If there has been anything positive about residential real estate in the last year, it has been the multifamily-housing market. Those who might have bought homes are renting apartments or condos instead, mindful of declining home values and coping with tighter lending requirements.

The latest national data, released Tuesday by the Census Bureau, showed construction permits for multifamily projects skyrocketing.

Locally, a fourth-quarter apartment-research report by real estate investment-services firm Marcus & Millichap confirms that "as a result of [Philadelphia's] solid rent and demand trends, developers are beginning to stir."

Eleven hundred new units are expected to be added to the local supply in 2012, compared with just 100 this year.

Investment in rental property also is increasing, but as demand grows, prices grow too. Many of the more desirable locations are long gone, or soon will be.

If you are considering investing in an apartment building, what should you look for?

"Cash flow, buy in the best locations, and buy the Volkswagen in the Rolls-Royce lot," said Center City real estate broker and developer Allan Domb. In other words, be smart with your money.

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These days, however, unless an apartment is fit only for rodents, it is unlikely to stay empty for long. Marcus & Millichap says the vacancy rate in this region - the eight-county Philadelphia metro area, plus New Castle County, Del. - will drop to 4.4 percent by year's end.

Center City's vacancy rate is officially 4 percent now, though some real estate agents and landlords say the central business district's rate is probably as low as 1.8 percent.

For comparison, Miles & Millichap says the vacancy rate in the city's Fox Chase/Lawndale sections is 1.7 percent, while Moorestown/Maple Shade/Mount Laurel's rate is 6.7 percent.

"Property owners are benefiting from job creation in multiple private-employment sectors and steady tenant demand from a large population of college students and recent graduates," the Marcus & Millichap analysts said.
About 20 percent of the region's population is 20 to 34 years old, considered the prime renter demographic. In addition, Marcus & Millichap said, significant gains in rents will be made in 2012, even with more units available, because the job market is expanding and that stimulates tenant turnover.

Carl Dranoff, who has rehabbed or built several large rental projects in the city, said investing in properties both large and small is happening "as never before."

"Broadly speaking, buying bricks and mortar is more tangible than the stock market, over which you have no control," Dranoff said.

In general, he said, this is a good time to buy rental property because the market has already shifted from one in which people want to own homes to one in which they prefer not to.

Obviously, it's less expensive to buy existing units than to construct new ones or retrofit a building, although location determines how pricey any property is.

"Consider the condition of the building you are buying," Dranoff said. "Even if you buy in a great location but there is plenty of deferred maintenance, the building will end up costing you more.

The goal of any investor in rental property is slow, steady income, so you might want to buy a building in what Dranoff describes as a more established area.

"You'll pay a little more, and the returns will be low, but you are in this for the long term," he said.
Look at the taxes. Are they going to be reassessed when you purchase the property? The last assessment might have been 20 or 30 years ago, so you need to decide whether the rents in place will be enough to offset your costs.

Also, Dranoff said, you need to look at the tenants. In this part of the country, the law is pro-tenant, and if you have one with a poor payment history, the difficulty of an eviction will result in a loss of income.

That's more crucial for a small landlord than for a big one. If you have a four-unit rental, and one tenant isn't paying - Dranoff quickly added that the reasons might be beyond the renter's control - your income will be 25 percent lower.

"Try to lock in good tenants in a multiyear lease with modest rental increases," he said. "Because turnover costs are substantial - it takes down time to get a unit ready, and there are often substantial fix-up costs - you may build in modest increases, but when you factor in fix-up costs, you might come out ahead."

Consider, too, whether you will hire a management firm or do that yourself. If you have a single property, it may be easier for you to do it. But for more than one property, Dranoff said, "would you want to get every single phone call or have a third party as a paid buffer between you and the tenant?"

As for financing, he said: "My advice is lock in the interest rate for the longest period of time. That's the key to peace of mind."

Investing for the long term is Dranoff's recommendation: "The most successful investors build their portfolios slowly and conservatively."



Published Fri, Dec. 23, 2011
by Al Heavens, Inquirer Real Estate Columnist

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Home building rose to its strongest level since spring of 2010 in November.

NEW YORK (CNNMoney) -- Home building spiked up in November to the strongest level in almost two years, as record-low mortgage rates and a surge in apartment and condo construction lifted activity.

Housing starts shot up to an annual rate of 685,000 in the month, up 9.3% from October and 24.3% higher than a year earlier. Building activity easily topped predictions of 627,000 starts economists surveyed by Briefing.com were expecting.

