Philadelphia versus Brooklyn?

Question

Hi all, I have a friend who is interested in beginning to invest in real estate. It would be so helpful if anyone is willing to offer any advice on her specific situation!

She lives in Bushwick, BK and loves it there- in theory, she'd be interested in buying a condo and living there herself for the next 4-5 years or so while she finishes school, then renting it once she moves away. She has a 6-figure income and her budget is 450-550k.

Other option is, she invests that money in a condo in Philadelphia to rent from the get-go. I own an investment property there already, and would be willing to help her out by checking on her place whenever I'm down there, so not much hassle for her. It seems like she could get a better value home in a nice Philly neighborhood, potentially with easier tenants, on her budget. Hard to get a sense of how much appreciation potential is left in Brooklyn though.

Thanks for your time again, and would be great to hear thoughts on this!

Janine Covello · Answer

This coming from a New Yorker and new Philly investor :) Honestly, that money can go SO much further in Philadelphia and she would have so many opportunities with that budget for a significant cash flow and rate of return.

That being said, so far I have found that in order to feel comfortable with my investments in Philadelphia to date, I have had to be pretty hands on in my first year. I think this is great, and I absolutely love the learning and the action items I check off after each trip down, but it isn't for everyone.

So she needs to make sure she can realistically commit to doing the research, finding the deals, finding a good team of people to work with, and making the trip down (The trip is super easy, only 2 hours each way from NYC if you remember to leave when it isn't traffic!!!)

Chris K. · Answer

This picture sums up my thoughts on Brooklyn:

GCs and developers literally cannot build apartments and mix-use buildings fast enough to meet the demand in the NYC area. If I had to bet, Brooklyn will always be a more desirable location to live compared to Philadelphia. That probably makes Brooklyn a "safer" investment but returns are probably not as good as theoretically compared to Philly. I use the word "probably" twice in that sentence since a lot of things can happen at an individual level.

If I were her, I would try to house hack. But I'm not sure if she can find anything house hackable at that price range in Brooklyn.

Marci Stein · Answer

my vote is for Brooklyn. It’s the new manhattan- you can’t lose .

Calvin Lipscomb · Answer

A lot will depend on location and your overall time horizon.  There are a number of demographic changes going on in Brooklyn that can make a long term buy and hold (I am thinking 10+ years) a great investment.  The buy-in for me is way to high with the assets I am working with.

Joseph Scorese · Answer

Hi @Ruby Froom,

Welcome to BP!

Comparing Brooklyn to Philadelphia is easy for buy in and return. Philadelphia.

Condo market in any capital market is one of the first assets to turn to bad in a down market. Would highly suggest a stabilized neighborhood base monies and purchase amount discussing. The appreciation would be a bit less then up and coming neighborhoods but a safe bet on maintaining value and rents.

Let me know if you have any questions.

Regards,

Joe Scorese

Matt S. · Answer

@Ruby Froom I would a say lot of it depends on where she wants to live and where she works. If she's going to school in Manhattan, say NYU or Columbia, the commute is going to be terrible once the L train shuts down (they're estimating 15 months...but who knows). With a six-figure income, she should be able to find a studio or 1 BR in a number of areas, so I would only suggest buying in Bushwick if she really wants to live there.

So if she'd prefer to live anywhere else, I would suggest investing elsewhere (Philly or another city) and using the cash flow to subsidize her rent.

Calvin Lipscomb · Answer

Location, location, and more location.  What is her plan when the L Train shuts down for at least 2 years?  That might be the best opportunity to purchase.  The calculations changes if buying and renting elsewhere as mentioned by @Jason Lee.   What is her goal with the property?  What is her exit strategy?  All the best.

Jared Forman · Answer

Do not know about the Brooklyn market, but Philedelphia is thriving with properties that cash flow. You can buy a triplex in a good neighbor for $450k or less and have it produce $3600-$4500 in rental income. This will diversify your investment with different streams of income ( 3 doors) and give good cash flow. For buy-n-hold investing it will mitigate the risk.

If you have any other questions about Philedelphia and it's metro area please reach out.

Jared Forman

Investment Specialist

Keller Williams Main Line Realty

Jason Lee · Answer

I don't know the Philly market but I'll guess cash flow is a little better there? Regardless, she has to live somewhere during those 4-5 years so if she purchased in Philly then she'd have to rent in Brooklyn? That would eat up any cash flow and end up being much more expensive, no? I'd buy in Bushwick. The Bushwick market is obviously frothy but at that price point (which is still affordable) there's still good upside. I think the last report I saw had lower priced units in Brooklyn median sales appreciating 10% YOY in Q1. Not sure what you mean by easier tenants in Philly. At the price point in Brooklyn she'd be looking at qualifying a tenant with an income very similar to hers (six figures).

Please put her in touch if she'd like to discuss any specific BK numbers.

Philadelphia versus Brooklyn?

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