7 Philadelphia Neighborhoods with High Cap Rates

Have you read Mashvisor’s Philadelphia housing market predictions for 2020? Our forecast and real estate market data show that:

• Philly’s population is growing and around half of the residents are renters
• Mashvisor’s price to rent ratio data (18) reveals that it’s typically more affordable for locals to rent than to buy a home in the city 
• The economy is diverse and most major industries provide residents with above-average wages
• The median property price is $319,388, which is relatively affordable compared to other major real estate markets in the US
• A Philadelphia real estate investment property will appreciate in value (4.1% in 2020 according to Zillow)
• Philadelphia houses for sale receive 1 offer on average and sell for 4% below listing price (Redfin’s Compete Score for the Philadelphia real estate market is 67- somewhat competitive)
• Non-owner occupied properties can legally be rented out on Airbnb Philadelphia
• More than 45 million tourists visit Philly every year, driving demand for Airbnb Philadelphia rental properties
• The average Philadelphia investment property can generate a good return on investment, regardless of the rental strategy:
  • Monthly Traditional Rental Income: $1,450
  • Traditional Cap Rate: 2.2%
  • Average Airbnb Daily Rate: $122
  • Monthly Airbnb Rental Income: $1,949
  • Airbnb Cap Rate: 2.5%
  • Airbnb Occupancy Rate: 49%

It’s clear that buying rental property in Philadelphia is a profitable real estate investment strategy for 2020. But it’s important to remember that although the general housing market is a good place to invest in real estate, not all Philadelphia neighborhoods will be. So if you were wondering where to invest in Philadelphia, Mashvisor’s data reveals the best Philadelphia neighborhoods with high cap rates.

The Best Places to Invest in Philadelphia in 2020

As mentioned, Airbnb is legal in Philadelphia. So, we’ve divided this list of high cap rate Philadelphia neighborhoods by rental strategy:

The Best Philadelphia Neighborhoods for Traditional Rental Properties

#1. Germantown East

• Median Property Price: $107,517
• Price per Square Foot: $87
• Price to Rent Ratio: 8
• Monthly Traditional Rental Income: $1,153
• Traditional Cap Rate: 3.5%
• Walk Score: 80

#2. Upper Kensington

• Median Property Price: $131,689
• Price per Square Foot: $77
• Price to Rent Ratio: 13
• Monthly Traditional Rental Income: $824
• Traditional Cap Rate: 3.1%
• Walk Score: 90

#3. Feltonville

• Median Property Price: $117,199
• Price per Square Foot: $80
• Price to Rent Ratio: 10
• Monthly Traditional Rental Income: $1,019
• Traditional Cap Rate: 3.1%
• Walk Score: 84

#4. Elmwood

• Median Property Price: $107,838
• Price per Square Foot: $100
• Price to Rent Ratio: 10
• Monthly Traditional Rental Income: $901
• Traditional Cap Rate: 3.0%
• Walk Score: 89

#5. Carroll Park

• Median Property Price: $145,785
• Price per Square Foot: $121
• Price to Rent Ratio: 11
• Monthly Traditional Rental Income: $1,104
• Traditional Cap Rate: 3.0%
• Walk Score: 86

Start your search for high cap rate properties for sale in Philadelphia neighborhoods right now.

The Best Philadelphia Neighborhoods for Airbnb Rental Properties

#1. Elmwood

• Median Property Price: $107,838
• Price per Square Foot: $100
• Average Airbnb Daily Rate: $91
• Monthly Airbnb Rental Income: $1,783
• Airbnb Cap Rate: 7.1%
• Airbnb Occupancy Rate: 45%
• Walk Score: 89

#2. Logan

• Median Property Price: $136,005
• Price per Square Foot: $91
• Average Airbnb Daily Rate: $87
• Monthly Airbnb Rental Income: $1,767
• Airbnb Cap Rate: 6.9%
• Airbnb Occupancy Rate: 52%
• Walk Score: 89

#3. Germantown East

• Median Property Price: $107,517
• Price per Square Foot: $87
• Average Airbnb Daily Rate: $79
• Monthly Airbnb Rental Income: $2,090
• Airbnb Cap Rate: 6.9%
• Airbnb Occupancy Rate: 61%
• Walk Score: 80

#4. Clearview

• Median Property Price:  $148,330
• Price per Square Foot: $132
• Average Airbnb Daily Rate: $99
• Monthly Airbnb Rental Income: $2,007
• Airbnb Cap Rate: 6.0%
• Airbnb Occupancy Rate: 43%
• Walk Score: 71

#5. Upper Kensington

• Median Property Price:  $131,689
• Price per Square Foot: $77
• Average Airbnb Daily Rate: $112
• Monthly Airbnb Rental Income: $1,394
• Airbnb Cap Rate: 5.9%
• Airbnb Occupancy Rate: 42%
• Walk Score: 90

Note: Mashvisor’s Airbnb data is compiled using figures from real Airbnb hosts across the US.

