3 Reasons To Invest in Rental Properties in Philadelphia vs New York City

Real estate investments have a longstanding history. Property investments have historically had consistently stronger returns than those from other investments. Investors depend on market analyses, comparables, potential returns, and other local factors before investing.

Today’s article is focused on two investor-favorite East Coast cities – Philadelphia and New York City. We believe these iconic cities have positively favored investors and offered stable investment returns. It is this belief that led us to set up our homebuying establishment in Philadelphia. Buying properties ranging from homes to industrial warehouses offered us over 39% returns on our initial investment in the first five years.

We strongly recommend Philly to be a better investment opportunity when it comes to rental properties and three strong reasons cement this endorsement.

Affordability and Entry Costs

For new investors, one of the biggest barriers is the cost of acquiring the property. We faced this years ago when setting up our homebuying business. What helped us was talking to the right people at the right time and doing a ton of market research.

NYC rental properties come with a hefty price tag. For most investors, the risk-to-rewards ratio is not so favorable. The average price per square foot in NYC is monumentally higher than in Philly, making the latter a more accessible opportunity for investors.

On average, you can sell a house in Philadelphia for approximately $250,000, whereas in New York City it often exceeds $800,000 depending on the borough (Manhattan being the most expensive). This stark difference allows investors in Philly to diversify their portfolios by acquiring more properties or investing in larger units.

Affordability is also directly proportional to lower property prices. Affordable properties also entail smaller down payments, making financing more manageable. For first-time investors or those looking to expand their portfolios, Philly offers an easier path with less risk.

This is one of the reasons that pushed us to set up our real estate business in Philadelphia over New York City and we have never looked back since.

Higher Return on Investment (ROI)

If all the prime-time shows taught us anything, it is that NYC has a lot of skyscrapers and that the business market is lucrative. But beyond the glitz and glam of suits, stocks, and briefcases, there lies the hard reality – high property prices and operating costs can cut into the profit margins SIGNIFICANTLY!

Philly, on the other hand, strikes a balance between reasonable property prices and competitive rental rates, making it an attractive option for higher ROI.

Philadelphia offers an average rental yield of 7-9%. In contrast, NYC’s rental yields hover around 2-4%, especially in areas like Manhattan and Queens. For investors seeking a strong cash flow, Philadelphia is more favorable.

Additionally, Philly is witnessing a steady influx of young professionals, families, and students which has increased the demand for rental properties. As such, neighborhoods offer a reliable tenant pool.

Regulatory Environment

By now you must have understood that investing in rental properties is not limited to numbers and profits, but there is a scope associated with regulations too. Compared to New York City, Philadelphia offers a more accessible regulatory landscape.

New York City is notoriously famous for its rent control laws, which can limit an investor’s ability to profit from the investment. On the other hand, Philadelphia has a less restrictive approach, allowing investors greater flexibility.

Another crucial element is property taxes. New York City’s property taxes in partnership with high property valuations, result in substantial annual taxes. Philadelphia’s property taxes are more moderate, helping investors retain a large some of their income.

Philadelphia’s landlord licensing process is more straightforward. This adds to Philadelphia’s overall appeal.

Some Additional Considerations

Although Philadelphia offers compelling advantages, it is essential to weigh the benefits against the challenges.

Market Stability

NYC’s real estate market is more resilient and has a global appeal. Philadelphia’s market although robust, does not have the same international demand.

Tenant Demographics

Philadelphia’s tenant base is diverse, but it will not command the same premium rental rates. Both New York City and Philly could be considered unsafe to some people.

Cultural Appeal

New York City’s unparalleled cultural appeal is significant enough to draw certain kinds of big-shot investors.

Investing in Philly vs NYC

While both Philly and NYC have their merits, Philadelphia stands out for its affordability, consistent ROI potential, and favorable regulatory environment. For those seeking a reasonable and stable investment, Philadelphia presents an excellent opportunity.

At Brotherly Love Real Estate, we buy homes in Philadephia for investing purposes and endorse it over NYC. How about you?