Philadelphia has emerged as a hot real estate investment market in recent years due to its affordable housing prices and thriving commercial real estate sector. The city provides solid cash flow potential for rental properties while also offering attractive appreciation potential in up and coming neighborhoods. Investors should focus on single-family rentals and multi-family properties to tap into strong tenant demand. Small apartment buildings are particularly lucrative since they avoid rent control regulations. Meanwhile, office and industrial properties are generating strong NOI growth as companies continue expanding in philadelphia. Investors must carefully research each neighborhood and property type to identify the best investment opportunities.
Single-family rentals deliver stable cash flow with upside potential
Single-family rentals (SFRs) have become extremely popular among real estate investors in philadelphia. The city has one of the highest rental yields for SFRs in the nation at over 10% on average. Investors are purchasing affordable properties in up and coming neighborhoods and renting them out to tenants. This provides a steady stream of cash flow from the rental income. Additionally, as the neighborhoods gentrify over time, investors can see substantial appreciation on their properties. Focusing on homes built after 1990 will provide lower maintenance costs as well. Just be sure to research the neighborhoods thoroughly and have a property manager handle tenant screening and maintenance.
Multi-family properties benefit from strong demand and limited supply
The multi-family sector has also seen tremendous growth in philadelphia in recent years. Rental demand is on the rise while new construction has not kept pace, leading to extremely low vacancy rates near 2% for apartment buildings. Investors should target small apartment buildings with less than 20 units to maximize returns. These small multi-family properties are exempt from the city’s rent control laws. Finding value-add opportunities to renovate older buildings can also boost rental rates significantly after improvements. Be prepared to handle more hands-on management with multi-family properties compared to single-family rentals.
Commercial real estate rides jobs and population growth
Philadelphia’s commercial real estate market is thriving as well, led by the office and industrial sectors. Major companies like Comcast, Jefferson Health, and FMC Corporation continue leasing more space to accommodate job growth. New coworking spaces and tech firms are also propelling office demand across the city. On the industrial side, e-commerce tenants keep gobbling up warehouse and distribution spaces. Investors can target small commercial properties like medical office buildings which provide stable cashflow without intense management. Larger Class A office towers and big industrial spaces also offer strong upside but require extensive expertise.
Focus investment searches on appreciating neighborhoods
When evaluating prospective investment properties in philadelphia, pay close attention to the neighborhood dynamics. Look for indicators of gentrification and population growth that signal an area is on the rise. Some top neighborhoods for investment currently include Fishtown, Graduate Hospital, Point Breeze, and Brewerytown. These communities are attracting new residents and businesses which lead to higher rents and property values over time. Avoid stagnant neighborhoods that show no signs of renewal or growth. Also beware of the highest crime areas to mitigate risks.
Philadelphia offers lucrative real estate investment opportunities for those targeting the right property types and neighborhoods. Single-family rentals, multi-family properties, and commercial real estate can all generate attractive returns. Just be sure to research each area carefully and work with an experienced local property manager.