Philadelphia Condominiums- Are They all ripe for flipping?

Philadelphia Condominiums- Are They all ripe for flipping?
As a Center City realtor in the downtown Philly area for
over nineteen years, I am often asked whether or not a
certain condo-be it an Old City loft, or a Rittenhouse
Square penthouse, is "flip-worthy". Often times the answer
is yes, but more often than not, the answer is no. There
are a number of deterrents which may limit one's ability to
flip a condominium in the downtown Philly area, and make a
profit. From high in and out costs, to an abundance of
existing inventory, to the plain nature of Philadelphia
real estate, the notion of making a quick buck can
sometimes be more of a myth than a reality.

To begin with, the transfer tax imposed on the sale of any
piece of real estate in Philadelphia is high. The city
imposes a four (4) percent transfer tax on every sale.
Almost always split between buyer and seller, this fee adds
a substantial weight to costs of attempting to turn say a
Rittenhouse Square condo, or an Old City loft into a quick
buck. So to buy, and to turn around and sell, one would
need to subtract four percent to their potential profit
margins-two percent upon purchase, and then another two
percent when they go to sell the property. Add this to the
normal fees associated with buying and selling Philadelphia
condos, and you have just had a fairly large bite taken out
of your potential profits.

Add that element to the fact that if you are buying, say a
high rise luxury penthouse condo in Rittenhouse Square, in
a building with two hundred units in total, you would need
to probably wait until the building sells out, in order for
there to be demand for your unit. I mean, why would someone
want to buy your condo, if the developer still has 74 units
to unload? That particular developer may be able to offer
incentives to attract buyers-be it an upgraded bathroom, a
flat screen TV, or otherwise do some customizing to the
unit that you may not be in a position to do to your lone
unit that you have on the market. So why would a buyer
want to look at your unit-a unit you have clearly marked up
in price (to cover your in and out costs, not to mention
your profit margin), when there is some substitutability in
the market place for him or her to go directly to the
developer, and strike a deal? Unless you got in on the
"ground floor" of a new Philadelphia condominium project,
and the developer simply "gave" you a unit at a steep
discount, then there would really be no incentive for
another buyer to come along and pay you a premium for your
lone unit.

Lastly, I see one of the main restrictions or limitations
to flipping a condominium in Center City to be plain old
greed. Let's say a buyer buys a condo in Rittenhouse Square
for any given price. I often times see that unit come back
on the market rather quickly, asking a thirty percent
markup. But one needs to ask, why? Where did that instant
appreciation come from? Thin air? Is there any concrete
reason why another buyer would be willing to pay such a
steep increase in price for a Center City condominium? Am I
missing something here? Philadelphia real estate is not the
kind of investment that generally has such a rapid
appreciation rate. We are the classic example of the
tortoise and the hare....and we are not the hare. Slow and
steady had always won the race for those looking to invest
into, say, an Old City loft, or a Society Hill condo. No
bubble here as values have a tendency to creep along at a
slow steady pace. And even if the developer has raised his
prices twenty percent since you bought your condo, that
doesn't mean that all Philadelphia condos have risen twenty
percent in value. An asking price is just that-an asking
price. One should not assume that such a price is
reflective of the true market value of real estate in
Center City.

I hope I have adequately illustrated that some condominiums
in Philadelphia are not worthy of a quick flip. Real estate
in Center City is more of a long term "hold" investment.
And generally speaking, with the barriers to resale-high in
and out costs, coupled with an bit of an excess in new
construction, high rise condos in the downtown area, one
might be better off buying a condo that has little
substitutability, and is more of a "dog"....a unit that
they can buy that is an ugly duckling, and turn it into a
swan. I believe buyers want to see value for what they are
buying, and cosmetic improvements almost always add up to
an appreciable increase in resale value, whereas a simple
flip might limit one's ability to make a profit on such a
buy and re-sell approach to looking for a profit.

As a REALTOR and homeowner here in town, I'd say that your
best bet here in Center City Philadelphia is a long term
approach. Your steady property value appreciation will pay
off in the end when you are ready to sell a few years down
the line.

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Mark Wade is a Philadelphia REALTOR who is "the" Center
City Philadelphia condominium specialist. Mark's vast
knowledge of what's trendy and which finishes buyers look
for when selecting a home hope both buyers and sellers of
Philadelphia real estate make the most of their investments.
View Center City condos for sale at
http://www.CenterCityCondos.com