Is Buying a Short Term Rental in Philadelphia a Smart Investment for 2023?

Investing in a short term rental in Philadelphia has always been a smart move. Will this trend continue into 2023? Let’s figure it out together.

The Philadelphia real estate market seems to have everything that’s required for a profitable investment in a short term rental. In addition to being a popular tourist destination, the city offers affordable property values and relatively conducive short term rental laws. But are they enough to make Philadelphia a top location for this rental strategy? We’ll discuss them in this article.

Table of Contents

1. Real Estate Market Trends and Forecast in Philadelphia
2. Tourism and Travel Trends and Forecast in Philadelphia
3. Short Term Rental Laws in Philadelphia
4. How to Find a Profitable Short Term Rental Property in Philadelphia
5. Top 5 Philadelphia Neighborhoods for Short Term Rentals in 2023
6. Getting Started With Profitable Philadelphia Short Term Rental Investments

There are a lot of factors and considerations that need to go into a good real estate investing decision. We’ll provide the data and information you need to decide if Philadelphia will be a good market for investments in 2023 and whether it’s aligned with your strategy in specific.

We will go through the process of finding profitable vacation rental opportunities in Philly should you opt for it. We’ll look at the best areas for buying Philadelphia short term rentals next year, based on up-to-date Mashvisor data and analytics.

You will also discover how various Mashvisor tools can help you along the different steps of choosing a top-performing investment property in an easy and efficient way. After finishing reading this article, you should have everything it takes to make 2023 your most profitable yet.

Real Estate Market Trends and Forecast in Philadelphia

The Philadelphia real estate market has always been a top location for investing in real estate, both in long term and short term rentals. There are many different factors that come together to produce this status.

The good news for investors is that all indicators point in the direction that the trend will carry on into 2023. In other words, Philly will be a great market for vacation rentals.

The main driver behind the traditionally strong performance of the Philadelphia rental market is the fact that the city has the largest population in Pennsylvania and the sixth-biggest in the US.

Also, the Philly economy performs better than the nationwide average. The main sectors include higher education, manufacturing, oil refining, health care, biotechnology, telecommunications, and others that pay good wages.

Moreover, Philadelphia constitutes a top tourist destination in the US, which is crucially important for those considering investing in a short term rental in the city. We will discuss details on tourism and travel trends shortly.

Now let’s take a closer look at the main real estate data points necessary to substantiate our claim that Philadelphia will remain a top investing destination in 2023.

Philadelphia Real Market Data for 2023

Following is a quick summary of all real estate and traditional and Airbnb rental data, investors need to evaluate the potential of the Philly market. The following numbers are based on Mashvisor November 2022 analysis of the Philadelphia real estate market, including general trends, listings, short term rentals, and long term rentals.

• Median Property Price: $398,997
• Average Price per Square Foot: $306
• Days on Market: 90
• Number of Short Term Rental Listings: 3,291
• Monthly Short Term Rental Income: $1,890
• Short Term Rental Cash on Cash Return: 3.50%
• Short Term Rental Cap Rate: 3.59%
• Short Term Rental Daily Rate: $153
• Short Term Rental Occupancy Rate: 36%
• Number of Long Term Rental Listings: 8,785
• Monthly Long Term Rental Income: $1,722
• Long Term Rental Cash on Cash Return: 3.80%
• Long Term Rental Cap Rate: 3.89%
• Price to Rent Ratio: 19
• Walk Score: 59

But what do all the above numbers mean?

Philadelphia Rental Market Data Analysis

Importantly, especially for beginner investors, Philadelphia benefits from affordable home values, only 12% above the national median. It is a positive trend for buyers, particularly amid skyrocketing mortgage rates that make purchasing a real estate property less affordable.

Philadelphia real estate market analysis reveals that it remained a seller’s market this year, and it is the forecast for 2023 as well. Whereas some US housing markets are expected to start turning into seller’s markets next year, demand in Philly will continue to be strong. So, investors need to use all tools at their disposal to optimize their results.

