Question for Philadelphia investors - is the population shrinkage impacting you?

Question

I'm thinking of doing some BRRRRs in Philly but notice that the population has been shrinking since 2020. BP has a great article on this here: https://www.biggerpockets.com/blog/philadelphia-real-estate-market. Apparently, the Philly population has shrunk down to where it was in 2014.

If you have rentals in Philly, I'm curious if you've had trouble finding good tenants and/or getting the rents you want? Do you find it's taking longer to fill a vacancy?

Housing prices are low but if there's too much inventory and a shrinking pool of renters, I'd be concerned about vacancy rates and cash flow. Thanks in advance for any insights!

Stuart Udis · Answer

Philadelphia is a large city and you shouldn't categorize the entire city based on this statistic. I believe the biggest issue many landlords currently face is the over supply of new housing that was rushed to the market due to a number of factors including the changing tax abatement legislation and favorable financing terms that were available when these properties were first purchased. Many of the recently constructed buildings are the result of these factors are just now coming on line but this disproportionately impacts certain neighborhoods. If you are going to invest in the neighborhoods with a lot of supply, it's important differentiate your product as tenants have quite a bit of optionality. My best advice would be to identify housing needs that are not being met by the current wave of development. If you can identify a need and it happens to be in a neighborhood with more restrictive zoning, that is a recipe for success. Keep in mind the reason why most of the new development is concentrated in certain areas of the city is due to favorable zoning. Zoning bills are frequently passed to promote new housing and development but there are plenty of neighborhoods in Philadelphia that have seen a rise in demand where the the zoning is more restrictive.

Elizabeth Rose · Answer

Thanks for this insight @Eric Greenberg - I'll DM you!

Alan Asriants · Answer

Hey Saaj, we are seeing quite the opposite. Inventory is so low in outskirts/suburbs that things are still selling with mulitple offers and above asking price, and a crazy demand for rentals.The city is struggling aside from some well established areas. Crime, population decrease and a large amount of new inventory are playing a factor

Saaj Patel · Answer

Mimicking what Eric said - Philly is "hyper" localized. I also have not had any issues with finding quality tenants. Now if you go and invest on the outskirts of Philadelphia where there is less activity, I can definitely see property owners struggling a bit more. It helps to have a really good team with an agent who is local and knows the area well. If you are looking for any guidance, feel free to PM.

Chris Pelc · Answer

You might benefit from looking into the suburbs of Philadelphia. Inventory is very low in these areas such as Delaware county, and Montgomery county. Some of the investors i work with have been strictly looking for rentals in these areas because they have an easier time finding a tenant. If you are dead set on investing in Philadelphia, maybe focus your search to the most desirable areas to live. Fishtown, Brewerytown, Manayunk, and close to center city. Student rentals are also a great opportunity too. With student rentals, you may also have a higher rental opportunity by charging rent per room. I personally went to Temple University, and finding off campus housing was challenging. And almost 8/10 the landlords were asking for rent by the room. Let me know if you'd like to talk a little more about this. Would be happy to connect.

Eric Greenberg · Answer

There are a lot of factors to this question as Philadelphia metro is very diverse and it would matter what type of renting you plan to do.I can speak to the areas I invest in (Olde Kensington/Fishtown/No Libs/Port Richmond) where there have been quite a number of large ‘luxury’ apartments built or being built in the last couple years. I have not had issues finding tenants for our A-C+ l LTRs (but have most tenants staying for multiple years as of late) and usually fast turn arounds for our MTRs. That being said the input from others in there area seem to suggest that rentals are slower to fill with some folks needing to drop rent/reduce deposits needed to sign a lease, especially in the larger multi and higher end SF rentals for LTRs. Also note there have been new STRs laws in place which could add supply to the LTR/MTR space as folks lost their ability to do under 30 day stays. Always happy to talk in more detail via DM.