Out-of-Town Real Estate Speculators Seek Profits in Philadelphia
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By Earni Young
Philadelphia Daily News
RISMEDIA, July 5 – (KRT) – At 8 a.m. on a recent Saturday, 40 people boarded a chartered bus leaving mid-town Manhattan in search of financial independence on the mean streets of Philadelphia.
Their mission was to buy relatively cheap Philly properties that will provide positive cash flow as rentals or that can be quickly resold for profit.
Many of these economic freedom riders are New Yorkers, but at least one hails from Australia and another drove all the way from Chicago. Both came especially for the day trip arranged by New York City Cash Flow.
The Gotham-based real-estate-investment club isn't the only group bringing out-of-towners to troll Philadelphia's rowhouse neighborhoods for likely properties.
Every weekend finds cars with license plates from New York, New Jersey, Maryland, the District of Columbia and elsewhere cruising the streets of Mayfair, Tacony, lower North Philly, Pennsport, Italian Market, Mill Creek, and Grays Ferry.
These are not relatives visiting from out of town, but investors on the lookout for "For Sale" signs. Even when there are no signs, they've been known to knock on doors at random hoping to find an owner willing to accept a cash offer.
Philly has become the next-best-place for buyers who are priced out of overheated markets in Boston, New York, and Washington D.C., and, yes, California.
Not everyone is happy about the surge in investment activity. Some neighborhood organizers fear the decline in owner-occupied homes will have a destabilizing effect over the long term.
Tom Forkin, vice chairman of the Mayfair Community Development Corp., is disturbed by a survey showing that roughly a third of the 3,796 homes sold in Mayfair during 2004 are being rented.
"We're not saying we don't want people to have an opportunity," Forkin said during testimony before City Council last month. "What we're saying is... when you get to a certain tipping point, six, seven or eight houses on a block, that's when the real problems start to set in."
Buyers looking to purchase a residence have difficulty competing with cash-rich investors who often are willing to pay $10,000 above the asking price.
Their aggressive bidding has added even more heat to a real-estate market already boiling over. Overall home prices in Philadelphia have increased an average of 116.4 percent since 1995. Areas like Center City have seen values jump by 300 percent or more in the same period.
Although new homes and condos sell for $400 a square foot and up, it's still possible to find a sturdy, three-bedroom, one-bath rowhouse in a working-class neighborhood for under $100,000.
A comparable house in any of New York's working-class boroughs goes for $250,000 to $450,000 -- making it nearly impossible to make money off a rental.
Philly real estate represents an opportunity too good to pass up, says Doug Fath, a recent graduate of New York University. Fath, 23, has purchased four Philly rowhouses in the past year, and claims to have pending agreements on three more.
The youthful entrepreneur plans to sell his home in Queens and move to University City within the next two months to better manage his fledgling real-estate empire.
"I love Philly, but I didn't really know too much about it until I started investing here," Fath says. "It's nothing like New York, but then again in some ways it's similar."
Uhm.
Shortly after 10 a.m., the NYC Cash Flow bus stops at 2nd and Spring Garden to pick up Andrew Davenport from the city's Office of Housing and Neighborhood Preservation. Davenport is the first of three speakers that club leader George Greene lined up for the day.
The charter bus moves slowly through Northern Liberties, then up North 4th Street through lower North Philly. All the while, Davenport talks about the impact of city-supported community revitalization projects such as La Pradera, Ludlow and Cambridge and Richard Allen Homes.
Sharon Laing, the Chicago investor, asks about financial assistance for multifamily housing for low-income renters and the elderly.
Laing, who is African-American, says she is looking to make money by doing the right thing.
"I can go anywhere and make money, but I'd like to reinvest in the community," she says.
It is Laing's second tour with NYC Cash Flow. She had taken an earlier trip with the group to Baltimore, but was not impressed by what she saw in the Maryland city.
"I like Philly better," Laing says, still a bit bleary-eyed from the 12-hour drive from Chicago to New York the previous day. "It was well worth my money."
When she's not moonlighting as a real-estate investor, Laing works full-time as a project manager for an international telecommunications company.
Greene says the 40 day-trippers included real-estate agents, mortgage brokers, investors who already own one or more properties, and newbies looking to get into the game.
Greene says the investment club has about 2,000 members. "We're not selling property.
We're an educational group where people can find partners and put money together to invest," Greene says.
He says the club started gathering information on Philadelphia early last year, and organized its first bus tour three months ago. The day trip costs $117 for members and $175 for nonmembers, and includes a box-lunch and snacks on the bus.
Featured speakers on past tours included Kevin Hanna, the city's secretary of housing and neighborhood preservation; Philadelphia Housing Authority Director Carl Greene; several local developers; real-estate agents and brokers.
All of the speakers appear free of charge, George Greene says.
Local Realtor Sharonn Thomas, of C. Percy White & Associates, also hopped aboard the bus at the Spring Garden stop. Thomas has worked with members of NYC Cash Flow for the past year. On this day, the tour will stop at two rowhouses her firm has listed in West Philly.
"These people are serious about buying," Thomas says. "They come down by train or bus, and we pick them up and tow them around. We're averaging maybe 10 to 15 agreements of sale a week with them."
The investor business is so good that broker C. Percy White has hired a certified property manager to provide one-stop-shopping for clients who are coming here from all over the United States and even Europe.
These Donald Trump wannabes come in all colors, ages and income levels, White says. The 40 riders on the NYC Cash Flow tour include whites, African-Americans, Asians, and Hispanics. There are young singles, including Fath, and middle-aged boomers traveling in pairs or alone.
Some are on their third or fourth trip to Philly. Others, such as Joy Taylor, are seeing the city for the first time.
Taylor, 43, says she heard a lot about Philadelphia from family members who live in Pennsylvania. "They said there were a lot of opportunities and when I found the NYC Cash Flow site on the Internet, I was very excited. I knew I had to take this tour," says Taylor.
Taylor and her husband own a small restaurant in Brooklyn and two six-unit apartment buildings on which they did much of the rehab work. They want to tackle something bigger, but New York real-estate prices are too high.
Ideally, Taylor is looking for a property with enough space for them to operate a small restaurant, with additional space that can provide rental income, she says.
Several boarded-up buildings in Nicetown, an area west of Temple University's medical campus, catch her eye and she jots down the addresses as they flash by.
"I do see a lot of opportunities for a lot of development, especially for a small investor like myself," she says.
Karen Tully, 49, a graphic artist who lives in a 300-square- foot studio in Brooklyn's gritty Red Hook section, gazes longingly at Liberties Walk.
The collection of white sandstone buildings with apartments built atop chic galleries and restaurants "is exactly the kind of place I can see myself living," says Tully.
Tully is amazed to hear one of the airy one-bedroom apartments could be had for roughly the same rent on her studio in Red Hook.
Tully, who works from home, is contemplating leaving the Big Apple behind for a live-work loft in Philly. Just call the bus trip homework.
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