Another major data point for investors is the average cash on cash return of short term rental properties, equivalent to 3.50%. While the figure might not sound like a lot since most experts recommend an ROI of 8% or more, you should keep in mind that it is just a city average. The best neighborhoods and best vacation rentals for sale provide a much higher rate of return.

Moreover, long term rentals are also a profitable option in Philadelphia. It may seem irrelevant to investors aspiring to become Airbnb hosts rather than landlords, but it’s key. This trend means that should you ever opt out of the short term rental strategy for whatever reason, you can convert your property into a long term rental and still make money.

Flexibility is a good thing in the dynamic real estate market, as proven once again by the impact of the COVID-19 pandemic.

So, in brief, the Philadelphia real estate and rental market provide everything it takes to be a good investment location, especially for short term rentals.

Tourism and Travel Trends and Forecast in Philadelphia

Next, we will take a look at the state of tourism and travel in Philadelphia as it is one of the main determinants of the performance of short term rental properties in a particular market. The tourism and travel industry impacts the occupancy rate, daily rates, rental income, and return on investment of vacation rentals.

So, let’s see if these trends are positive for buying a short term rental in Philadelphia in 2023.

Travel Magazine ranked Philadelphia, Pennsylvania as the fourth top US city to visit in 2022, and this trend is expected to continue into 2023 as the last travel restrictions fall. Philly is praised for being a dignified cultural center with multiple attractions like museums, institutes, and festivals.

In 2021, as many as 36.2 million tourists visited the Greater Philadelphia region despite ongoing pandemic-related restrictions, which is already an increase of 21% from 2020. In 2022, the number is expected to be exceeded. Tourism is forecast to grow further in 2023 as tourists are eager to make up for opportunities missed during the peak of the pandemic.

Many visitors prefer the comfort of short term rentals over expensive and impersonal hotels, creating demand for this investment property type. The growing interest from travelers will boost vacation rental occupancy rates in Philadelphia and possibly push them beyond the 50% threshold.

All in all, short term rental trends in the Philadelphia market are in line with the overall US housing market predictions for 2023. In brief, the industry is expected to not only recover but to actually get back on track with its expansive growth prior to the pandemic.

Short Term Rental Laws in Philadelphia

Before being 100% confident that buying a short term rental property in a certain market makes sense, you should check out the local Airbnb laws and regulations.

To counteract the negative effects of the quick expansion of the vacation rental industry, many US local authorities have implemented various restrictions. They vary from simply requiring the payment of transient occupancy taxes to only allowing owner-occupied short term rentals for a limited number of days per year.

Let’s see what the local laws say about owning a short term rental in Philadelphia.

According to recently updated legislation, there are two types of short term rentals in Philadelphia:

• Limited lodging, which refers to the primary residence of the host and does not pertain to buying an investment property for the sole purpose of running a business
• Visitor accommodation, which refers to units that are not the primary residence of the host and thus relate to investing in short term rentals. Keep in mind that these rentals are only allowed in zoning districts CMX-3, CMX-4, CMX-5, CA-1, CA-2, RMX-1, and RMX-2. So before you start buying a property, make sure you focus on these areas exclusively.

To start an Airbnb business in Philadelphia, you need to complete the following steps:

1. Apply for a Zoning Permit for Visitor Accommodation online or in person.
2. Obtain the Zoning Permit.
3. Apply for a Commercial Activity License
4. Obtain a tax-compliant Business Income and Receipts Tax account.
5. Obtain Lead Safety Certification and inspection reports.
6. Apply for a Rental License.

For further information on the legal requirements in Philadelphia, check out the Mashvisor short term rental regulations page.

How to Find a Profitable Short Term Rental Property in Philadelphia

Now that you know that vacation rentals are expected to perform well in Philadelphia in 2023 and that they are legal there, the question is: How do you locate the best opportunities?

To find the most profitable short term rental in Philadelphia, you need a mix of market-level and property-level research and analysis. Traditionally, this type of real estate investigation took months to complete. But here, we will show you how the Mashvisor real estate investing app can help you find the best property in 15 minutes.

