Does the Philadelphia market have more room to grow?

3 Replies

I'm familiar with the number of neighborhoods around center city Philadelphia (Graduate Hospital, Point Breeze, Fishtown, Rittenhouse, etc.) but haven't lived in the city for ~2 years now. Is this still a good market to get into? What neighborhoods still have 'great deal' potential? Thank you!

Really depends on your intended use, time horizon, and price range. If you're looking for rentals that meet the 1% rule? Good luck. You're anywhere from 3-15 years too late for most of those areas if we're talking true borders for those neighborhoods. If you're looking for flips? Sure, there are still good deals available in some of those areas. If you're like most and looking for cash flow plus some appreciation, I'd point you towards neighborhoods next to Fishtown - Kensington & Norris Square and next to Point Breeze - Newbold, West Passyunk & Grays Ferry. 

The answer to this question all depends what you consider to be "great potential." The city is not nearly the same as it was two years ago. For instance, Grays Ferry Shells were selling for 60-70k back then and now it's tough to find anything under 100k that sells for 250k on the out-sale. Norlibs and Fishtown have next to no inventory left since the boom a few years ago so if you want to get into those neighborhoods you are going to have to pay up for it. Cobbs Creek is not reaching up to +200k ARV in some pockets. It really depends on what you value the most in a deal. What end buyer do you understand and know what they are looking for? Are you valuing high minimum profits or quick turn arounds?

I guess as a starter question- how much of your own money do you plan on putting into it? 

It absolutely has far more room to grow. Many remain skeptical about continued growth in general simply due to lasting concern from the collapse in 2008. Philadelphia's market is one of the most stable markets. A lot of the city is dependent on the many huge universities here. It is not a city like Seattle based only on one industry such as tech which booms and busts quickly. Most importantly, it is relatively very affordable when compared to other large, great east coast cities such as Boston, NYC, DC, etc. Many are investing here and also moving from NYC. 

Most all of us can get caught up in wishing that we could buy at the priced from 5 or 10 years ago, but this is no different than looking back at old stock prices. Many neighborhoods in Philly have greatly grown, improved and therefore increased in price. That being said, countless opportunities remain at most all price points and investments may not be home runs in terms of investment stats, but they will be very safe, solid investments which will also appreciate over time. It all depends on your goals. 

Just don't buy into any rhetoric that things cant keep going up, from those who think things should cost what they did 10 years ago because they are from here. Working in real estate in philly, it is hilarious at times how predictable people walking into open houses are. If they are from the neighborhood, they are surprised by how high prices are, but if they are newer to philly, they expect prices to be higher. This also goes for neighborhoods. Fishtown is now notorious but there still are very affordable homes. It is a better neighborhood than the neighboring Northern Liberties where prices have been higher historically. This is going to change and as values surrounding Fishtown go up, buying in the heart of it remains a fantastic option for appreciation. Rental demand is incredibly high as well. 

 

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