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Updated 8 days ago, 11/11/2024
Rental Demand Philidelphia?
Good afternoon, I've been exploring options to acquire a property for long term rental in the Philidelphia area.
I have found some options which seemed ideal in sync with the BRRRR method, however from looking on sites like Zillow and Redfin, there just seems to be so many available options, for nice rentals and good rates, so would it even be ideal to buy in the area if it would be so difficult if even possible to find a tenant? What are the chances I'd be stuck with a vacant apartment?
I'd appreciate any insight or leads.
Thank you!
It's a good concern. Try to track days on market and price trends to see how well an area is selling.
There is a housing shortage in general, so every house will eventually be a home. The key question is, "At what price?" You should think about what you would offer with regards to your competition and compare rents. You can price your rental near the bottom of your comparable competition to rent faster. Alternatively, you can offer more such as central air when the competition doesn't have it.
Avoid areas with a lot of new rental deliveries. Philadelphia as a city is nowhere near saturated, but you aren't buying the city. You are buying 1 property in a local neighborhood. Philly can vary quite a bit street-to-street. Look at that property's immediate area. It's all location, location, location. The suburbs are good areas for prospecting too.
Quote from @James Mc Ree:
It's a good concern. Try to track days on market and price trends to see how well an area is selling.
There is a housing shortage in general, so every house will eventually be a home. The key question is, "At what price?" You should think about what you would offer with regards to your competition and compare rents. You can price your rental near the bottom of your comparable competition to rent faster. Alternatively, you can offer more such as central air when the competition doesn't have it.
Avoid areas with a lot of new rental deliveries. Philadelphia as a city is nowhere near saturated, but you aren't buying the city. You are buying 1 property in a local neighborhood. Philly can vary quite a bit street-to-street. Look at that property's immediate area. It's all location, location, location. The suburbs are good areas for prospecting too.
I have SFR rentals in Delaware County, but not in Philly. I know Philly at a very high level, but not the details to talk about neighborhoods.
@Isadore Nelson There is currently a glut of new housing that will take some time to absorb in specific neighborhoods but certainly not something impacting the entire city. The 19122, 19123 & 19125 zip codes stand out as neighborhoods currently experiencing this issue. It is also easy to understand why. These neighborhoods have had favorable zoning for a number of years and development usually follows the path of least resistance.
Keep in mind prohibitive zoning is a leading barrier of entry and is usually why neighborhoods lack new supply even when the underlying fundamentals and demand are strong. This is a trend you will observe across the country, not specifically in Philadelphia. It is also why such neighborhoods are most likely to appreciate because those who own properties in these neighborhoods are on the correct side of the supply/demand equation.
Since your post is focused on Philadelphia, the city has good fundamentals...strong Ed's & Med's, good accessibility to both NYC & DC, own port, international airport etc. These are all reasons to believe the neighborhoods that experienced the largest spike in new housing will effectively absorb the supply that was built in recent years. In the meantime I would focus on other neighborhoods. I personally invest heavily in northwest, particularly the 19119 zip code for the exact reasons I noted. The neighborhood has some of the most prohibitive zoning and strong demand, exactly the combination that leads to good absorption.
Areas near college campuses are good places to begin as is Center City and south philly. Avoid the c/d neighborhoods, they are trash and difficult to efficiently operate in.
@Stuart Udis is on point as always. Just to expand on his point about a glut of new housing- we are certainly feeling it when it comes to leasing and renewals throughout 90% of the city.
We manage over 500 rental units in almost every zip code of Philadelphia, and our 2024 leasing year has been the most difficult in my 7 years of professional property manager experience. We have faced the longest average on-market times and fewest leads per day on market that we've ever recorded. In my professional opinion- supply currently exceeds demand throughout most of the city. Especially in the zip codes @Stuart Udis mentioned above, and around Temple University.
New building permits have slowed down, relatively speaking, in 2024. I believe we are still 2-3 years out from the market equalizing toward the historic mean of leasing times.
- Kevin M.
There are a lot of areas in Phila that have way too much supply right not. Some is from nearby development of major mulit family complexes happening in areas like northern liberties, fishtown, point breeze etc. There is way too much supply and these "big dog" buildings are offering insane incentives, effectively killing the small landlord. There was already a lot of supply in the first place, but now your 2 bed apartment has to compete with these large buildings trying to fill vacancies literally offering 2 months free rent in some cases. They also have ammenties you might not like: pools, gyms, WFH areas, etc.
Then you have areas like temple that area not renting well because of the surrounding location of university and lower demand for students to live there.
Also you have locations like SW phila that were heavily pushed onto investors chasing BRRRR. On paper looks great, in reality too much hassle, not as great quality tenants, and what you're seeing: too much competition.
Based of my market knowledge, the strongest rental areas are the suburbs (strong neighborhoods in bucks, chester, delco, montco (main line), northeast phila, parts of mount airy, chestnut hill.
@Stuart Udis Went into more detail on why some areas are affected.
- Alan Asriants
- [email protected]
- 267-767-0111
Quote from @Kevin M.:
@Stuart Udis is on point as always. Just to expand on his point about a glut of new housing- we are certainly feeling it when it comes to leasing and renewals throughout 90% of the city.