Are These Really the Highest Cap Rate Neighborhoods in Philadelphia?

The short answer is yes. According to Mashvisor’s data, these are the Philadelphia neighborhoods with the highest cap rates. If you’re in doubt, that means we need to take a step back and understand what the average cap rate for a real estate market represents.

It’s generally accepted in the real estate industry that a good cap rate for rental property is somewhere between 8% and 12%. And if you can find an investment property for sale with an even higher cap rate that:

• Is in a good real estate market
• Promises to be a positive cash flow property

then you’ve spotted a great real estate deal. 

Related: Forget Everything You’ve Heard About What Is a Good Cap Rate

And because most of us are aware of this, when we see the list of top Philadelphia neighborhoods with cap rates between 3% and 7%, we start to wonder if these really are the best neighborhoods in Philadelphia to buy rental property. Even the average cap rates by city for the Philadelphia real estate market fall far below the “good cap rate” range. This is simply due to one major reason:

Real estate market data, whether by city or neighborhood, tends to include a massive supply of real estate comps. This is what makes Mashvisor’s data so reliable. We don’t just look at a few Philadelphia rental properties and then show you the cap rates. Rather, our database includes return on investment data for all possible Philadelphia investment properties. So, naturally, the average cap rates by city and neighborhood tend to be on the low side. They reflect both the high cap rate rental properties as well as ones with lower cap rates.

It’s also important to note that while a property with a high cap rate is generally considered to make for a better real estate investment, this isn’t always the case. A low cap rate property found in a promising location that has the potential for positive cash flow and appreciation could be a good investment.

Related: Where to Find Reliable Neighborhood Data for Real Estate Investing

Still, the higher the cap rate of a location, the more likely it is that you’ll find a high return property there. So our list of the top Philadelphia neighborhoods with high cap rates makes for some of the best places to invest in real estate in Philly.

Want to Do a Philadelphia Neighborhood Analysis Yourself?

Today, these are the top Philadelphia neighborhoods for buying rental property. But by the time you get your investment property financing in order and are ready to conduct your search, you:

• May not find investment properties for sale in these Philadelphia neighborhoods
• Other up and coming neighborhoods in Philadelphia with high cap rate properties for sale may have replaced these locations as “the best”

This is why it is so important that Philadelphia real estate investors (actually, all real estate investors) have a way to conduct neighborhood analysis of a housing market at any time. Although Mashvisor often puts together these lists of best neighborhoods to invest in real estate for you, we do you one better. We put at your disposal the Real Estate Heatmap Analysis Tool.

The Heatmap Analysis Tool is a real estate investment tool that allows you to quickly and easily conduct a neighborhood analysis. Essentially, it helps you identify top neighborhoods based on the following metrics:

• Listing Price
• Traditional Rental Income
• Traditional Cash on Cash Return
• Airbnb Rental Income
• Airbnb Cash on Cash Return
• Airbnb Occupancy Rate

Remember: Cap rate and cash on cash return are equal until you factor in your specific investment property financing. This means if you’re searching for high cap rate neighborhoods, finding a neighborhood with high cash on cash return using Mashvisor’s Real Estate Heatmap means you’ve identified one. To conduct an investment property search taking your mortgage information into account, click here.

Here’s what the Philadelphia neighborhood map looks like when we set the filter for Traditional Cash on Cash Return:

And here’s what the Philly neighborhood map looks like when we set the filter for Airbnb Cash on Cash Return:

These two versions of the map will show you where the Philadelphia neighborhoods with high cap rate properties for sale are at any time. Sign up for a 7-Day Free Trial with Mashvisor to conduct your own neighborhood analysis of the US real estate market of your choice.

Related: Finding Income Properties Using a Heatmap

Want a Faster Way to Find High Cap Rate Properties for Sale in Philadelphia?

If you just want to find a high cap rate rental property immediately and then conduct neighborhood analysis on its location, then Mashvisor’s Rental Property Finder Tool is for you.

Say you’re looking for high cap rate multi family homes for sale in Philadelphia, here’s how to use this tool:

Set the filters to match the criteria:

• Location (Philadelphia, PA)
• Distance from the City
• Budget
• Rental Strategy (Airbnb or Traditional)
• Type of Property (set the filter for multi family homes for sale)
• Number of Bedrooms and Bathrooms

The tool’s AI will return a list of the high cap rate properties for sale in Philadelphia that match your criteria. Take a look:

Find Top-Performing Philadelphia Income Properties Today

Armed with a list of the best Philadelphia neighborhoods and two real estate investment tools that are sure to help you find high cap rate properties, it’s time to start your search. All you have to do is Sign Up for a 7-Day Free Trial with Mashvisor.