Investing in Pennsylvania - Lehigh Valley

22 Replies

Hi BP as a longtime lurker-listener-reader, finally have some capital burning a hole in my mattress.

I have been researching PA (Lehigh Valley: Allentown, Bethlehem etc.), but feel I’m a little late to the game since it seems that everyone in the Tri-State area swarmed there starting last year.

Ideally looking for a small multi-fam which I can house hack, but also open to SFR's as well, my main focus is on obtaining a property that produces a positive cash flow.

Was hoping if anyone could provide some insight into how this market is currently faring

Or Any general advice from those who have/are invested in the area

Or Any recommendations for specific nearby neighborhoods to research deeper within my price range (approx. 250-300K)

Thank you all!

small multis go quick and rarely have anything but on-street parking, however, If you get pre-approved you'll probably be able to get something if you watch the market closely. 

contact James Reardon his is an agent that helps real estate investors

@Frank Mancuso - I'm currently under contract on a MF unit in Easton that hits the numbers well (from my partners and my perspective). They're still out there but you have to be ready to jump on them quickly as many are under agreement within 1-2 weeks (or days sometimes) from the list date. However, I have seen where the CAP and CoC rates have declined over the past 12-18mos due to increased values. Some investors I know are heading up towards the Scranton area where the returns are higher.

On my property management company side, I'm working with a few owners who closed on their units just recently and found good cashflows in the ABE area. There are a few events in the area where you might find some off-market opportunities. 

Originally posted by @Tom McGrew :

@Frank Mancuso - I'm currently under contract on a MF unit in Easton that hits the numbers well (from my partners and my perspective). They're still out there but you have to be ready to jump on them quickly as many are under agreement within 1-2 weeks (or days sometimes) from the list date. However, I have seen where the CAP and CoC rates have declined over the past 12-18mos due to increased values. Some investors I know are heading up towards the Scranton area where the returns are higher.

On my property management company side, I'm working with a few owners who closed on their units just recently and found good cashflows in the ABE area. There are a few events in the area where you might find some off-market opportunities. 

Great points Tom. I think the difference in Scranton area vs the Lehigh valley is there is practically 0 appreciation up there. Great cash flow opportunities everywhere even on the MLS up there though. What areas does your PM business cover?

Originally posted by @Charlie Cooper :
Originally posted by @Tom McGrew:

@Frank Mancuso - I'm currently under contract on a MF unit in Easton that hits the numbers well (from my partners and my perspective). They're still out there but you have to be ready to jump on them quickly as many are under agreement within 1-2 weeks (or days sometimes) from the list date. However, I have seen where the CAP and CoC rates have declined over the past 12-18mos due to increased values. Some investors I know are heading up towards the Scranton area where the returns are higher.

On my property management company side, I'm working with a few owners who closed on their units just recently and found good cashflows in the ABE area. There are a few events in the area where you might find some off-market opportunities. 

Great points Tom. I think the difference in Scranton area vs the Lehigh valley is there is practically 0 appreciation up there. Great cash flow opportunities everywhere even on the MLS up there though. What areas does your PM business cover?

Hey Charlie - Spot on with Scranton vs. the Valley and appreciation. When I've looked at places in Carbon County, I don't factor in any/much appreciation when calculating returns. 

My PM company is in the Valley and surrounding areas. Our areas depend on a few things but would cover about 1-1.5hr drive time from Bethlehem (where our office is) generally speaking.

@Charlie Cooper I would want something in the range of $100-200/per door if possible, I wasn't really targeting a specific CoC %, is there generally one that you like to aim for? I know the formula can skew one to be leverage happy, my general assumption was if you wouldn't buy it with cash don't buy it with a loan. But, as both you and @Tom McGrew mentioned Scranton has better returns but the appreciation is almost non-existent, case of balancing pros and cons

@Frank Mancuso To scale you want to buy with the loans. I won't touch SFHs or small multi's with less than $300/door average just because I have partners for most of my deals. My ultimate goal on deals is to be able to have no cash in them in the end because of the BRRRR strategy. If I do have cash in, I am usually only looking at deals with 25%+ COC returns, and that includes pulling out money for capex/repairs/vacancy and calculating for property management (even though I self manage right now). feel free to message me for a more in-depth discussion or if you have some properties you'd like to look at #s on.

