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Graduate Hospital Neighborhood Analysis

Finding the True Investment Home Values for Motivated Buyers and Sellers.

14 min read

Graduate Hospital

Homes in Graduate Hospital

View Recent Graduate Hospital Market in a full screen map

This is our brand new product.  We will show you exactly what homes sold in the area recently.  As you look at the homes, you are able to see many things.  This includes:

  1. 1. Location/Address
  2. 2. Home Type
    1.  Rowhome
    2.  Apartment
    3.  Condo
    4.  Condo/Apartment: Means we weren’t 100% positive but believe the listing to be one of the two.
  3. 3. Sold Date
  4. 4. Sold Price
  5. 5. Bedrooms
  6. 6. Bathrooms
  7. 7. Square Footage
  8. 8. Our Move In Philly Scoring System for this program, which is explained below to help you compare future homes without leaving your present homes.

We will keep this updated as the market continues to shift!

For our scoring system, we will be looking both externally and internally.  We will grade both parts of the property on a 1-5 scale. The 1-5 scale is as follows

1= Uninhabitable

2= Low Desirability

3 = Starter Home/Needs some work

4 = Nice Home – No work necessary to live there

5 = Beautiful home. Plenty of Amenities

Southwest Center City Philadelphia is a neighborhood known as Graduate Hospital since the 1980’s, creatively named after a hospital that was in is the west end of Graduate Hospital and Broad St. acts as the eastern border.  We will conduct a current market and neighborhood analysis on Graduate Hospital.

Graduate Hospital was given an A+ Overall Neighborhood Grade, as it has a population of approximately 13,000 with a median income of over $81,000, which is almost a whopping $30,000 over the national average.  Graduate Hospital’s community members are very well educated as well as you can see below.

From an investor’s point of view, Graduate Hospital also boasts a very high rental rate, which may help to focus our strategy for purchasing homes in this area.  Graduate Hospital has a rental rate of 51%, which sounds like money.

G-Ho’ as Graduate Hospital is apparently called according to Wikipedia – but let’s be honest who calls it that – is home to Naval Square.

Naval Square has a rich history, as the location was built to be a hospital in 1827, but then functioned as the Philadelphia Naval School (prior to the Naval Academy formation in Annapolis) and lastly functioned as a home for retired sailors.  The home closed in 1976 and then the lot was purchased in 1988 by Toll Brothers.

Currently, Naval Square is a gated community with high end condominiums that boasts a suburban feel in the urban setting.  The location provides security, as it is a great part of Philadelphia and will continue to be a key component of the Graduate Hospital neighborhood.

As a clean, safe and walkable area, Graduate Hospital has experienced rapid gentrification over the last few decades.

History of Graduate Hospital

This portion is for the history buffs, so if you just want to know more about today’s local real estate market then you can just skip to the market analysis.

Looking towards Center City from 19th and Lombard

In the middle of the 17th century, Swedish colonists inhabited what is now known as Graduate Hospital – this is where the names for Christian and Catharine streets came from.  After the Swedish colonists, G-Ho’ was occupied by British and Dutch colonists. Until 1799, with the construction of the Schuylkill Arsenal, the land was all farms. The area developed further when the US Naval Asylum and Academy was constructed in 1833.

The Graduate Hospital area began to form after the civil war.  It experienced rapid growth in the 1870’s and was predominantly Irish American, but then the neighborhood transitioned to mostly African American by 1920. Throughout the first half of the century, Graduate Hospital was a solid working-class neighborhood until the 1960’s, when a freeway was proposed to be built between Center City and the neighborhoods to the south.  With this information, properties and businesses were abandoned and the neighborhood decayed for years.

In more recent years, the neighborhood has experienced a revitalization and is now a staple example of gentrification in Philadelphia.

Attractions in Graduate Hospital

Graduate Hospital has numerous businesses that are sprouting up, and it lays claim to great, affordable restaurants, such as Ant’s Pants Cafe on South Street.  Graduate Hospital also boasts a great collection of bars and pubs including Pub and Kitchen on Lombard Street.  Every summer, since 1975, Graduate Hospital hosts the Odunde Festival at the intersection of Grey’s Ferry Ave. and South Street (where there is an awesome Fro-Yo shop, by the way!).  Odunde is a one day street festival, which comes from a tradition of the Yorube people in Nigeria to celebrate the new year ( that should help you win a few Quizzo games, you’re welcome.)

There is plenty to do in Graduate Hospital, and even better, you can easily walk over to Center City or University City with no problem from Graduate Hospital.

Market Analysis: Graduate Hospital

We will look into the single family homes for sale in the Graduate Hospital neighborhood in Philadelphia.

Wow, this could take a while.

