Are you thinking of investing in Airbnb rentals in 2020? Are you searching for the best locations for buying a vacation home next year? How about the Philadelphia real estate market? Airbnb Philadelphia will be one of the most profitable real estate investing strategies in the US housing market. Find out why!
State of the Airbnb Philadelphia Rental Market
To begin with, let’s have a look at the main real estate data figures and analytics in the Philadelphia housing market related to the performance of Airbnb Philly rentals. The numbers below are generated by Mashvisor’s rental property calculator which uses actual Airbnb rental comps to perform real estate market analysis and evaluate the profitability potential of a rental strategy in any US market.
Forecast Performance of the Philadelphia Real Estate Market
- Median Property Price: $319,100
- Listings for Sale: 2,681
- Average Days on Market: 86
- Monthly Airbnb Rental Income: $2,210
- Average Airbnb Cap Rate: 4.3%
- Average Airbnb Occupancy Rate: 52.4%
As you can see from the Philadelphia real estate market analysis above, the city-average capitalization rate for Airbnb investment properties is 4.3%. Real estate investors with vast experience might argue that this is not a good cap rate as it does not fall within the traditionally recommended range of 8% to 12%.
However, what new real estate investors should keep in mind is that this is expected to be one of the highest cap rates for short term rentals across the US housing market. This is only a city-level average figure, while the best Philadelphia neighborhoods for vacation rental homes will boast much higher values.
Philadelphia Airbnb Laws and Regulations
If you are wondering if you should invest in an Airbnb Philadelphia rental, another important factor to consider – in addition to the expected return on investment – is whether short term rentals are legal and what rules and regulations they have to comply with.
You will be happy to hear that Philadelphia Airbnb properties are legal as long as they meet certain licensing requirements. Although vacation homes for rent in Philadelphia do not need a rental license, they need a Commercial License which can be obtained online through the website of the City of Philadelphia. In addition, short term rentals in the Philadelphia real estate market are divided into three main groups:
1. Short Term Limited Lodging: If you rent out your primary home on a short term basis for less than 90 days per calendar year, you’re not required to have a limited lodging permit.
2. Limited Lodging Home: If you plan to rent out your primary home as a vacation rental in the Philadelphia housing market for more than 90 but less than 180 days per calendar year, you will need to get a Limited Lodging Home permit. It is issued by the City’s Department of Licenses and Inspections and costs $125.
3. Visitor Accommodations: If you want to operate an Airbnb Philadelphia rental property for more than 180 days per calendar year or if this is not your primary home, you will need to obtain a registration permit for Visitor Accommodations.
Moreover, as a Philly Airbnb host, you will be required to install smoke alarms on specified locations in your vacation home, and you will have to pay an 8.5% City of Philadelphia Hotel Tax.
Despite these Airbnb regulations and requirements, investing in Airbnb Philadelphia is one of the best real estate investment strategies. Not many other major US markets allow non-owner occupied short term rentals, especially with such good cap rate.
Factors Affecting Airbnb Philly
1. High Demand
One of the most important factors for the rate of return on a short term rental property is the Airbnb occupancy rate which it can attract. This, in turn, depends – among other things – on the demand for Airbnb properties in this particular real estate market.
With over 45 million visitors per year, Philadelphia definitely experiences high demand from Airbnb guests. These visitors include both leisure tourists and business travelers.
The tourism industry is blooming in the Philadelphia real estate market as Philly comprises one of the major historical sites in the entire US. Moreover, the economy is growing and developing at an above-average rate.
2. Friendly Airbnb Rules and Regulations
Another key determinant of the success of the Airbnb business in any location is the short term rental laws that the local authorities have imposed. Once again, the legal and regulatory environment is favorable for Airbnb Philadelphia rentals as even non-owner occupied vacation rentals are permitted.
3. Affordable Real Estate Prices
Property prices are crucially important, especially for beginner real estate investors who often have tight budgets and limited financing opportunities.
The median price of homes for sale in Philadelphia, listed on Mashvisor’s Airbnb analytics platform, is much below what other best places to buy a short term rental property offer. Philadelphia real estate values are affordable for both local investors and those out of state.
