There’s much to be said about Philadelphia, the City of Brotherly Love.
Of course, you can start with the cliches about Philly cheesesteaks and Rocky Balboa. You could lean into the city's world-famous passionate, and upfront personality.
Anybody interested in Philadelphia knows of the city’s love of sports. They’ve all heard of the Broad Street Bullies and the Philly Phanatic, and they know about the millions watching the Eagles every Sunday.
Yet, while these facets are ingrained in the city’s deeply woven fabric, they only scratch the surface.
Philadelphia might be a sports town, but it’s
rich in culture, the arts, and dining opportunities (far beyond the cheesesteak). No matter the time of year, the buzz on the streets is palpable and infectious. The iconic city is an attractive place for anyone wishing to spend their best years in an area with a lively zeal and a flourishing spirit.
It’s then worth asking, how viable is Philadelphia’s real estate? Is it profitable for landlords? Is it affordable for homebuyers and renters? We’ll explore these questions below.
Before getting into the specifics of Philadelphia real estate, let’s examine the general affordability of the city.
According to the Philadelphia Business Journal, over the past decade, Philadelphia has emerged as one of the nation’s more cost-friendly cities.
However, that statement on its own may be misleading.
The same article clarifies that the cost of housing and utilities in the metro area is relatively high–or, at least, exceeds national averages. While the city has a well-earned reputation for being easy on the wallet,
more evidence mounts by the day that homebuyers need substantial incomes.
The kicker in this discussion is the reduced cost of goods. That’s how Philadelphia has gained its track record as a frugal city dweller’s paradise. On top of that, the city has separated itself in the rental market–offering prices far more reasonable than most of the US (we’ll delve more into this topic later).
For further context, it’s
40% less expensive to live in Philadelphia than it is to live in New York.
Then consider that the median household income in
Philadelphia is $68,379 while
New York’s is $67,046. Residents of Philadelphia can make more
and
save more than if they lived in the Big Apple.
We’ll look at more numbers below to see how they align with the above summation.
Per Wallet Investor, the median price for a typical Philadelphia home is $191,246 (as of January 6, 2023). This number is expected to increase to $195,932 next year and continue this upward trajectory over the next half-decade. More to the point, the median price for the average home in the City of Brotherly Love is expected to reach $213,116 by 2028.
Digging more into these projections, you’ll find that a 5-year investor in an average Philadelphia home will yield almost an 11.5% profit. To better illustrate, investing $100,000 now–in 2023–would likely lead to a $111,440 return by 2028.
By the end of 2023, it’s expected mortgage rates will be at
7.1% after spending most of the year at around 7.4%, says the Philadelphia Business Journal.
While prices of homes will continue to rise, the rate of increase is slowing down across the US, leading to the market favoring neither buyers nor sellers.
Here are a few more considerations:
Current reports show that the median rent in Philadelphia is $1,221. This number amounts to a 1% month-over-month decrease but is still a 2.4% increase year-over-year. The median price for a one-bed apartment in the city is $1,101, while the two-bedroom median is $1,283.
These numbers represent an advantage for those looking to rent in the city–despite the year-over-year increase. The 2.4% year-over-year jump is eclipsed by the 4% national average.
Furthermore, Philadelphia has a 9.1% lower median rental price than the rest of the US. The median one-bedroom in the US costs $1,153, and $1,321 for a two-bedroom.
So, while prices for homebuyers can get steep in Philadelphia, the landscape for renters is far less fiscally straining.
Landlords may look at this favorable pricing and hesitate. However, it’s
actually good for them.
The lower rental price and reasonable living cost in Philadelphia are attracting renters in droves. Moreover,
employment keeps growing across the city, meaning rental applicants have the income to ensure no payment snafus.
Undoubtedly, real estate prices–such as for a rental property–are reasonable enough in Philadelphia.
What’s more, those who purchase real estate to rent in Philadelphia can rest assured they’re entering a market with plenty of demand because of the city’s thriving culture and affordable cost of living.
That said, nothing in life is guaranteed.
Success as a rental property owner depends on the owner’s ability to manage the said property (or properties).
Taking the wrong steps and failing to stay organized will make it far more challenging to attract the best rental applicants at the most return-forward price. It’ll also make it tougher to keep your tenants happy. Then, they’ll be less likely to remain as renters providing that steady, reliable income.
Working with GM Holdings is one way to ensure that a rental property is managed in a manner most conducive to the highest financial returns. We streamline the rental process through our cutting-edge property management software–AppFolio. We ensure everything runs ship-shape, helping you work less to earn more.
Contact GM Holdings today to learn more about what we can do for your rental property.
