Investing in real estate in Philadelphia has long been considered a wise investment strategy. As the largest city in Pennsylvania and one of the oldest and most historic cities in the United States, Philadelphia offers a unique combination of affordability, strong rental demand, and redevelopment opportunities that make it a top choice for real estate investors. In 2020, despite the challenges brought on by the COVID-19 pandemic, the Philadelphia real estate investment market remained strong and continued to attract investors looking for stable cash flow and long-term appreciation potential. Here is an overview of some of the key factors that made Philadelphia one of the best cities for real estate investment property in 2020.
High rental demand and occupancy rates make Philadelphia investment properties desirable
Philadelphia has a large population of renters, with over 40% of households renting rather than owning their homes. This generates tremendous demand for rental housing in the city that keeps occupancy rates high. Even during 2020, when many cities saw occupancy rates drop, Philadelphia maintained an occupancy rate around 95% for multifamily properties. High demand relative to supply allows landlords to maintain or increase rents while keeping units filled.
Strong job market and population growth support investment property demand in Philadelphia
Philadelphia’s diverse economy, anchored by education, healthcare, pharmaceuticals, tourism and other service industries, has helped the city recover strongly from recessions. Steady job growth provides fuel for real estate demand. Philadelphia’s population has been increasing as well, growing by over 25,000 residents between 2010 and 2020. More jobs and more people translate into greater demand and higher rents for Philadelphia investment properties.
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Although Philadelphia is one of the oldest major cities in the U.S., it offers plentiful opportunities for real estate development and renovation. New construction is ongoing in neighborhoods like Fishtown, Callowhill and University City. Developers are also rehabbing older or historic buildings and converting them into apartments, hotels and other modern uses. Real estate investors can capitalize on development trends by investing in properties with upside potential before renovation and upgrades occur.
Affordable property prices and high cash flow returns attract investors to Philadelphia
Compared to other major cities on the East Coast like New York and Washington D.C., real estate in Philadelphia is very reasonably priced. Investors are able to achieve much higher capitalization rates, often 7-8% or more, on Philadelphia investment property purchases compared to other more expensive coastal cities. This allows for strong ongoing cash returns. Relatively lower property prices also keep investment capital requirements in check.
Strong market fundamentals point to continued real estate investment strength for Philadelphia
While 2020 was challenging for many real estate markets, Philadelphia proved resilient. Investment capital continued to flow into Philadelphia real estate due to its strong fundamentals. As the city moves into post-pandemic recovery, investors will likely continue seeking out Philadelphia’s balance of affordability, upside potential and cash flow strength. Demographic and job trends create a positive outlook for real estate demand in Philadelphia, while development opportunities and market dynamics support growth in rents and property values over the long term.
In summary, Philadelphia demonstrates many of the essential features real estate investors look for – factors like high occupancy, population and job growth, relatively affordable pricing, and value-add potential. For these reasons, Philadelphia ranked among the top investment property markets nationally in 2020. Investment property owners with holdings in Philadelphia can feel confident in the city’s ongoing ability to deliver stable income and asset appreciation.