on your investment.

Keep reading to learn the answer to, “Are multi-family properties a good investment in Philadelphia?”, plus our tips on how to profit from multi-family properties.

Are Multi-Family Properties a Good Investment in Philadelphia?

The housing market in Philadelphia has continued to perform well in recent years. Real estate is booming, with new construction homes cropping up everywhere to develop the city. In short, yes, multi-family properties are a good investment in Philadelphia. Multi-family properties are defined as “a form of housing where several separate housing units are contained within one building, or even several buildings, within a complex”, according to Essential Living. This provides an excellent opportunity for investors to reap the benefits of multiple rent charges in one location.

How to Profit From Multi-Family Properties in Philadelphia

The rewards for owning multi-family developments can be huge, but the key is knowing how to profit from multi-family properties in Philadelphia. At Brotherly Love Real Estate, we know there are three main factors that contribute to the success of these developments.

1. Develop Real Estate Partnerships

a person in a suit handing over keys after signing a contract

One of the best things you can ever do to catapult your real estate career is to build partnerships. Partnerships can help you develop expert industry knowledge in areas you had no prior knowledge of. They can help you gain deals and create better developments that run more efficiently, owed to the combined expertise. A good partnership can also lead to better buying deals, from being able to avoid borrowing money by working with cash, to getting a better offer on an apartment complex.

2. Choose Your Philadelphia Neighborhood Wisely

a map of philadelphia with a pin

Choosing a good location for your multi-family property is important for two reasons. Firstly, the area you choose can lead to higher leases and more growth rate over time. Secondly, a good location can lead to better, more reliable tenants. Philadelphia is a huge city, with lots of opportunities in different neighborhoods.

Some of the best neighborhoods for multi-family properties include Allegheny West, Brewerytown, Strawberry Mansion, and Germantown. Some areas to avoid for multi-family properties in Philadelphia are tourist areas (where short-term rentals are more profitable) and areas not suitable for families (due to lack of infrastructure of high crime rates).

At Brotherly Love Real Estate, we only buy in certain areas of Philadelphia, namely B and C class neighborhoods, when buying properties for cash.

3. Establish Rules with Philly Tenants

navy and orange apartment buildings with balconies

Tenant screening can be a tough process, but it’s worth spending time on. Regardless of whether you know the inhabitants beforehand, you must run personal screenings, complete background checks, contact references, and confirm salaries.

Not doing your due diligence can cost you money down the road if your tenants stop paying rent or leave their lease early. Make certain you check the details of every person over the age of 18 who will be living in the property. Once you’re satisfied with your checks, get a strong lease agreement signed by all relevant tenants. Naturally, the most crucial information you should include in your lease is a payment schedule and information on what happens if payments are missed.

It’s also important to set rules for your tenants in multi-family properties. While you shouldn’t be too strict with the rules, having boundaries for what is and isn’t accepted will ensure you get the right tenants in place. It’ll also ensure your tenants are happy in the property and stick around long-term.

For example, you could set rules around:

Establishing rules with your tenants early is the best way to avoid a costly eviction process in Philadelphia.

Thinking About Investing in Multi-Family Properties in Philly?

Investing in multi-family developments in Philadelphia can be profitable in 2023 and beyond, provided you choose the right area and vet your tenants properly. For more advice on investing in properties in Philadelphia, call Brotherly Love Real Estate at (215) 326-9208. Our friendly team are happy to discuss your property needs and how we can help!