Here is our step-by-step guide on how to find a profitable vacation rental property in Philly in 2023:

1. Choose the Best Neighborhood for Buying a Short Term Rental

The first step in the process of finding a good investment property in Philadelphia is conducting neighborhood analysis. The neighborhood where you invest is as important as the city because a lot can vary from one area to another. They can differ in terms of accessibility, attractions, entertainment options, and safety.

You can use the Mashvisor real estate heatmap to obtain a color-coded representation of the Philadelphia short term rental market by area. You can see the neighborhoods with low property prices and high Airbnb occupancy rate, rental income, and cash on cash return.

Once you’ve selected a few areas that seem like a good match, check their zoning districts to confirm that visitor accommodation is legal there, as listed above. In order to own a non-owner occupied short term rental in Philly, you must invest in one of the zoning districts where it’s allowed.

Neighborhood Analysis

After covering the legality issue, it’s time to dive into deep neighborhood analysis to make sure that your chosen area is indeed the best for vacation rentals. You can refer to the Mashvisor neighborhood analysis pages to obtain all the real estate and short term rental data that you possibly need.

Some of the data provided by the Mashvisor platform includes:

• Mashmeter: Mashvisor-unique score evaluating the future potential of an area based on past performance and trends
• Median property price
• Average price per square foot
• Average rental income
• Average cash on cash return
• Average occupancy rate
• Optimal rental strategy
• Walk Score
• Transit Score

The above data points will help you make sure that you can afford to buy an income property in this area that will generate enough income to provide above-average ROI.

2. Search for Real Estate Listings in the Local Market

The second step in the process of finding good short term rentals for sale in Philadelphia is actually looking through active listings. You can search through local newspapers and news websites, drive for dollars, talk to your network, or even check out property listing websites. Or, you can use the Mashvisor investment property search engine to optimize the process.

Because Mashvisor was created with investors in mind (not homebuyers), you can find all the tools you find for a targeted short term rental property search. You can set your exact criteria like budget, neighborhood, expected rental income, and ROI to see all active listings that match your expectations.

While most vacation rentals for sale are MLS listings, there are also some off market properties that usually come at discounted prices, making them ideal for beginner investors. With regards to MLS listings, Mashvisor gives you access to them without the need to be a real estate agent.

When you get a list of properties that meet your criteria, you can sort them by price, income, and cash on cash return to get the best-performing properties on top.

To start searching for the most profitable short term rentals in Philadelphia, sign up for a 7-day free trial of Mashvisor now.

3. Analyze the Potential of Selected Properties for Sale

As you want to optimize your real estate investing outcomes, it’s important to choose not simply a good rental property but the best rental property available for sale in the market. That’s done by obtaining data on comparable short term rentals, called rental comps, and comparing them against your selected property.

However, vacation rental listing platforms like Airbnb, Vrbo, and Booking.com do not provide the data that investors need, so they need to look for an alternative source.

Detailed Property Analysis

Mashvisor is the best real estate data provider in the US market, especially in terms of short term rentals. With the help of Mashvisor, you can conduct a detailed short term rental property analysis in a matter of minutes. All you need to do is to click on one of the properties you selected during the investment property search stage.

Each real estate listing comes with all the numbers, figures, and information you need to make sure that it will turn into a profitable vacation rental investment, including:

• Listing property price
• Price per square foot
• Property square footage
• Number of bedrooms and bathrooms
• Amenities
• Breakdown of startup costs
• Monthly vacation rental income
• Breakdown of monthly operating expenses
• Cash flow
• Occupancy rate
• Cash on cash return
• Cap rate

Mashvisor gets nationwide real estate and rental data from reliable sources like the MLS, Airbnb, and public records before applying its proprietary machine-learning algorithms to it. So, the numbers in the investment property analysis provided by the platform reflect the actual performance of active Airbnb listings.

The level of detail and the ability to analyze specific properties for sale make Mashvisor the superior short term rental analytics tool, better than AirDNA, Rabbu, and AllTheRooms.

4. Get the Necessary Documents

The final step in investing in a good short term rental property in Philadelphia is obtaining the required permits, licenses, and other documents. You can find a comprehensive list of them above. Some applications can be submitted online, while others might require in-person appointments.

Make sure to start on the legal process as soon as you buy your short term rental to be able to rent it out quickly to begin to make money from real estate.

