Pennsylvania is filled with history and diversity. From the shores of Lake Erie to the Delaware River, nearly 13-million Americans call the state home. And when it comes to home, thirty percent of Pennsylvanians rent instead of own.
If you want to tap into that market to start or grow your rental property business, here are the top five places to invest in residential real estate in Pennsylvania.
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1. Allentown
- Median listed home price: $220,500
- Median Price per square foot: $132
- Rental Vacancy rate: 4.94%
- Schools in the area: 4 schools with above-average ratings
- Median Rental Income: $1,504/month
- Household Median Income: $43,816/year
Just over an hour north of Philadelphia and 90 minutes west of New York City, you’ll find Allentown, PA, with a population of 125,000. This location is perfect as many young people are leaving urban centers for a more affordable life in smaller towns. Lehigh Valley Economic Development says the area’s 18-to-34 age group is growing faster than any other region in Pennsylvania.
As Allentown proves itself attractive to young people, you will also find it attractive as a real estate investor. While real estate prices are about 8% lower in Allentown than in Philadelphia (35% lower per square foot!), rent prices are about 7% higher. Meanwhile, house prices are up 19.3% year-over-year, but homes are sitting on the market for an average of 43 days.
As more young people recognize Allentown as a livable alternative to New York and Philadelphia, house prices and rents are likely to increase. Now could be the perfect time to invest in this rising market.
2. Philadelphia
- Median listed home price: $264,500
- Median Price per square foot: $202
- Rental Vacancy rate: 5.13%
- Schools in the area: 17 elementary schools and 11 high schools with above-average ratings
- Median Rental Income: $1,400/month
- Household Median Income: $49,127/year
Philadelphia is home to a rich history, diverse neighborhoods, delicious food, and some of the most walkable urban areas in the country.
Pennsylvania’s most populous city has some of the state’s highest housing prices, which have remained flat year-over-year. Homes remain on the market for an average of 66 days, meaning you’ll have your choice of properties. Single-family and multi-family investment properties can commonly be found for less than $200,000.
Philadelphia has a robust market for off-campus housing, with several major universities and a student population of 134,221. The city is also home to a sizable population of professionals and information workers. The education and health care sectors (including pharmaceutical giant GlaxoSmithKline) employ tens of thousands of people.
A challenge for Philadelphia is its status as America’s “poorest” large city, with a poverty rate of 23.3% and above-average crime rates. Take advantage of the balanced housing market to be thorough with your due diligence, and be sure to protect your investment with a good landlord insurance policy.
3. Pittsburgh
- Median listed home price: $225,000
- Median Price per square foot: $155
- Rental Vacancy rate: 4.72%
- Schools in the area: 24 elementary schools and nine high schools with above-average ratings
- Median Rental Income: $1,187/month
- Household Median Income: $50,536/year
Pittsburgh has been called one of the most liveable cities in the world, with more than 15,000 acres of parks and green space. The city also boasts a thriving arts and entertainment industry and a relatively high household income paired with an affordable cost of living.
The city’s history in steel and manufacturing has evolved into an economy driven by technology, engineering, and advanced manufacturing. Some 1,600 technology firms write paychecks to the city’s residents, as do many colleges and universities.
While house prices in Pittsburgh are flat year-over-year, rents have gone up 8%. Condo units are commonly found for less than $200,000, and multi-unit investment properties can be had for less than $250,000. With a high median income of just over $50,000, median rents just under $1,200, and a reasonable vacancy rate, there appears to be plenty of room for landlords to grow.
4. Reading
- Median listed home price: $179,900
- Median Price per square foot: $111
- Rental Vacancy rate: 5.36%
- Schools in the area: 3 schools with above-average ratings
- Median Rental Income: $825/month
- Household Median Income: $35,745/year
Ninety minutes northwest of Philadelphia is Reading, PA, a town of just under 100,000 that could present an opportunity for investors willing to take a chance.
With a history in manufacturing, Reading fell on hard times when the area’s major employers began to fail, and the poverty rate spiked to over 40%. That number is improving, but the area still relies heavily on manufacturing to support the economy. Local incomes are still low, as are real estate prices and rents.
After decades of frailty and little change in the town’s economic makeup, what makes Reading a good opportunity for investment? Just as in Allentown, geography could be the key. Reading is within a 2-hour drive of Baltimore, Philadelphia, Trenton, NJ, and Wilmington, DE. It’s also easily accessible from rapidly growing Allentown, PA, and the state capital, Harrisburg.
For young people migrating to smaller cities, Reading is close to major urban centers and offers a deep discount. Those priced out of Allentown could view Reading as a viable alternative, a hypothesis supported by evidence from the city’s real estate market. The median home price in Reading is up 12.5% year-over-year, and the number of active listings is down 13.12% for the same time frame.
It will take Reading years – if not decades – to catch up to its peers. But for a long-term investor with patience and savvy, it could be a very rewarding place to invest.
5. Erie
- Median listed home price: $130,000
- Median Price per square foot: $103
- Rental Vacancy rate: 5.19%
- Schools in the area: 7 schools with above-average ratings
- Median Rental Income: $660/month
- Household Median Income: $38,655/year
Investors looking for stability should head north to Erie, PA. House prices in this city of 100,000 are more affordable than other Pennsylvania communities of the same size but are comparable to Erie’s great lakes neighbors, Cleveland and Buffalo.
While Erie doesn’t have the geography necessary for rapid growth in today’s market, it has a strong local economy and represents a relatively safe locale to invest in real estate. House prices and rents have remained steady over the past year, and high incomes paired with low rents suggests that rent collection is less likely to be a major challenge here than elsewhere in the state. All this could make it the perfect market for a beginner investor looking for a cautious start.
FAQs
With two major cities, and proximity to densely populated areas of New York, New Jersey, and Maryland, Pennsylvania has strong prospects for real estate investors. State laws are generally viewed as landlord friendly, and there are no rent controls at the state level.
There is a large rental market in Pennsylvania, with 29.5% of the over 5-million households being renter-occupied. People are far more likely to rent their homes in Philadelphia and Pittsburgh than in other parts of the state.
Pennsylvania homes cost approximately 20% less than the national average for similar properties. The average home price in Pennsylvania is lower than other parts of the northeast, including New York, New Jersey, Connecticut, and Massachusetts, but higher than its neighbors to the west, including Ohio and West Virginia.
