Philadelphia’s real estate experts expect 2018 to end up being a great year for the local real estate market. In fact, the recent Urban Land Institute’s Real Estate Forecast projects the local red hot real estate market will continue to sizzle in 2019. Especially in the multi-family and multi-unit market, where demand continues to be high.
Here are five things to look for this year if you’re considering a real estate investment in Philadelphia:
Not All Multi-Family Properties Are Created Equal
While it’s true that overall, multi-family properties are very popular in Philadelphia, there is also a lot of new construction taking place in the upscale portion of the market. Many new properties in the upper side of the price range are being forced to offer incentives to get people to purchase or rent. And those incentives can make the property less valuable to an investor.
While demand continues to rise there is also an exceeding supply of product coming to market which could mean a decelerating rents and higher vacancies – look for these units to absorb with construction moderating after 2019. Philadelphia seems to look like its matching demand with supply compared to other markets where there is imbalances with either too much supply or too much demand. Here is a snapshot of Yardi’s latest multi family market report of the five-year supply and demand for the top 30 metro markets in the US:
Millennials Are Important, But So Are Baby Boomers
Millennials are an obvious market for multi-family properties and investing in properties that appeal to them can be a solid investment strategy. But it’s also important to realize that the other population segment worth targeting in Philadelphia are baby boomers. Many of them are downsizing as they age and are looking for a smaller unit with low maintenance requirements. Which is the definition of a multi-family property.
Be Aware Of Rivals Markets
The Philadelphia real estate market is hot, but that also means that nearby areas are trying to cash in on the demand. Experts point to the $1 billion-dollar development in nearby King Of Prussia as well as an explosion of new multi-family properties in Camden as possible rivals to the Philadelphia market.
Multi-Family Properties Can Also Be Multi-Use
One of the hotter trends in 2017 was the growth of multi-family properties that are part of or close to multi-use properties than include shopping, restaurants and other businesses. People like the idea of being able to easily walk from their front door to nearby businesses and they are willing to pay a premium for the convenience.
Airbnb Growth Makes Multi-Family Properties More Desirable
Room rentals apps such as Airbnb are legal in Philadelphia and they’re growing popularity makes multi-family properties a better investment. Buying a multi-unit property and then renting the units out via something like Airbnb can be a very lucrative business. And that potential profit-making ability has raised the price of many multi-family properties located in desirable areas.
While overall, the market for multi-family homes in Philadelphia is expected to continue to be hot, that doesn’t mean any or even most properties would be appropriate as an investment property. That’s why it pays to consult a real estate expert with deep knowledge of the multi-family real estate market. They can help you focus your investing strategy and select the best properties for your portfolio.