Philly has changed greatly since I left many moons ago....it's vibrant, a great restaurant town and also still affordable to get started owning property even though it is the 5th largest city in the country.
So I did a little search on Redfin to see how much it would be if I was starting out and wanted to buy a duplex in a neighborhood that was already gentrified for only 3.5% down.
Forget what you hear about having to put 10% or 20% down to buy a property. With an FHA loan you only need 3.5% to buy a 1-4 unit property provided you live in the property. With an FHA loan you can have the 3.5% down payment be a gift from your parents or other relative. With an FHA loan you can have a co signor like your parents or siblings to help you qualify. With an FHA loan you can have a credit score of about 620 and sometimes even lower. With an FHA loan you get to add the rent from the other units to your income to help you qualify. FHA loans give us lots of options to help get people started in real estate.
So for the property pictured above it is a duplex in the Bella Vista neighborhood of Philadelphia with one 2 bedroom/2.5 bath unit rented for $1350 and one 1 bedroom/1 bath unit rented for $925 . Utilities are separate so your tenant will pay for their own. After searching on Craigslist for similar rentals I believe these rents to be under market so there should be room to raise them in the future.
Here is how the payment on this breaks down on an FHA loan using a current sample rate of 3.0% with no points on a 30 year fixed rate loan. Note that in exchange for letting you put so little down on a property, FHA charges you two mortgage insurances. One is added to the loan amount (1.75% Up Front Mortgage Insurance) and one you pay monthly (.85% Monthly Mortgage Insurance)
Asking Price: $425,000
Down Payment: (3.5%) $14,875
Loan Amount: $410,125
Final Loan Amount after Up Front Mortgage Insurance of $7177 Is Added: $417,302
Principle & Interest Estimate: $1760
Property Tax (1.4%) Estimate: $496
Homeowner's Insurance Estimate: $175
Monthly Mortgage Insurance Estimate: $296
Total Estimated Monthly Payment: $2727
Now if I move into the one bedroom apartment I will be receiving $1350 in rent from the 2 bedroom unit based on the current lease. $2727 - $1350 = $1377 will be my portion of the monthly payment.
So now I own a duplex in downtown Philly for less than $1400 a month! In addition I put less than $15,000 down. There will be closing costs but there is a way to cover those without having money. On FHA what you can do is choose a slightly higher rate and get a "rebate" that is used to pay your closing costs. Your mortgage person will help you with this.
Bottom line is if I want to move out in a few years and buy another 1-4 unit property I can now rent this out (most likely the rents will cover my payment) and now the tenants will pay this property off for me so when I am retired I have an income stream. The more 1-4 units I buy the more income I will have when I retire!
I also looked up the last time this property sold....on July 13, 1989 this property sold for $62,000! Keep that in mind when buying property. The best way to get wealthy with real estate is time. Over time your property will appreciate, your tenants will pay off your mortgage and you will reap the benefits of a secure retirement!