Building permits, a closely-watched reading that is less affected by weather than actual starts, also shot up, rising 5.7% from October and 20.7% from the year before to 681,000 homes annually.
"By historical standards, homebuilding activity is still very depressed, but at least it appears to be on an established upward trend," said Paul Diggle, property economist at Capital Economics.

Helping to lift building was the fact that the average rate for 30-year and 15-year fixed rate mortgages hit record lows last week, according to Freddie Mac. And the latest National Association of Home Builders' survey released Monday also showed a pick-up in activity, with the best level of customer traffic since early 2008.
Both permits and starts were the strongest readings since the spring of 2010, the original deadline for a homebuyer tax credit that sparked a temporary rebound in building and home sales.

Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said it's important not to get too excited about a single month of strong building, particularly so far ahead of the spring selling season -- a key period for the market. But he said the latest readings are encouraging.

"There has been a noticeable uptrend in several key housing metrics in the back half of this year, so even though we are downplaying the November data to some degree, it does appear that residential construction is finally beginning to rise from its post-recession lows," he said in a note to clients Tuesday.

The gains in single-family home starts and permits were more modest than those for multi-family homes.
Starts of buildings with five or more housing units nearly tripled from a year ago, to an annual level of 230,000.
It was the greatest number of starts of units of that size since September 2008, the month the Lehman Brothers bankruptcy sparked a meltdown in financial markets.



Published by Chris Isidore @CNNMoney
December 20, 2011

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On a recent afternoon, a woman in a minivan pulled up to the group of neighborhood activists and city officials gathered outside Germantown Town Hall. "You're planning to do something with this building?" the woman asked. "Please, you've got to do something good with it."

The 1923 Town Hall - a refined Beaux Arts version of the neoclassical Merchant's Exchange in Old City - has been empty since 1995. It stands, deteriorating, on Germantown Avenue directly across the street from Germantown High.

"It's really depressing to be in that school all day looking out here at this building wasting away," said the woman. She drove away.

For those at Germantown High, and for the assembled activists and officials, Town Hall is a daily reminder of Germantown's lingering unmet potential.

The ceremonial hall with entablature memorials to Germantown's World War I dead is a refined, graceful space, remarkable even in a neighborhood that is a showplace of American architecture between 1700 and 1930. Germantown's streetscape is as exuberant and variegated as any city district in America, its organic urban form the antithesis of Center City's oppressively rational grid. And today, like Town Hall, it is stuck, seemingly too expensive to fix, its potential obvious and yet painfully elusive.

"Where's Germantown going?" asks Alan Greenberger, deputy mayor for planning and economic development. "That's a question we keep asking. Germantown should be fabulous. I'm not sure I know why it isn't."

"I have always thought," says Cindy Bass, newly elected Eighth District councilwoman, who will take office in January, "that this is one of the neighborhoods that has the most potential to grow and develop. Its potential speaks for itself."

So much of that potential lies in the neighborhood's turrets and towers, crests and colonnades, porches and porticos, in the slate and stucco and stone. In 1933, when the National Park Service launched the Historic American Building Survey, they began the immense project in Germantown because of the area's rich architectural history.

"We are a 326-year-old community with connections both deep and broad," says David Young, the director of Cliveden, the historic mansion on the site of the Battle of Germantown. "We think that's cool, but it means nothing if there's no connection to contemporary life."

Connections are so often made through the buildings themselves. Ken Weinstein, a real estate developer known for his adaptive reuse of train stations and other commercial properties, has been buying Germantown buildings for 22 years. "I fell in love with taking something decrepit and making something wonderful," he says.

But Weinstein, who estimates he has invested $10 million in Germantown, says the net result has been stasis. "For 22 years, 99 percent of the people have been saying the same thing as they are today: 'Now, Germantown is going to take off!' "

Everyone is still waiting.

A group of businessmen started Colonial Germantown Inc. in the 1930s with the idea of consolidating historic sites into a fabricated pedestrian village. It never happened. In 2006, the caretakers of 15 historic sites tried again to market the area as a tourist destination by forming the nonprofit Historic Germantown.

Unlike the 1930s, the idea today isn't to objectify the past, but rather to engage with it. In May, Historic Germantown hired a full-time director, Barbara Hogue, and charged her with helping the sites connect with neighborhood residents and with tourists who are drawn to Philadelphia for the Liberty Bell and better-known historic attractions. "We want to give people a chance to engage with their own history. They want to know, 'Where do I fit in?' " says Hogue. "It's not just about 300 years ago something exciting happened to a stranger. We're telling stories about today."
Already, attendance is up. Cliveden hosted a record number of visitors in 2011, surpassing its projected annual attendance in August. Altogether, the sites bring up to 50,000 people a year to Germantown, making an estimated economic impact of $3 million to $4 million. Hogue's goal is to double that in two years.

