The transfer tax is your first expense
Before you underwrite the rent, underwrite the closing. Every purchase inside Philadelphia pays 4.578% in transfer tax, 3.578% to the city and 1% to the state, and custom splits it evenly, so the buyer’s share is 2.289% of the price. There’s no investor exemption. On a $300,000 rowhome that’s $6,867 out of your pocket at settlement, before the lender’s fees and the title policy.
The suburban counties charge 2%, split 1% and 1%, with a handful of towns higher: Radnor, Upper Darby, Tredyffrin, and the City of Chester at 2.5%, Upper Providence and Coatesville at 3%. A $300,000 twin in Havertown costs the buyer $3,000 in transfer tax. Same house price, $3,867 less at the table. The transfer tax guide has the full breakdown.
DSCR loans: the rent qualifies, you don’t
Most small landlords in the city end up on a DSCR loan, the debt service coverage ratio loan. The lender divides the property’s monthly rent by the full monthly payment, and if the result clears the program’s floor, your personal income never enters the file. No tax returns, no W-2s, which is why it fits the contractor who writes off everything and the nurse with three rowhomes in Point Breeze.
| DSCR loan basics | Typical range |
|---|---|
| Coverage ratio wanted | 1.0 to 1.25, some programs below 1.0 with compensating factors |
| Down payment | 20–25%, a few programs at 15% |
| Credit | 620–680 minimum, 720+ for the best pricing |
| Reserves | 2–12 months of the full payment |
| Vesting | Personal name or LLC |
| Prepayment penalty | Common, ask how long |
The ratio uses the appraiser’s market rent or the signed lease, whichever the program specifies. If a rowhome would rent for $2,000 and the full payment with taxes and insurance is $1,700, the ratio is about 1.18, as an estimate. The prepayment penalty is the line people skip. If you plan to refinance or sell inside a few years, ask for the penalty schedule before you sign.
Conventional investor loans and the 2–4 unit limits
Conventional loans also finance rentals, using your personal income, tax returns, and a share of the expected rent. They price differently for investors and want more down than a primary residence. The exact minimum depends on the unit count and the lender, so ask. The 2026 conforming limits in all five counties are the same for a rental as for a home you live in.
- 1 unit: $832,750
- 2 units: $1,066,250
- 3 units: $1,288,800
- 4 units: $1,601,750
Above those, it’s a jumbo or a portfolio loan. FHA doesn’t insure pure investment purchases at all; it requires at least one borrower to live in the property. If you’re willing to do that, the duplex and triplex page shows how 3.5% down on a fourplex works, and it’s the cheapest way into the landlord business this city offers.
Temple, Drexel, Penn: who you’re bidding against
The rental corridors investors ask about most are the ones around the universities. Know who else is buying there. Drexel gives benefits-eligible faculty and staff a $15,000 forgivable loan to buy between 31st and 48th Streets, Girard Avenue to Chestnut Street, covering Mantua, Powelton Village, and West Powelton. Penn’s program pays $7,500, forgiven after five years, inside a West Philadelphia boundary that runs from the Schuylkill River west to 56th Street, roughly Market Street south to Paschall Avenue. Temple pays full-time employees $5,000 in ZIPs 19121, 19122, 19132, 19133, and 19140, and $4,000 in 19123, 19125, and 19130.
The city adds up to $4,000 through Philadelphia Home Buy Now for eligible employees of those anchor employers. Add it up and an owner-occupant buyer in Powelton Village can walk in with $19,000 of someone else’s money. Your DSCR loan doesn’t care, but your offer price will. The University City page covers the neighborhood itself.
Taxes, assessments, and the license question
Philadelphia’s property tax is 1.3998% of assessed value. The $100,000 homestead exemption that saves owner-occupants up to $1,399 a year isn’t available on a rental, so you pay on the full assessment. Escrow follows the assessment, and the assessment just moved.
The 2027 assessment notices mailed June 29, 2026 raised the median home 3% from 2025, but nearly 6,000 owners saw increases above 50% over two years, concentrated in North Philadelphia and Kensington. Kensington’s median rose 15.3%. Those are the blocks where small investors have been most active, and the escrow on a purchase there will be set on the new number. First Level Review closes September 1, 2026, and the BRT appeal deadline is October 5, 2026.
Landlord licensing is the other line item. Philadelphia requires it, the rules change, and we’re not the ones to summarize them. Ask the lender what they need to see at closing, and confirm the current requirements with the city before you sign a lease.
New construction in Fishtown or Point Breeze comes with the 10-year abatement, which for permits after January 1, 2022 starts at 100% of improvement value and drops 10 points a year. Model the rent against year five’s tax bill. When you’re ready to pull equity out of a rental you already own, the cash-out page explains the caps.
Start with one call
Say the address, the expected rent, and whether you want to close in an LLC. The lender you get does investor loans on Philly rowhomes and multi-units, with the transfer tax already in the estimate. Call us.