May 28, 2020

We evaluated two properties, one in Philadelphia, PA (primary market) and another in Camden, NJ (secondary market).  The goal was to highlight the different opportunities and risks based upon the market.

Observations:

1. The Listed price for the primary market property is 4.25x’s higher than the secondary market which significantly reduces the upfront capital required to invest in the secondary market.

2. The Margin above target rent (using the 1% rule) is 4.6x’s higher for the secondary market property which would indicate better monthly cashflow and overall ROI (although there may be underlying costs that could impact the monthly cashflow and ROI).

3. Both Philadephia, PA (#86), and Camden, NJ (#10) are in the Top 100 cities for violent crime although Camden is consistently near the top year in and year out.

4. Both neighborhoods score at or very near the bottom for elementary and high school education rankings.

5. The Philadelphia neighborhood has a very high walkability score at 95. This means most amenities like groceries, gas, transit, and other conveniences are within a 5-minute walk.

6. The Camden neighborhood has a lower walkability score at 63. Groceries are too far to be purchased and carried home. But transit and other shopping are attainable within a 10-minute walk.

7. Both properties need work based on the photos provided by Zillow. com. As an investor, the repair amounts necessary to rent out the property should be taken into account.

The summary analysis is in the table below:

 

Property #1

Property #2

 

                City/State

 

Philadelphia, PA (primary)

 

Camden, NJ (secondary)

 

                Address

 

2538 South Hicks St.

 

1641 Pulaski St.

 

           Neighborhood

 

Girard Estates

 

Liberty Park

          Property Status

Bank Owned

Bank Owned

 

              Listed Price           

           (forclosure.com)

 

$123,500

 

$28,900

        Target monthly rent

        minimum 1% Rule

 

$1,235

 

$289

               Average Rent

       (www.rentometer.com)

 

$1,435

 

$1,229

 

     Margin above target rent

 

$203

 

$940

     Other Information:

    Top 100 Crime Rank

    Elementary School rating

    High School rating

 

#86

2 out of 10

1 out of 10

 

#10

2 out of 10

1 out of 10

 

Based on the little bit of information gleaned from the crime rates, walkability, photos on Zillow, and our overall rental rate analysis, the Camden property looks like it would have the best margins.

There are too many factors that go into evaluating rental property investment decisions to be addressed in this article, so it is important that each investor evaluate specific opportunities and risks associated with their investment decisions.

To run other rental rate evaluation reports like this one visit rentometer.com.

Reference:

Crime Statistics:

Per the Neighborhood Scout Top 100 most dangerous cities:

#10 – Camden, NJ (population:  74,000)

Violent Crime Rate (per 1,000 residents): 16.2

#86 – Philadelphia, PA (population:  1.6m)

Violent Crime Rate (per 1,000 residents): 9.1
 

Source: https://www.neighborhoodscout.com/blog/top100dangerous
 

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