Investing in Philadelphia real estate has long provided investors with impressive capital gain and cash flow yields. As the sixth-largest city in the US with a diversified economy, Philadelphia continues to attract new residents and businesses. Its convenient location, abundant amenities, historically significant sites and affordability compared to other major East Coast cities make Philadelphia a strategic market for property investors. This article will explore key factors driving demand and explain why Philadelphia investment properties can be excellent additions to an investment portfolio.
Strategic Location Drives Strong In-Migration to Philadelphia
Philadelphia is strategically located between New York City and Washington D.C., providing convenient access to two major metropolitan areas. It has an international airport with daily nonstop flights to Europe and is within a two-hour drive of New Jersey beaches. Philly’s location and extensive public transit options make it an attractive option for commuters working in outlying areas. Companies have taken notice, relocating regional offices and headquarters to the metro area. This inflow of new residents and businesses continues to fuel demand for Philadelphia real estate.
Philadelphia’s Resurgence Attracts Investors and New Residents
Over the past decade, Philadelphia has undergone an urban resurgence. Dilapidated factories and warehouses have been transformed into stylish loft apartments, contemporary office spaces, restaurants and entertainment venues. Young professionals and families seeking an affordable alternative to New York City and Washington D.C. have flocked to Philly’s rejuvenated neighborhoods. Median home prices in the city have increased over 50% since 2010. Strong demand has kept the apartment vacancy rate under 5%.
Affordability Relative to Other Major Cities
The average sale price for an investment property in Philadelphia is approximately $350,000. While prices have appreciated significantly over the past decade, Philadelphia still offers affordability compared to other major East Coast cities. Investors can acquire properties generating strong cash flow. For example, a duplex purchased for $350,000 could generate over $3,600 in monthly rental income. The relatively low buy-in price and healthy cash flows are extremely appealing to investors.
Ongoing Revitalization Expanding Across Philadelphia Neighborhoods
Areas across Philadelphia are seeing new development and revitalization. For example, North Philadelphia neighborhoods like Brewerytown have seen significant gentrification and development along the Fairmount Avenue corridor. Developers have converted old breweries and industrial buildings into apartments, attracting an influx of new residents. Similarly, Point Breeze in South Philadelphia has undergone revitalization, with new restaurants, coffee shops and apartments. Identifying and investing early in transitioning neighborhoods can provide substantial upside.
Strong Job Growth Providing Rental Demand
Philadelphia’s diversified economy and business-friendly policies have driven strong job growth. Financial services, healthcare, education, manufacturing, tourism and technology companies are all major employers in the metro area. Over the past decade, the unemployment rate has fallen sharply while jobs have increased steadily. Continued job growth provides fuel for the city’s rental market, creating demand that keeps vacancy rates low and rent prices stable.
In summary, Philadelphia real estate offers an excellent value relative to other major East Coast cities, while benefitting from strong demand drivers that indicate ongoing appreciation potential and healthy cash flow yields for investment property owners. Identifying strategically located properties in revitalizing neighborhoods can further boost returns.