7/1/2005
Realty speculators seek profits in Phila.
Earni Young
Philadelphia Daily News

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, 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."... continue to page 2