So let’s narrow this down to single family homes with at least 3 bedrooms and 2 bathrooms in order to find the most coveted properties.   As noted earlier, we will limit this study to properties that lay between the Schuylkill River and Broad Street and bordered by the north by South Street and to the south by Washington Street. Properties in this area are an expensive investment and prices can range from $300-650k.

In this area, it will be common to find homes that will rate as a three on our scale. These properties are in excellent condition, and they better be for that price range! As a quick recap, this is the scoring system that we utilize.

Housing Metric Score:

Now is the time that my partners and I go the purely subjective route and we grade the property on a scale of 0 to 3. Our scale is defined as such:

  • 1= Uninhabitable
  • 2= Low Desirability
  • 3 = Starter Home/Needs some work
  • 4 = Nice Home – No work necessary to live there
  • 5 = Beautiful home. Plenty of Amenities

In this area, it should be expected that the property comes with hardwood and newer appliances as well as a recently updated bathroom.  Notice, the houses here are expensive, but require zero effort once you move in (except for that day where you call all of your friends and hope that someone comes to help move that old couch you have).

Current Market Update

Let’s take a look at what the current home values are in this area.  I started this off by analyzing the current houses for sale to see where the market currently stands.

Here is an example of what is currently on the market in Graduate Hospital.

The middle house, 922 S 25th Street, is currently on the market and the asking price is $489,000.  So let’s take a look at exactly what $489,000 will get you in this neighborhood.

These pictures reveal a gorgeous home with modern updates in a great neighborhood – which definitely helps to justify the steep price tag.  So let’s look at some specifics for this property and then understand where this relates to the current market.

922 S 25th Street is a 3-2 (three bedroom, two bathroom) town home which consists of 1,900 square feet and was built in 1925.  As far as price goes, this property is an average example of what is to be expected in Graduate Hospital.

This property has been on the market for 84 days and has seen multiple price reductions – which tell us that maybe this market may be cooling down.  This property has actually seen a price reduction during the writing of this article and is now down to $489,000 from an initial asking price of $499,000 in October 2017.  It sounds like this homeowner is starting to feel the heat from holding this property.

As a side note – let’s take a quick look at why a homeowner may start to feel desperate to sell a property.

For every month that a homeowner holds onto a property when they are trying to sell it – they must account for holding costs, which include things such as the mortgage, taxes, PMI, insurance, etc., and as you can imagine, this gets expensive after a few months.

922 S 25th Street was last sold in August 2010 for $125,000, and over the course of the last 8 years, the property values have skyrocketed in this area. If we assume that this house sells for $450,000, that would equate to a property value increase of 260% or 32.5% every year!

Obviously this growth is unsustainable, but this just goes to show the drastic revitalization that has taken place in Graduate Hospital over the last decade.

So now that we have seen one example of what is currently on the market in Graduate Hospital, let’s see how this compares to the market averages that we have analyzed.

 922 S. 25th StreetGrad. Hosp. Home Avg.
Sq. Ft.1,2741,835
Year Built19251959
Days on Zillow8479
Listing Price$489,000$515,333
$/Sq. Ft.$384$282.19

As you can see, this property is slightly smaller than the average house that is on the market (remember this is only for houses that are 3 bedrooms and at least 2 bathrooms).  Even though this property is well below the average asking price of homes on the market – it is more expensive per square foot, which is something that we find to be a huge red flag when looking for a home.

While appraisers do not utilize price per square foot when determining home values, we find it to be incredibly useful from an investors perspective.  When you invest in a home, rather than just purchase a home, you want to make sure that you are getting a deal.  If the housing metric scores (as shown above) are equal, then we know that the houses are overall pretty similar.  With this in mind, we want to find deals – and a deal means getting the most house for your investment.  Therefore, when all else is equal, we like to look at the price per square foot to determine how much house we are getting for our investment.

Also, of note, the properties have been on the market for 79 days!  Clearly, there is some disconnect between buyers and sellers about price.  We cannot recommend a purchase price in this market at this time.  Currently, some homes in Graduate Hospital are being purchased for above asking price.  To me, this appears that people are paying over market value for homes right now for sentimental reasons.  With sentimental factors influencing price, potential buyers in this area could be facing an uphill battle as some people will be willing to over pay to get their “forever home.”

Recently Sold: Graduate Hospital

Now that we know what’s available in Graduate Hospital, let’s take a look at some of the properties that have recently been sold in this area.

By taking a look at some recent sales in Graduate Hospital we can see how the current market compares to the houses that were actually sold.

 Recently Sold HomesCurrent MarketComparison
Square Feet1,5681,835+117%
Year Built19531959100%
Days on Zillow65.879-120%
Listing Price$513,800$514,444100%
$/Sq. Ft.$348.19$303.00+87%

From this chart, we can see that current market properties are very similar to the properties that have recently sold.  Keep in mind, that these properties all scored extremely well for appearances.