We manage over 500 rental units in almost every zip code of Philadelphia, and our 2024 leasing year has been the most difficult in my 7 years of professional property manager experience. We have faced the longest average on-market times and fewest leads per day on market that we've ever recorded. In my professional opinion- supply currently exceeds demand throughout most of the city. Especially in the zip codes @Stuart Udis mentioned above, and around Temple University.
New building permits have slowed down, relatively speaking, in 2024. I believe we are still 2-3 years out from the market equalizing toward the historic mean of leasing times.
This is another perfect explanation.
- Alan Asriants
- [email protected]
- 267-767-0111
Quote from @Sebastian Bennett:
Areas near college campuses are good places to begin as is Center City and south philly. Avoid the c/d neighborhoods, they are trash and difficult to efficiently operate in.
I'm interested in South Philly. Where would you consider C/D neighborhoods there? Is it further south (ex. Lower Moyamensing, Whitman,..) and further west (ex. Point Breeze,..) from Passyunk Sq/E. Passyunk? Sorry I'm not from Philly but I would appreciate any insight.
Quote from @James Mc Ree:
It's a good concern. Try to track days on market and price trends to see how well an area is selling.
There is a housing shortage in general, so every house will eventually be a home. The key question is, "At what price?" You should think about what you would offer with regards to your competition and compare rents. You can price your rental near the bottom of your comparable competition to rent faster. Alternatively, you can offer more such as central air when the competition doesn't have it.
Avoid areas with a lot of new rental deliveries. Philadelphia as a city is nowhere near saturated, but you aren't buying the city. You are buying 1 property in a local neighborhood. Philly can vary quite a bit street-to-street. Look at that property's immediate area. It's all location, location, location. The suburbs are good areas for prospecting too.
Great advice, thank you. I've been looking into options in various areas, but there seems to be tons of available rentals in all areas of Philadelphia. I don't know enough to bet on a particular block when looking at deals, so if that is the situation I may need to look elsewhere.
Quote from @Stuart Udis:
@Isadore Nelson There is currently a glut of new housing that will take some time to absorb in specific neighborhoods but certainly not something impacting the entire city. The 19122, 19123 & 19125 zip codes stand out as neighborhoods currently experiencing this issue. It is also easy to understand why. These neighborhoods have had favorable zoning for a number of years and development usually follows the path of least resistance.
Keep in mind prohibitive zoning is a leading barrier of entry and is usually why neighborhoods lack new supply even when the underlying fundamentals and demand are strong. This is a trend you will observe across the country, not specifically in Philadelphia. It is also why such neighborhoods are most likely to appreciate because those who own properties in these neighborhoods are on the correct side of the supply/demand equation.
Since your post is focused on Philadelphia, the city has good fundamentals...strong Ed's & Med's, good accessibility to both NYC & DC, own port, international airport etc. These are all reasons to believe the neighborhoods that experienced the largest spike in new housing will effectively absorb the supply that was built in recent years. In the meantime I would focus on other neighborhoods. I personally invest heavily in northwest, particularly the 19119 zip code for the exact reasons I noted. The neighborhood has some of the most prohibitive zoning and strong demand, exactly the combination that leads to good absorption.
Fascinating, thank you. Is prohibitive zoning intentional as far as economics or more so other factors? Is there a likelihood that it will change, and what typically drives such changes? Also, if zoning restrictions were to be relaxed, could the area end up like others with abundant supply, potentially leading to a decrease in property values?
Quote from @Sebastian Bennett:
Areas near college campuses are good places to begin as is Center City and south philly. Avoid the c/d neighborhoods, they are trash and difficult to efficiently operate in.
I came across an intriguing deal for student housing—a 6-bedroom property. However, it seems like it might be too late to secure tenants for this school year. Additionally, it’s challenging to assess the demand for student housing in the area. Filling up the property could be tough, and managing multiple tenants annually can be demanding. These uncertainties could make it unideal for a newbie.
Quote from @Kevin M.:
@Stuart Udis is on point as always. Just to expand on his point about a glut of new housing- we are certainly feeling it when it comes to leasing and renewals throughout 90% of the city.
We manage over 500 rental units in almost every zip code of Philadelphia, and our 2024 leasing year has been the most difficult in my 7 years of professional property manager experience. We have faced the longest average on-market times and fewest leads per day on market that we've ever recorded. In my professional opinion- supply currently exceeds demand throughout most of the city. Especially in the zip codes @Stuart Udis mentioned above, and around Temple University.
New building permits have slowed down, relatively speaking, in 2024. I believe we are still 2-3 years out from the market equalizing toward the historic mean of leasing times.
Quote from @Alan Asriants:
There are a lot of areas in Phila that have way too much supply right not. Some is from nearby development of major mulit family complexes happening in areas like northern liberties, fishtown, point breeze etc. There is way too much supply and these "big dog" buildings are offering insane incentives, effectively killing the small landlord. There was already a lot of supply in the first place, but now your 2 bed apartment has to compete with these large buildings trying to fill vacancies literally offering 2 months free rent in some cases. They also have ammenties you might not like: pools, gyms, WFH areas, etc.
