Investor · Oakland, CA · Member since 2016 · 57 posts · 16 votes
I'm interested in investing for high cash flow (getting 20% cash on cash return and up).
Unfortunately this leads me to less than desirable areas. In my case the areas seem relatively safe (C neighborhood, low crime- definitely not a war zone) but have declining populations and housing prices seem like they will only decline in the near future... (Specifically I'm looking to invest in northern PA around Scranton / Wilkes-barre)
My broker in the area keeps warning me of this - but is buying one of these properties really a bad idea considering I'm going Into this to maximize cash flow and not appreciation?
Investor · Wilkes-Barre, PA · Member since 2014 · 179 posts · 42 votes
10y
I can't speak for Lackawanna County and Scranton, but Luzerne County (where Wilkes-Barre is) has had a rising population according to the most recent census data. I invest in and around Wilkes-Barre because I grew up here and I know the area well and like you said, the cash flows are high; Levered IRR >25%. Its not optimal, because you're never going to recognize massive appreciation, but I'm not brave enough to deploy funds to buy an 8 unit building in [insert city here] when I literally know nothing about that city's neighborhoods.
With all of that said, Luzerne County has some really solid pockets where there is a good renter base and enough middle class jobs to keep housing prices growing very, VERY slowly.
Investor · Wilkes-Barre, PA · Member since 2014 · 179 posts · 42 votes
10y
I can't speak for Lackawanna County and Scranton, but Luzerne County (where Wilkes-Barre is) has had a rising population according to the most recent census data. I invest in and around Wilkes-Barre because I grew up here and I know the area well and like you said, the cash flows are high; Levered IRR >25%. Its not optimal, because you're never going to recognize massive appreciation, but I'm not brave enough to deploy funds to buy an 8 unit building in [insert city here] when I literally know nothing about that city's neighborhoods.
With all of that said, Luzerne County has some really solid pockets where there is a good renter base and enough middle class jobs to keep housing prices growing very, VERY slowly.
Real Estate Agent · Philadelphia, PA · Member since 2015 · 180 posts · 69 votes
10y
what's the reason for looking into Scranton/Wilkes Barre all the way from Cali? @Scott Taylor Cheap entry? Higher cash on cash return? The reason I ask is because I occasionally think about pulling the trigger on buy and hold properties in Scranton also. I went to high school there and know the area fairly well.
Kansas City, MO · Member since 2015 · 609 posts · 321 votes
10y
To me, any area with declining population seems like an area to avoid.
It violates the basic laws of supply and demand. When demand goes down for rentals, your monthly rent will be forced down and you'll likely face depreciation of property values.
Investor · Oakland, CA · Member since 2016 · 57 posts · 16 votes
10y
@Jon Sanborn Good question. I'm looking for high cap rates (and high cash-on-cash return) with a low entry price (think properties < $300k).
I'm originally from NYC and have family out in eastern Ohio, so long car trips across PA / route 80, so I'm somewhat familiar with many of the towns (although wouldn't know anything about neighborhoods, etc). Plus PA has landlord friendly laws, from what I've seen (I know NYC and SF don't).
I looked initially in the bay area (too expensive - no shock there) and then out within a few hours driving distance. Couldn't find anything within the amount I'd want to invest in (even leveraged) - at least for a first time investment. I also don't own a car (I'm in a metropolitan area - so no need). So without buying a car - something even within a few hours drive will cost me ~ $100 for the day to check the property, etc.
Investor · Oakland, CA · Member since 2016 · 57 posts · 16 votes
10y
@Kevin D. where did you get that census data showing population growth? The wikipedia page seems to say the opposite (population decline - only slightly, though - at 1%)
Real Estate Agent · Philadelphia, PA · Member since 2015 · 180 posts · 69 votes
10y
@Scott Taylor Makes sense, that would be very expensive getting out to your properties investing an hour away from you without a car. I consider starting my investing career in Scranton for the same reasons as you... I really want to maximize cash on cash return and get into a cheaper market than Philly (much cheaper than the Bay Area but still). Keep me updated on your journey and let me know if you have any questions about the area!
I use city-data for a lot of statistical/demographic analysis and then I go after specific on other portals with more recent and selective data (like crime reports etc.)
Accountant · Hoboken, NJ · Member since 2016 · 28 posts · 7 votes
10y
According to US Census Bureau, it looks like Lackawanna County overall has experienced a slight decline in overall population - 7/1/15: 211,917 v 7/1/14: 212,719. However looks like Scranton has seen a slight increase - 7/1/15: 77,118 v 7/1/14: 75,281. You can always get comparative info direct from census.gov, there are also population projections available as well if they state provides them I believe. Hope this helps!
Susquehanna, PA · Member since 2016 · 15 posts · 7 votes
10y
I live a short distance north or Scranton. The main reason investors run for the hills when it comes to Scranton is the fact the local taxes and zoning are ridiculous! Every time there is a deficit or money issue in the city, they raise taxes on the few remaining contributing citizens. I believe the tax rate is 3.4%. For a population that doesn't make high incomes its a pretty big deal. They also have a privilege to work in Scranton tax. Not sure what the rate is on that but it really isn't an incentive to bring in new jobs or workers into the city. I just saw on the news they want to raise more taxes due to the School system being broke.
The biggest employer, I believe, is Scranton University which is basically owned by Louis Denaples and he pretty much owns the rest of Scranton and Lackawanna County. What he or is family doesn't own, he has in his pocket!
They are basically giving homes away in Scranton just to get out. The MLS looks amazing but if your dig deeper you'll find the dirt in the City.
Last gripe about Scranton, the streets have so many potholes you think you are driving through downtown Ramadi after it the Marines were done with it! PA roads are bad but the City of Scranton tops them all!
There are a few small cities in Lackawanna County that are quite a bit nicer and investor friendly. Dickson City is right outside of Scranton and is nice. The home prices are very reasonable and I know people who have rentals there and seem to be doing well even as novice investors. If you do a google search it will show a high crime rate but that is only due to retail theft at the Viewmont Mall and the surrounding business district.
Archabald is nice little borough. I believe Valley View is the school district and people seem to like that school. My wife is from this area and owns a business close to there.
Peckville is nice but the Mid Valley School District has pretty low ratings.
Clarks Summit and the Abingtons are very nice areas. They have the best schools in Lackawanna and will demand higher prices from sales and rents.
Carbondale is a another town East of Scranton and in Lackawanna County to stay out of. The house are dirt cheap in any condition but the resale value is way to low to make a good percentage on flips You could buy and hold but he caliber or tenants are only going to bring low rents and the value of homes has not increased in as long as I can remember.
I hope this helps and gives a very quick and a little "boots on the ground" look at Lackawanna County.
Investor · Wilkes-Barre, PA · Member since 2014 · 179 posts · 42 votes
10y
According to the Census Bureau, in 2000, the population of Luzerne County was 319,218 and in 2010 is was 320,918. Only 0.53% growth, but still growth. I, personally don't take much stock in the numbers that come out between censuses.
@Jon Sanborn .... Plus PA has landlord friendly laws, from what I've seen (I know NYC and SF don't).
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Just because the PA landlord tenant law is more landlord friendly than in NYC or SF, that does not classify them as landlord friendly ;) I believe most would say they are less landlord friendly than most areas of the USA.