Philadelphia is a popular destination for rental property investors because of its growing population, job market, and attractive real estate market. The employment rate in the city has grown by 1.64% year-over-over, attracting more employees in the city. The rents in Philadelphia also have gone up by 3% over the year, making the city an ideal investment option.
Rental property investment can offer good ROI in Philadelphia but you need to be aware of the problems you may face while investing in a rental property in Philly. Here are some of these.
You Need To Do A Lot Of Research To Find A Good Neighborhood
A good neighborhood creates desirability, demand, and high market value for your rental property. Therefore, it is necessary to do a lot of research before investing. Make sure you select a neighborhood that can offer a large pool of tenants and high rental income. Also, you should choose the neighborhood based on your investment expectations and financial capabilities.
Philly is good for both residential and commercial investment. A lot of the tenants are often families with kids or students in the universities. Understand the requirements of your tenants to decide which type of property you want to purchase. Check for proximity to schools, universities, and workplaces. Also, ensure that the crime rate is low in the area, as safety is a strong concern for tenants.
In Philadelphia, City Center West, Rittenhouse Square, and Washington Square West are the most popular neighborhoods for renters. Investors on a budget can think of Old City, University City, Fish Town for their rental property investment.
You Need To Have Strong Financial and Investment Strategies In Place
Rental property investment can be tricky for first-timers or beginners as you need to decide the type of property in which you want to invest. For example, you can invest in single-family houses, multifamily, and short-term rentals.
Once you decide the type, figure out your purchase plan. Also, take both upfront costs and hidden costs into account while buying the property.
You Have to Be Ready For High Home Prices
The home prices in Philadelphia have increased by 14% over the last year. The current median list price for a single-family house in Philadelphia is $264,000. For multifamily properties, the price is between $375,000 to $610,000. Philadelphia is a seller’s market as it offers various desirable properties and the demand from buyers for all kinds of property is exceeding the current availability. Therefore, investors need to be ready with stable finances while investing in Philadelphia.
You Need To Do Lots Of Paperwork
Being bad with documentation can cause a great deal of trouble for investors. To avoid this, it is imperative to do your due diligence while examining the property papers. Make sure you collect pay slips, tax reports, credit check reports before applying for a mortgage. Safely store miscellaneous documents such as bills of sale, certificate of occupancy, proof of homeowners’ insurance, affidavit of title, and tax transfer declarations.
A spreadsheet with multiple investment variables can help investors tabulate investment metrics such as cash-on-cash return, IRR (Internal Rate of Return), MOIC (Multiple On Invested Capital), and more to know if their investment will be profitable.
Investing in Philadelphia can be an excellent decision, when you have proper guidance and the help of an experienced real estate professional. A property management company, like TCS Management, which has been working in the Philly real estate market for over a decade can preemptively help you determine the issues you might face while investing in a rental property here, and also provide solutions for the same.
TCS Management is a full-service property management company headquartered in Philadelphia, Pennsylvania, serving Cherry Hill, NJ, Wilmington, Delaware, and the surrounding areas. We manage both single family and multifamily properties including condos, apartments buildings, townhomes etc.
Contact us for more details.