4. High Airbnb Rental Income
Last but not least, the return on investment on any rental property is determined mostly by the purchase price and the monthly rental income. The Philadelphia Airbnb rental income is high enough to lead to excellent returns in terms of cap rates. Airbnb Philadelphia rentals promise to be a profitable option.
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Best Neighborhoods in Philadelphia for Short Term Rentals
Choosing the best city for real estate investing is one thing. Selecting the right neighborhood within this city is another. Just as you don’t have to spend weeks performing real estate market analysis to decide that Philadelphia is one of the best locations for Airbnb investment properties, you don’t have to waste time and energy on conducting neighborhood analysis to find out the top Philadelphia neighborhoods for vacation rentals.
Mashvisor’s rental property calculator highlights the following areas as the top-performing ones:
1. Strawberry Mansion
- Median Property Price: $84,500
- Price per Square Foot: $73
- Listings for Sale: 15
- Average Days on Market: 100
- Monthly Airbnb Rental Income: $1,930
- Average Airbnb Cap Rate: 21.8%
- Average Airbnb Occupancy Rate: 55.0%
2. Hartranft
- Median Property Price: $197,400
- Price per Square Foot: $105
- Listings for Sale: 20
- Average Days on Market: 99
- Monthly Airbnb Rental Income: $2,110
- Average Airbnb Cap Rate: 21.0%
- Average Airbnb Occupancy Rate: 47.9%
3. Dunlap
- Median Property Price: $136,400
- Price per Square Foot: $87
- Listings for Sale: 15
- Average Days on Market: 126
- Monthly Airbnb Rental Income: $2,650
- Average Airbnb Cap Rate: 19.5%
- Average Airbnb Occupancy Rate: 54.2%
4. Southwest Schuylkill
- Median Property Price: $210,900
- Price per Square Foot: $140
- Listings for Sale: 8
- Average Days on Market: 77
- Monthly Airbnb Rental Income: $2,670
- Average Airbnb Cap Rate: 13.7%
- Average Airbnb Occupancy Rate: 54.2%
5. Mill Creek
- Median Property Price: $97,700
- Price per Square Foot: $85
- Listings for Sale: 3
- Average Days on Market: 26
- Monthly Airbnb Rental Income: $2,020
- Average Airbnb Cap Rate: 13.5%
- Average Airbnb Occupancy Rate: 52.5%
6. Elmwood
- Median Property Price: $93,400
- Price per Square Foot: $88
- Listings for Sale: 21
- Average Days on Market: 83
- Monthly Airbnb Rental Income: $2,270
- Average Airbnb Cap Rate: 13.3%
- Average Airbnb Occupancy Rate: 53.8%
Finding the Best Airbnb Property in Philadelphia
With the help of the best real estate investment tools, you can quickly and efficiently find income properties with the highest return on investment. Here are the software tools you will need to locate a top-performing Airbnb Philadelphia property:
- Heatmap: Mashvisor’s heatmap real estate tool will show you a map of Philadelphia neighborhoods with the lowest median property price, the highest Airbnb occupancy rate, the highest Airbnb rental income, and the highest Airbnb cash on cash return.
Heatmap: Airbnb Cash on Cash Return in Philadelphia Neighborhoods
- Property Finder: Mashvisor’s Property Finder tool will allow you to find the best-performing short term rental properties in the Philadelphia real estate market which match your requirements in terms of budget, property type (single family home, multi family home, condo, or other), and number of bedrooms and bathrooms.
Property Finder: Best Airbnb Philadelphia Rental Properties
- Investment Property Calculator: Mashvisor’s Airbnb profitability calculator – or simply Airbnb calculator – will help you perform detailed, accurate investment property analysis on any property which the Property Finder has highlighted. You will get estimates on the property price, startup costs, recurring expenses, Airbnb occupancy rate, Airbnb rental income, cash flow, Airbnb cash on cash return, and Airbnb cap rate. Moreover, you will get help in deciding on the optimal financing strategy for buying rental property.
Investment Property Calculator: Analysis of Airbnb Philadelphia Property
So, should you invest in Airbnb Philadelphia? Yes, you should. Not only is this one of the few US housing markets where Airbnb investment properties remain legal, but Philly also offers one of the highest Airbnb cap rates that you can expect to see across the US.
To get an early start and begin the year on the right foot, sign up for Mashvisor now to start looking for the top-performing Airbnb rental properties in Philadelphia today.