@Emma Fitzgibbon makes a great point about the age of many of the homes being a factor. Though some of them can be a prime candidate to rehab up front, and then you need less capex set aside for the first few years. 

@Charlie Cooper when you say "25%+ CoC" are you considering appreciation (internal CoC) or not? Also, could you pls provide some example numbers of a recent deal you got that achieved 25%+ CoC? (I am just asking since I have not managed to get a deal that good, and would like to learn/gain some new perspective from more experienced ppl, like how much cash-flow are those deals, how much downpayment/initial cost, how much monhtly estimated expense, etc)

Originally posted by @Charlie Cooper :

@Frank Mancuso To scale you want to buy with the loans. I won't touch SFHs or small multi's with less than $300/door average just because I have partners for most of my deals. My ultimate goal on deals is to be able to have no cash in them in the end because of the BRRRR strategy. If I do have cash in, I am usually only looking at deals with 25%+ COC returns, and that includes pulling out money for capex/repairs/vacancy and calculating for property management (even though I self manage right now). feel free to message me for a more in-depth discussion or if you have some properties you'd like to look at #s on.

@Emma Fitzgibbon makes a great point about the age of many of the homes being a factor. Though some of them can be a prime candidate to rehab up front, and then you need less capex set aside for the first few years. 

25%+ CoC these days, NICE! We're closer to the 15% range on our most recent deal which we felt good about considering the appreciation in the past ~18mos.

@Frank Mancuso    it is common for investors to feel like they missed the boat. Of course there have been a few "wrong" times to buy in recent history but in the long run, the markets do continue to move in the upward directions. Lehigh Valley is on its way upward and got a big boost from the recent market shifts. I work with remote investors and while we find far fewer opportunities in the last year than we did previously, we still find them. Getting outbid often but that's ok. Closing on a fantastic duplex with 4 parking spaces this week... Strong believer in the best time to buy real estate is yesterday :-) Of course you also need to do it analytically and intelligently. Good luck!

@Frank Mancuso

I would suggest looking on the outskirts of the Lehigh Valley - check into Wind Gap, Bath, Bangor, Pen Argyl, Lehighton and Slatington.

I know of a few portfolios about to hit the market in the Slatington area that would produce good cash flow.

I just purchased a duplex in Pen Argyl that will cash flow about $600 a month after CapEx, Repairs, & vacancy.

@John Majoris

If you can find deals it is. I lived in the slate belt from 2002-2015, it is a pretty decent hard working area. And just like all over, rents are up! 
One of my properties in Bangor I purchased in 2019 for $40,000 (off market), rehabbed it myself $15,000, I’m now getting $1400/month and it’s worth $125k. 
my other one here purchased in 2016, I’m all in for $40k ($23/$17)including rehab, getting $1275 and it’s worth $140k. 
I would definitely buy more here if I could find them. I just stay away from S. main, N.2nd and parts of N.Main. Not terrible, but not great. 

@Matt M. the 100-200 net range was based on initial #'s I had run off of mls properties with very conservative expenses at my budget level, was gauging if there is better potential/less market saturation elsewhere as I'm not as familiar with the outlying areas but as yourself, Tom and Nate have all been pointing out other locations to look into

@Frank Mancuso

Anything I’m seeing that’s worth a look flies off the market quickly. I guess I’m just choosy and won’t pay these outrageous market prices and the 1% rule doesn’t make a lot of sense to me, doesn’t typically leave much meat on the bone.

As for the $100/200 door, if you need a heating system for example, your cash flow is gone for a really long time, and you better hope you have no other big repairs.