Over the past few years, short term rentals have emerged as a lucrative option for real estate investors. The high potential for profits coupled with the ease of finding new tenants has prompted many people to pivot from a traditional investing approach to a short term rental strategy. This has been made exceptionally easy thanks to platforms such as Airbnb. Having said that, there is still some ambiguity concerning the legal status of non-owner occupied rentals. In this article, we will focus on the Philadelphia real estate market and explore whether or not you should invest in Airbnb Philadelphia in 2019.
Is Airbnb Legal in Philadelphia?
Like many cities across the United States, the legal framework for short-term rentals in Philadelphia was established recently. Last year, various local governments were still sending cease-and-desist letters to rental property owners. The stop orders didn’t target the city but many Philadelphia vacation rental owners still felt uncertain. Fortunately, their fears turned out to be unfounded. Short-term rentals are legal in Philadelphia thanks to a law that went into effect in 2015. Below is a brief overview of Airbnb regulations in the city:
- You can rent out the property for a maximum of 30 days at a time and 180 days in a year
- The property should have a working smoke and carbon monoxide alarm system
- You are not allowed to install lodging signs outside the rental property
- The property shouldn’t host more than three people who are not related
- It has to be your primary residence
- You should apply for a visitor accommodations variance if the Airbnb rental property is not your primary residence
- You are not allowed to make radical physical changes to the home
- The property is subject to short-term rental taxes of 8.5% on the amount received by the host
It is important to note that these laws only apply to Airbnb Philadelphia. Homeowners from adjacent jurisdictions should check local regulations to make sure that they’re in compliance with the law.
Philadelphia Housing Market Data
Now that we’ve gone over Airbnb laws in the city, we can get into the Airbnb analytics for Philadelphia. Real estate data is extremely valuable for anyone looking for Philadelphia investment properties. The convenient thing is that you can gain access to such data right here on Mashvisor! Real estate investment tools such as the Airbnb profit calculator can be of great help to you. To learn more about it, click here.
But first, let’s take a look at some Airbnb Philadelphia analytics.
- Median Property Price: $358,220
- Price per Square Foot: $361
- Price-to-Rent Ratio: 20
- Airbnb Rental Income: $2,148
- Airbnb Cap Rate / Cash on Cash Return: 2.7%
- Airbnb Occupancy Rate: 49.5%
As valuable as these numbers are, they’re still a long way from painting the full picture. Real estate investing involves several moving parts and the use of such data is just one aspect of it. Let’s delve deeper into the reasons why you should consider investing in Airbnb Philadelphia.
Why You Should Invest in Airbnb Philadelphia
As you can see from the data above, housing prices in the Philadelphia real estate market are significantly low relative to larger cities like Boston and New York City. Furthermore, the cash flow that Philadelphia investment properties can generate with the Airbnb rental strategy is remarkably high. More importantly, all economic indicators point to a booming market that is ideal for an Airbnb investment property.
Here are some of the factors that make Airbnb Philadelphia a lucrative investment.
1 – The city boasts a growing tourism sector
One of the hallmarks of an attractive real estate market is a healthy tourism industry. In Philadelphia’s case, a record number of tourists was registered last year and the upward trend is expected to continue. This bodes well for Airbnb Philadelphia as the influx of tourists will result in a high Airbnb occupancy rate.
2 – The market is not saturated with Airbnb listings
One of the biggest issues that plague major markets such as Los Angeles and New York is the saturation of Airbnb listings. This is due to the fact that investors got in early, which ended up putting significant downward pressure on Airbnb rates. Airbnb Philadelphia, on the other hand, is still a relatively nascent market where real estate investors can make a decent rental income without incurring a lot of expenses.
3 – Philadelphia is a buyer’s market
The Philadelphia real estate market has experienced a shift to the buyer in recent months. This is an ideal situation for real estate investors. Thanks to this shift, finding affordable Philadelphia houses for sale has become very easy. In a buyer’s market, prices are relatively low and bidding wars between buyers rarely occur due to high inventory. This is in stark contrast with the seller’s market where prices remain high and inventory is scarce. Essentially, you will have no trouble finding and buying the ideal Airbnb investment property for your business.
Investment Data for the Best Neighborhoods in Philadelphia
As you know, data can significantly vary from neighborhood to neighborhood. This is why a detailed breakdown of different locations in the city is essential. Here are the top neighborhoods that you should check out when you’re looking to invest in Airbnb Philadelphia.
Kingsessing
- Median Property Price: $104,098
- Price per Square Foot: $86
- Price-to-Rent Ratio: 10
- Airbnb Rental Income: $2,530
- Airbnb Cap Rate / Cash on Cash Return: 9.0%
- Airbnb Occupancy Rate: 62.7%
McGuire
- Median Property Price: $69,614
- Price per Square Foot: $71
- Price-to-Rent Ratio: 4
- Airbnb Rental Income: $1,396
- Airbnb Cap Rate / Cash on Cash Return: 8.8%
- Airbnb Occupancy Rate: 44.5%
Fairhill
- Median Property Price: $72,000
- Price per Square Foot: $71
- Price-to-Rent Ratio: 7
- Airbnb Rental Income: $1,157
- Airbnb Cap Rate / Cash on Cash Return: 7.6%
- Airbnb Occupancy Rate: 38.2%
East Park
- Median Property Price: $74,950
- Price per Square Foot: $74
- Price-to-Rent Ratio: 6
- Airbnb Rental Income: $1,709
- Airbnb Cap Rate / Cash on Cash Return: 7.6%
- Airbnb Occupancy Rate: 48.4%
Haverford North
- Median Property Price: $159,600
- Price per Square Foot: $143
- Price-to-Rent Ratio: 18
- Airbnb Rental Income: $1,884
- Airbnb Cap Rate / Cash on Cash Return: 7.3%
- Airbnb Occupancy Rate: 50.6%
Airbnb Philadelphia offers tremendous opportunities for any real estate investor willing to capitalize on the current positive market trends. When you consider the easy entry, the high Airbnb rental income, and the overall growth potential of the city, buying an Airbnb investment property in the Philadelphia housing market can easily be the wisest investment decision you make in 2019.
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