Investing in Bethlehem PA

12 Replies

Hi Everyone!

I am a new investor to the Bethlehem PA market. I’m looking at an opportunity on the south side of the river in Bethlehem. Does anyone have any insight or knowledge into the area? Crime, quality of tenant, time spent vacant, chances of the area becoming revitalized, etc. any and all insight is much appreciated!!

Hi @erikpaley, you definitely want to pick certain areas of the south side

Above Broadway street in fountain hill near the st Luke’s hospital is generally a good area, a nice place could attract hospital workers and nursing students or tracking medical workers. Near Lehigh university is also better but probably more expensive, if you rent to students of course the rent is also much higher. Sticking to the main streets are a little better than the winding back alleys. I have a townhouse on 4th street near the steel stacks. That road is busy but seems to have better family tenants, the little alley ways behind it however look much more rough. I’d advise having a walk or drive around and you’ll easily get a feel for the south side.

North side much better tenant quality but much more expensive homes, you’d be more likely to get young professionals.

I haven’t owned long in the south side I have an inherited tenant who has paid but is now moving out. I think it may be harder to find a quality tenant but not impossible I expect to find more of a blue collar worker or lower income family. However after my husband and I do some DIY cosmetic renovations we’ll be passing the property to a manger to do that for us and I am not worried about filling the property rentals are in demand

@Erick Paley Welcome to the forum. The south side of Bethlehem has plenty of investor activity. Quality of tenant and time spent vacant are more directly related to the skill of you or property manager than the location. There is a large number of perspective tenants, and a low amount of rental inventory in the area. This will give you plenty of options when filling your units, so make sure you are patient and place one that is fully qualified. This applies to the entire Lehigh Valley.

Chances of the area becoming "revitalized" is a pretty open ended question. There are strong economic drivers, and the market appreciated 24% last year (2 year trailing average sale price of 2-unit was $124,500, past year average sale price of 2-unit was $163,500). The casino, steel stacks, and other establishments in the area have brought out of town money which has seen some good shops and places to eat pop up. The big opportunity here is Lehigh University student housing. For example, one of my deals was for a 4/2 SFH that was $120k after renovation and refinance. This brings in a gross of $27,600 per year in rent, and has been stable throughout COVID. I don't see any major changes taking place in the short time, but the outside investor demand has been driving price increases resulting in very nice appreciation.

@David Ribardo

Hi David, thank you for your response. Are you’re analytics related to strictly the south side of Bethlehem or is that 2 family sales stat inclusive of all of Bethlehem?

Do you see any price/unit shift in either direction when you bump up to 4-15 units class B,C buildings?

Erick, there is always a price shift as you transition to nicer and larger properties. The highest cap rates and cash on cash returns will almost always come from single family homes. This is because you can pass on all utilities and common area expenses to the tenants directly. As you go to larger deals you are able to acquire many more units, but typically it comes at the expense of a lower cap rate. It comes down to what you have more of. If you have more time, buy smaller properties with higher ROIs. If you have more capital to invest, buy larger deals which will get you an overall larger return, despite the lower cash on cash ROI.

For me, I personally started off in low end rentals in rural Louisiana. I found this to be challenging, where I was having deals that looked great on paper but frequently underperformed my projections. All it takes is a single bad tenant to set you back six months or more. I've learned that just because it is cheap, doesn't mean it is a good value. More importantly, real estate is a relationship based business. Choosing quality people to work with is the most important decision. It doesn't matter how good your property is - if you have one weak link in the chain, it can lead to failure. Your entire team (agent, inspector, lender, property manager, contractor, attorney, etc) has to be at a professional level to ensure success.

Hi @Erick Paley

I own a 2 unit property in Fountain Hill which is right next to south bethlehem. I am pretty familiar with the area of bethlehem and would love to be of any help. 


I just rented my second unit for $1100 section 8. And downstairs has been rented for 5 years section 8 to another tenant.

Please feel free to reach out to me, my phone number is 484-408-7795. I am also a loan officer and can get you pre approved. 

A question for those investing in Bethlehem, PA is whether you are all familiar with the "Business Privilege and Mercantile Tax" landlords need to pay??  I am a new owner to Bethlehem and just got notice of it.

Erick:

Earlier in the year after closing on property, I received a letter from City of Bethlehem advising me that it was a requirement to register rental property with the city since rental activity is considered business activity.  At first I ignored it, but since then I have received another advising that this will be my "final notice".  After checking further, I now find that there is an annual $25 license fee to pay, and then will be charged 0.15% of rental come tax time I assume.  I'm thinking .15% may not be that bad, so I'm getting ready to comply.

If you are operating and not received this before, more information can be found at www.tfgtax.com.