All this is possible, community advocates are quick to note, because Germantown has enormous assets - intact residential blocks with relatively little abandonment, a few strong educational institutions, churches (90 of them, in fact), a significant retail avenue with ample storefronts, considerable transit infrastructure, and the historic sites. Urban planners say Germantown has "good bones."

"But we've got to figure out how to put some meat on the bones," says Yvonne Haskins, a lawyer who has worked extensively in community development in Philadelphia and who has been representing neighbors in the recent efforts to stop two low-end chain stores from opening in the Chelten Plaza shopping center. "How do you build on the bones? That's the question. I'm telling you, people are hungry for answers."

The hunger has been made worse by the unraveling of community leadership. "Why is Germantown not better off?" asks Weinstein, the developer. "Because we've had a community-development corporation that worked against the interests of the community." After that organization, Germantown Settlement, was dragged down by debt and corrupt management in 2010, community members came together to form Germantown Community Connection. That effort fell apart when neighbors divided over the Chelten Plaza store issue.

And now, says Councilwoman-elect Bass, "there is a void in terms of direct leadership."
Beyond that, say city officials and community leaders, there is lack of unity. "The neighbors are fragmented," says Deputy Mayor Greenberger, in part due to wide class differences across the geographically massive neighborhood. Once the neighborhood can speak in a unified voice and prove it's competent at managing its resources without corruption, Greenberger says, development money will flow.

Of course, the difficulty with all of this - and perhaps also why it is so exciting - is that it places the burden of directing neighborhood investment on residents and business owners, and not the city.
The latest effort to address that fragmentation is Germantown United, a nascent community-development corporation with about 22 local civic organizations and neighborhood associations as members that formed out of the opposition to the Chelten Plaza project. "We have to attract people from every corner and allow them to demonstrate they can get things done," says Haskins, who has been a driving force behind the group.

Germantown United has been holding regular stakeholder meetings. "People are coming to the table religiously, envisioning what they want to see, and they're serious about it," says Haskins. Organizers hope the process will produce an action agenda by January.

One hope for ambitious neighborhood-based groups is to ride waves of investment that come from peripheral agencies. This month, SEPTA plans to begin the $30 million renovation of the turn-of-the-century Wayne Junction regional rail station at Wayne and Roberts avenues. Wayne Junction is just what its name indicates, a conduit between North Philadelphia and the Northwest. It's also one of the few regional rail stations that offer constant - and fast - service to and from Center City and University City.

Both Haskins and Weinstein see the investment in the station, part of a broader transit-oriented development pushed by the City Planning Commission, as a major catalyst for development in Germantown. Weinstein has purchased two major parcels near the station. "I want to be part of that energy," he says. Germantown United, for its part, wants to link the station's redevelopment to further investment in the worn but architecturally vibrant Wayne Avenue commercial district.
Almost everyone wishes for a similar spark for Town Hall. Councilwoman-elect Bass says she'll seek tax credits and grants for its preservation. It's easy to see the monumental, circular hall (and the series of smaller offices and conference rooms) becoming something inspiring. Perhaps the public face of a community-development agency like Germantown United, or even as a visitor center for the entire Northwest. One educator, John Churchville, proposes an incubator for green businesses linked to the science program at Germantown High School across the street.

Haskins isn't sure if renovation of Town Hall will lead or follow Germantown Avenue's resurgence. She only knows it has to happen. "Sooner or later," she says, "human beings figure things out."


Published Dec. 9th, 2011
by Nathaniel Popkin



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After their youngest child finished high school in June, destined for
college, Janice and John Potts lost no time bolting from New Jersey.

By the end of July, the longtime Haddonfield residents were cheerfully
ensconced in a three-bedroom rowhouse near Philadelphia's Washington
Square.

Their new abode is much smaller than the 4,500-square-foot home (with
swimming pool) that they sold, but it comes with a huge plus.

"We downsized in terms of space, but cut our property-tax bill in
half," said Janice Potts, 52, an outsource-services manager for a
Center City firm. John Potts, 54, works for a networking-systems
company, often from home.

The Pottses spent as much to buy their Pennsylvania house as they
realized from their Jersey sale. "Basically, we swapped dollars," she
said. "But for us, the move made perfect sense. We got rid of one car.
I walk to work. It's a more convenient life."

According to the 2010 census, "in-migration" from New Jersey to
Pennsylvania is a burgeoning movement that accounted for 80 percent of
the Keystone State's net gain last year of 25,770 residents from other
states.

In interviews with demographers, real estate agents, financial
planners, and the recently relocated, tax savings, quality-of-life
choices, and new commuting patterns emerged as the driving forces
behind the influx.