Top 5 Philadelphia Neighborhoods for Short Term Rentals in 2023

As we highlighted above, the real estate market is highly local, including Philadelphia. Thus, choosing one of the best areas for a short term rental in Philadelphia is crucial to optimizing your investment decisions.

Below, we’ve ranked the five best Philadelphia neighborhoods for the short term rental strategy. The ranking is based on the Philadelphia rental market analysis conducted by Mashvisor at the end of November 2022. The main factor we’ve focused on is the average vacation rental cash on cash return, which is the most comprehensive measure of ROI in real estate investing.

1. Haverford North

• Median Property Price: $319,957
• Average Price per Square Foot: $150
• Days on Market: 97
• Number of Short Term Rental Listings: 547
• Monthly Short Term Rental Income: $2,101
• Short Term Rental Cash on Cash Return: 5.94%
• Short Term Rental Cap Rate: 6.13%
• Short Term Rental Daily Rate: $151
• Short Term Rental Occupancy Rate: 34%
• Walk Score: 92

The area that provides the highest return on investment on short term rentals across the city is Haverford North. An average cash on cash return of 5.94% is not something that investors come across every day.

2. Whitman

• Median Property Price: $291,719
• Average Price per Square Foot: $246
• Days on Market: 72
• Number of Short Term Rental Listings: 540
• Monthly Short Term Rental Income: $2,527
• Short Term Rental Cash on Cash Return: 5.30%
• Short Term Rental Cap Rate: 5.41%
• Short Term Rental Daily Rate: $171
• Short Term Rental Occupancy Rate: 44%
• Walk Score: 93

The second best Philadelphia neighborhood for vacation rental investments is Whitman. This offers the highest monthly revenue.

3. Belmont

• Median Property Price: $234,450
• Average Price per Square Foot: $180
• Days on Market: 81
• Number of Short Term Rental Listings: 536
• Monthly Short Term Rental Income: $1,726
• Short Term Rental Cash on Cash Return: 4.42%
• Short Term Rental Cap Rate: 4.55%
• Short Term Rental Daily Rate: $150
• Short Term Rental Occupancy Rate: 35%
• Walk Score: 91

Another top area for buying a short term rental property in 2023 is Belmont. This is the most affordable area on our list.

4. McGuire

• Median Property Price: $239,000
• Average Price per Square Foot: $162
• Days on Market: 44
• Number of Short Term Rental Listings: 547
• Monthly Short Term Rental Income: $1,783
• Short Term Rental Cash on Cash Return: 4.28%
• Short Term Rental Cap Rate: 4.41%
• Short Term Rental Daily Rate: $153
• Short Term Rental Occupancy Rate: 40%
• Walk Score: 91

Number 4 on our list of the top Philadelphia neighborhoods for short term rentals next year is McGuire.

5. Girard Estates

• Median Property Price: $336,262
• Average Price per Square Foot: $276
• Days on Market: 81
• Number of Short Term Rental Listings: 522
• Monthly Short Term Rental Income: $2,476
• Short Term Rental Cash on Cash Return: 3.74%
• Short Term Rental Cap Rate: 3.81%
• Short Term Rental Daily Rate: $174
• Short Term Rental Occupancy Rate: 42%
• Walk Score: 89

One more local Philadelphia real estate market you should consider in 2023 is Girard Estates.

Start searching for profitable short term rental properties for sale in Philadelphia.

Getting Started With Profitable Philadelphia Short Term Rental Investments

Vacation rental properties promise to be the best real estate investment strategy in 2023, and buying a short term rental in Philadelphia is the perfect choice for all the reasons listed above. Demand from domestic and international visitors will be strong, pushing occupancy rates, daily rates, rental income, and – ultimately – rates of return up.

As investment results can vary widely between areas within the same market, we’ve provided you with the top five Philadelphia neighborhoods that will bring the highest ROI in 2023. With the help of Mashvisor, you can search for the most profitable opportunities within them and analyze rental properties for sale more accurately and more efficiently than ever before.

To learn more about how Mashvisor can help you find top short term rentals in Philadelphia, sign up for a free demo with our experts.