Good areas for multifamily buy and hold around Philadelphia, Pennsylvania?

Question

Hello BP,

I am trying to identify areas to prospect in and around Philadelphia, PA. I just moved to the area so I am looking to identify areas where I can purchase an apartment building (5+ units, but under $1 million, and under $100k/unit). I'd like an area that has a little upside, but attracts quality tenants - massive appreciation is not a priority. Value add is a priority.

If you have any suggestions please feel free to throw them out.

Thanks

Troy Sheets · Answer

@Mark Redmann has some good thoughts. I'd add that you shouldn't limit yourself to looking at strictly multis. If the zoning is right, RM-1 for instance, you can make a single into a multi with no variances. Lot size determines how many units you can make the house by right.

Zoning guide shows you what each zoning type means here in Philadelphia and what is allowed "by right". Brewerytown is popular because it's a lot of RM-1. Investors are taking the big 3-story houses that are RM-1 and turning them into 3 unit rentals, one unit per floor. Great value add play, especially if it's already in crap condition. I'd look for areas with concentrations of RM-1 if that's a route you're interested in.

Zoning map is a quick way to determine how a property is zoned (if it's not in the listing). The map is not very user-friendly but it's been accurate so far and can help you identify large swaths that you're interested in.

I'm beating a dead horse as I say this every time someone mentions Temple area but, in my opinion, Temple is a micro-bubble that will pop soon. It's been good to a lot of people for a long time and I may be wrong but it scares me. We had a meeting with a smaller local bank a couple months ago and their VP on the commercial side stated that they had an appetite for nearly anything we wanted to get into EXCEPT Temple student rentals. Her exact words were "we feel it's a bubble that is getting ready to pop". I'm sure I'm pissing off a lot of people that love that area but I'd definitely look long and hard before diving into Temple. I'm sure there are deals to be had there but it's really block-by-block.

Makeila Logan lafate · Answer

You could definitely venture past 40th. It just varies on which side of west philadelphia you are in. Philadelphia is one of those cities where you can literally cross one street and the entire dynamic changes.  So it would  be beneficial to just get in your car and drive around. Brewerytown and manyunk are also really hip areas. I think where you want to buy property might have to start with the type of tenant you want to rent to, once you know that you can better narrow down a target area. Again im a newbie so these are just my opions based on living in the tristate area for all my life...LOL

Mark Redmann · Answer

Northern liberties and Fishtown have grown so much. You'll be hard pressed to find any deals in northern liberties.  In Fishtown there's some opportunity, but you have to be vigilant in finding and buying the deals.  Things move fast here.  There is a lot of new construction in both these areas.  The same can be said for Point Breeze.  Quickly changing, some new construction, have to be on the ball when it comes to deals here also.

For multifamily, yes any university area will be good, expect to pay more though.  University City seems to be a hot spot near where I live in Graduate Hospital.  I can't speak on areas around Temple U or Temple Hospital, no experience here. Why don't you do some research on the area surrounding Baltimore Ave between UPenn and oh i don't know, 50th St?  52nd St? Those are larger houses and there might be some multifamily opportunity there. It might be a better alternative than the higher prices of University City

Makeila Logan lafate · Answer

Up and coming and newly developed areas are in northern liberties, fishtown and lower Kensington. College/university areas will be north philadelphia close to broad street surrounding temple university and temple hospital. And west philadelphia/university city area of philadelphia 30th thru 40th streetes market to baltimore ave streets surrounding university of penn, university of penn hospital and drexel university. All these area are good for tenants that are students, working class, doctors, teachers, law enforcement. A nice urban mix of professional people.  Hope this helps.

Matt Whitermore · Answer

@Makeila Logan lafate

Thank you for the response and for the insight. In University City you wouldnt go past 40th? I have heard from others that you can go a few blocks past 40th and still be in good shape and attract students.

@Mark Redmann

Also, thank you for the response - and good to meet you in Brewerytown last night. I will look into that area in University City/West Philly.

@Troy S.

Really good info there. Those are two resources I will get a lot of use out of. Also great to meet you last night.

Matt Whitermore · Answer

@Peter Dunne

Thanks for chiming in. That is great insight. Looking forward to continuing the conversation next week.

Peter Dunne · Answer

Hi Matt,

Welcome to the area. I know we are connecting in the future and so can discuss in more detail then. However, to find 5+ units under $100k a door, you need to invest in areas with an average cap rate of 7+, or find off-market deals. In the nicer areas that I am interested in (Mainline, West Mt. Airy, Chestnut Hill, etc.), investors are currently paying very high prices (low cap rates around 6). That said, most of the bigger investors (Post Brothers, Cross Properties, Galman Group) are looking for for the 50+ unit apartments, so there is opportunity in the smaller units if you can find them and work directly with the owners. I would begin by defining what kind of tenant you want to attract and the property profile that fits that market. Philly is a city of universities, so if housing students does or doesn't interest you, it would impact that neighborhoods you are interested in. Each Philly neighborhood has its own feel and attracts different populations.

Matt Whitermore · Answer

@Benjamin Fineman

Thanks for the insight.

Benjamin Fineman · Answer

I agree with the post above. It depends on the neighborhood and the artificial barriers. There are houses on 47th and 48th Street in West Philly that are listed in the $600k-$800k range.

Good areas for multifamily buy and hold around Philadelphia, Pennsylvania?

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