Does that make Pennsylvania the new destination state?

Not of the magnitude of nationally ranked No. 1 Texas. But it is the
undisputed leader in the Northeast, where all but three states saw
more people move out than in: Vermont, New Hampshire, and
Pennsylvania, by far the most formidable draw.

In 2010, Pennsylvania's population was 12,577,555. That year, 235,580
out-of-staters arrived and 209,810 residents moved out, for an
in-migration gain of 25,770 - the eighth-largest nationwide.

(The tabulations do not include births, deaths, or immigration from overseas.)

"The commuting zones for New York, New Jersey, and Maryland are
expanding into Pennsylvania," said Gordon De Jong, professor of
sociology and demography at Pennsylvania State University.

According to De Jong, the Pennsylvania counties most benefiting from
state-to-state moves are: Pike and Monroe, within commuting distance
of the New York metropolitan labor market; Northampton, Bucks, and
Lehigh, with proximity to New Jersey's labor market; and York, Adams,
and Franklin, within the Baltimore/Hagerstown metropolitan market.

New Jersey's 2010 population was 8,709,933. Domestic migration
produced a net loss of 66,603 with 127,369 moving in from other states
and 193,972 moving out. Only Illinois, New York, and California lost
more last year.

Kathleen Conway, of the Prudential Fox & Roach real estate office in
Society Hill, said many of her clients were Garden State transplants.

"The main reason they are coming is real estate taxes," she said. New
Jersey "people tell me their taxes are $17,000 a year. My goodness, I
had never heard of that."

Annual taxes on a "comfortable townhouse" in the Washington Square or
Fitler Square neighborhoods, she said, are closer to $5,000.

A drop from $17,000 to $5,000 is a monthly saving of $1,000.

"At today's 4 percent mortgage rates, $1,000 equals $250,000 in extra
buying power," said Conway, noting that many of her clients make use
of that equation to buy up.

Vito Cosmo, a managing director of the Philadelphia office of the
accounting firm Grant Thornton, said Pennsylvania's flat tax on
personal income was another lure for New Jerseyans.

"The personal income tax rate in Pennsylvania is a flat 3.07 percent,"
he said, "whereas in New Jersey, the rate can be double or triple
that, depending on your income."

In recessionary times, "people are more likely to stay put," said De
Jong, the demographer. That's another factor that contributed to
Pennsylvania's gain, as did the continued aging of the population.

"Over the past decades," he said, "a smaller proportion of the state's
population is in the high-out-migration [age group of] 18 to 30." So
at a time when more people are coming in, fewer are leaving.

The trend is intensifying.

In raw numbers, in-migration to Pennsylvania from all other states in
2005 was 221,277 and grew to 235,580 in 2010. Out-migration from
Pennsylvania to all other states in 2005 was 218,410; it dropped to
209,810 in 2010.

Pennsylvania's affordability compared with New Jersey's and New York's
has been drawing urban-oriented artists, musicians, and assorted
hipsters to Northern Liberties for more than a decade, said Monika
Kreidie, director of NLArts, a visual-arts program for children in a
community center at Third Street and Fairmount Avenue.

The latest influx, she said, includes musicians and rappers drawn to
Fishtown for not only the housing but also the venues, such as Johnny
Brenda's and The Fire.

While many painters and sculptors moved to Philadelphia from New York
for affordable studio space, artists Colin Keefe and his wife, Andrea
Wohl Keefe, recent transplants from Brooklyn, have a different story.

They had plenty of studio space in New York - 2,000 square feet - but
their apartment was tiny, and it felt even smaller after their son,
now 5, was born.

"Our whole life was in 600 square feet of apartment space," Colin
Keefe said. "It wasn't going to get any bigger, but my son was."

Through a software-consulting gig in Fort Washington, Colin Keefe was
familiar with Pennsylvania.

"Philadelphia started to grow on us as a potential place to live," he
said. "What it came down to for us: We wanted to have a home and
studio space.

"That wasn't really possible in Brooklyn. To buy the [Mount Airy]
house that we have here, in Brooklyn is $800,000, and that was not in
the realm of possibility. We were looking for a situation where we
could have everything in one package."

Their Mount Airy house, with a carriage house in back, fit the bill.
They have adequate work space. On the ground floor, they opened a
gallery, Mount Airy Contemporary.

They were looking for an arrangement that felt "green, but also city,"
said Colin Keefe. "Mount Airy is really what sold us on Philadelphia.
Idyllic, green, and yet still part of a larger entity.


Published: December 6, 2011
By Michael Matza
Inquirer Staff Writer

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