Then you have areas like temple that area not renting well because of the surrounding location of university and lower demand for students to live there.
Also you have locations like SW phila that were heavily pushed onto investors chasing BRRRR. On paper looks great, in reality too much hassle, not as great quality tenants, and what you're seeing: too much competition.
Based of my market knowledge, the strongest rental areas are the suburbs (strong neighborhoods in bucks, chester, delco, montco (main line), northeast phila, parts of mount airy, chestnut hill.
@Stuart Udis Went into more detail on why some areas are affected.
Quote from @Stuart Udis:
@Isadore Nelson There is currently a glut of new housing that will take some time to absorb in specific neighborhoods but certainly not something impacting the entire city. The 19122, 19123 & 19125 zip codes stand out as neighborhoods currently experiencing this issue. It is also easy to understand why. These neighborhoods have had favorable zoning for a number of years and development usually follows the path of least resistance.
Keep in mind prohibitive zoning is a leading barrier of entry and is usually why neighborhoods lack new supply even when the underlying fundamentals and demand are strong. This is a trend you will observe across the country, not specifically in Philadelphia. It is also why such neighborhoods are most likely to appreciate because those who own properties in these neighborhoods are on the correct side of the supply/demand equation.
Since your post is focused on Philadelphia, the city has good fundamentals...strong Ed's & Med's, good accessibility to both NYC & DC, own port, international airport etc. These are all reasons to believe the neighborhoods that experienced the largest spike in new housing will effectively absorb the supply that was built in recent years. In the meantime I would focus on other neighborhoods. I personally invest heavily in northwest, particularly the 19119 zip code for the exact reasons I noted. The neighborhood has some of the most prohibitive zoning and strong demand, exactly the combination that leads to good absorption.
Quote from @Giman Kim:
Quote from @Sebastian Bennett:
Areas near college campuses are good places to begin as is Center City and south philly. Avoid the c/d neighborhoods, they are trash and difficult to efficiently operate in.
I'm interested in South Philly. Where would you consider C/D neighborhoods there? Is it further south (ex. Lower Moyamensing, Whitman,..) and further west (ex. Point Breeze,..) from Passyunk Sq/E. Passyunk? Sorry I'm not from Philly but I would appreciate any insight.
All those areas you mentioned sound South, what about North closer to Northeast Philadelphia Airport?
@Isadore Nelson I'm currently seeing 154 available rentals on Zillow in the 19119 zip-code, ugh... is exactly the wrong way to analyze a neighborhood, lets use the 19119 zip code for this exercise:
Did you know the 19119 zip code is ~ 3.5 Square miles? That's 3x the size of most Philly zip codes where real estate investors customarily buy investment properties. This means there is upwards of a 10 minute drive to reach some of the "A" locations in the neighborhood when traveling from the "C" areas. Along with the travel distance there is 50%+ swing in rental rates. How many of the 154 listed properties are in the true "A" neighborhood locations? Of those how many are 2 bed + home office or 3 beds, basically suitable for a household earning $150K? You likely see no 1500 SF 2 bed + home office's renting for $2,850+ either but that is my best performing unit type. The tenants who rent those units are college administrators, physicians, consultants etc. They would never look at 99% of the 154 units that are listed on Zillow at any given time.
I used this exercise to show how opportunities fall through the cracks & most investors make investment decisions based on bad or irrelevant data. Zillow doesn't tell the story I shared on the 19119 zip code but driving the neighborhood, walking properties, observing the daily routines of those who live there and listening to residents articulate their wants and needs does. That's how you truly learn and understand neighborhoods and where demand and supply pressures fall in your favor. That is the information you should be relying on when you make your investment decisions not the 154 rental listings available shown on ZIllow. These same principles should be applied to anywhere you choose to invest.
lol mic drop
The Philadelphia rental market remains strong, especially in high-demand areas near universities, hospitals, and transit hubs, so vacancies can generally be minimized with the right property in the right location. While there are many options on the market, targeting neighborhoods with consistent renter demand and investing in well-maintained properties will help you attract tenants more quickly and reduce vacancy risk.
Good afternoon!
I completely understand your concern about potential vacancy issues, especially when it seems like there are so many rental options available in the Philadelphia area.
However, not all areas are created equal when it comes to rental demand. Based on recent data, there are specific zip codes in Philadelphia with lower Days on Market (DOM), indicating strong rental demand and a quicker turnaround in finding tenants. Here are a few prominent ones you might want to consider for your BRRRR strategy:
- 19153 - 19 DOM
- 19152 - 26 DOM
- 19154 - 28 DOM
- 19115 - 31 DOM
- 19118 - 34 DOM
These areas typically have better tenant demand, meaning properties are rented out faster compared to other parts of Philadelphia, where DOM can exceed 50 days. Focusing on these zip codes could help reduce your chances of prolonged vacancies and improve your cash flow stability.
If you’re looking for more detailed market insights or need assistance with tenant placement to maximize your investment, feel free to connect. I'm here to help you navigate the local market and ensure you make a well-informed decision.
Best of luck with your investment journey, and I’m looking forward to seeing you succeed!