The current homes on the market are actually 17% larger than the homes that have recently sold.  Since the prices are still similar this means that there is an opportunity to get more house for your money – which is evident as the current marker $/Sq. Ft. is 13% lower than the homes that have just sold.

Current homes on the market also have been on the market for 20% longer than previously, which helps point to the fact that the market may be in the initial stages of a plateau.  It will be key to use this information to your advantage in this market and make sure that you find a house where the homeowner is feeling the heat and beginning to become desperate to sell!

This will not hold true for all of the homes.  When we did our analysis most of the homes experienced about a $10,000 price drop while on the market, but there were a few where the price actually increased as time went on.  One home sold for $25,000 over asking price!

It is important to understand the effect that demand can have on price.  In the above example, there were clearly multiple people interested in buying this property which drove the property way up – which means that as savvy and educated homebuyers you should probably move on with your home search.

Rental Analysis

Let’s take a look at some of these properties as a rental property in order to analyze these homes as an investment and a home rather than just as a home and let’s see how the Graduate Hospital rental market fares.  Let’s imagine that you just bought 922 S 25th Street (congratulations!) and let’s assume that in a few years you no longer want to live in the city, but you want to hold on to this home that you just bought – so we will analyze this property as a buy and hold rental.

Based on the current market, we will assume that we buy 922 S 25th Street for asking price since it has just experienced a price reduction – which we have seen before – and it has been on the market for about the average number of days before a home in this area sells.

If your plan is to buy a home in this area to live in for a few years and then renting it out, then this will be the MOST IMPORTANT information you could read before making that purchase.  As a rental investment, the properties in this area are AWFUL.  If you put down 20% on these properties and then one day rent these homes, this will be the financial outcome.

Avg. Cash Flow-$5,227
Avg. NOI$19,384
Total Investment$107.800
Cash on Cash ROI-8.25%

Although rents are relatively high in this area, with an average of about $2800/month for a 3 bedroom and 2 bathroom town home, the rents are NO WHERE near high enough to justify the cost of the homes in this area.

FINANCIAL ANALYSIS
NOI$15,722$16,062$16,409$16,763$17,124
Forecasted Op. Exp. Ratio99.4%99.08%98.77%98.46%98.16%
Monthly Mort. Service$2,051$2,051$2,051$2,051$2,051
Annual Mortgage Service$24,611$24,611$24,611$24,611$24,611
Mortgage Balance$380,628$374,532$368,131$361,409$364,350
Principle Paid$10,572$6,096$6,401$6,722$7,059
Interest Paid$14,039$18,515$18,210$17,889$17,552
CASH FLOW/TAXES
Before Tax Cash Flow-$8,889-$8,549-$8,202-$7,847-$7,486
Taxable Income-$16,462-$20,598-$19,946-$19,271-$18,573
Income Taxes-$5,762-$7,209-$6,961-$6,745-$6,501
After Tax Cash Flow-$3,127-$1,339-$1,221-$1,103-$986

The above mentioned rents barely cover the monthly mortgage.  After renting this property for 15 years you can expect to finally make $84 after tax cash flow!

Graduate Hospital Neighborhood Analysis Recommendations

Based on our analysis, if you were interested in buying a property in Graduate Hospital, we would recommend that you do the following.

First, make sure that this house will be the property that you plan on living in for many years to come. The market is definitely near the peak and home values will not continue to grow at 30% per year.

While these homes will continue to appreciate, we do not anticipate this current pace to continue. If this home will be your residence for the next 30 years and you love living in the city, then these homes can be a great purchase because of the prime location and the high supply of recently renovated homes.

Second, if you are going to purchase a home in this area, we would recommend a property like 2440 Kimball Street.

 

How about that rooftop deck!

This property is the perfect archetype of what you should be looking for when looking to buy a home in Graduate Hospital. This property has 3 bedrooms and 3 bathrooms, 2,150 square feet and the asking price is $499,000.

Details

  • Property Characteristics: 3 Bedrooms and 3 Bathrooms
  • Square Feet: 2150
  • Asking Price: $499,000
  • $/Sq Ft.:  $232

(Note: the last price decrease for this property was 12/19/17 – so expect a price decrease 1/19/18 if the homeowner is feeling some heat!)

The $/Sq. Ft for this property is $232, which is $100 less per square foot than most homes in this area!  Lastly, this property has been on the market since 5/3/17 and was initially listed for $575,000, but has not yet been purchased.

The above archetype is a prime example of how you can find great deals in hot markets by finding the properties that have been overlooked for the last few months.

So to recap, Graduate Hospital can be a great place to buy a home depending on your plans with the property.  This property will hopefully appreciate, but the market has begun to slow down so I expect prices to level out shortly.  With this in mind, these properties can be great forever homes if that is your desire, but from a real estate investors perspective I would not recommend investing in a single family home in Graduate Hospital at this time.

 

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