I'm thinking about investing in the Pittsburgh area, does anyone know of certain areas I should begin my search in. I am looking to buy and hold for several years and would like to find an area with potentially good appreciation and a good rental income. Thanks in advance for any advice.
In all honesty, there's very little appreciation here for buy and hold properties, unless you force it with renovations and updates, or you find a sucker to pick it up when you're ready to sell it.
There are, however, many neighborhoods that provide great rental income, and there's lots of inventory, especially if you're willing to fix up a rough one to rent.
You can message me if you have any questions, I'm happy to help.
Jeremy, Thanks for the honesty
I can affirm what @Jeremy Pace just said. At a high level, the issue with Pittsburgh real estate is that after the crash in the steel industry in the 70s/80s, the combined statistical area went through massive depopulation as folk emmigrated to other parts of the nation to find work. Many of the buildings that had no users began to decay and fall into ruin, with high concentrations of such buildings in the Monongahela Valley. The market is still in the process of absorbing this excess housing stock in the form of rehabs.
Many of these buildings are vintage 1890 - 1910 when Andrew Carnegie was rapidly expanding the local steel industry. As you can imagine, even a lot of these buildings that are in service are still in pretty rough shape. The cost of rehabbing will often put the ARV above nearby comps, making them hard to sell after the work is done. Rents can be okay in the poorer area, but when I was checking out the popular South Side Flats area, many of the properties weren't even breaking the 1% rule.
For out of state buy and hold investors, you'll find neighborhood valuations to be particularly treacherous. Because of the historical nature of municipality formation here, we have too many townships that are too small to properly maintain city services. For this and other reasons quite a few municipalities are under a PA state system of financial distress known as Act 47. It's a financial limbo condition where the town is not technically in bankruptcy yet is severely limited in operating as an ongoing financial entity. So within a couple miles of each other, for example, Braddock and Rankin are in Act 47 but Swissvale is not.
On the positive side, the region has shown some great signs of stabilization in the last 5 - 10 years, and was relatively strong during the 2008 financial crisis. For the locals and recent immigrants, there are some great opportunities to invest if you can study the fundamentals and ignore the emotional issues the region shares collectively. But the market will probably be biased heavily in favor of income over appreciation until some legitimate building stock shortages show up in key neighborhoods and until new construction starts showing more promise.
Thanks J Scott for the wealth of information, I appreciate the feedback.
The unique benefit of the Pittsburgh market is the cash flow potential. The industrial-era housing stock is very inexpensive, while the rents are moderate. The gap produces a health cash flow margin. For example, you can easily find a $50-60K duplex that rents for a total of $900. With average tax and insurance expenses, you can likely cash flow $300-350 per month. Be careful with the taxes, though. As another post mentions above, the antiquated municipality system generates wildly varying tax rates in communities that border one another. I have had high property taxes can eliminate deals that would otherwise cash flow well.
I advise against purchasing with an eye towards price gains. That said, prices remained perfectly stable during the housing crash and financial crisis. The market does seem to have stabilized after decades of decline.
One additional benefit is affordable local, independent contractors. You may be able to renovate a house more easily in Pittsburgh than in coastal markets given the low cost of contracting and supplies. Just make sure you can understand the Pittsburgh accent!
Feel free to follow up with me if you have questions.
@Account Closed you are spot on with your assessment from my limited time here in Pittsburgh. We are seeing some hot spots in price appreciation, especially when there is new construction going up along side rehab parcels. Areas like the Strip District got very hot where there used to be old steel mills, but conversely Homestead that equally had riverside steel mills is still struggling for a breakout into higher property prices.
Until the excess stock of fix and holds get worked down, appreciation may struggle. It's a sure bet to get cash flow if you run the numbers correctly, but with some very serious analysis on demographic trends, there is some nice potential for both appreciation and cash flow. South of the Monongahela river particularly comes to mind.
These posts have been really informative as I am very new to real estate investing and I am looking to try to make my first purchase early 2016. I have been reading a lot of good stuff over the past few months but what I want to do is start building my contacts in the area. Can anyone recommend a good real estate agent that works with investors that I can look into?
Thanks in advance!
Hi Andrew, I am a Realtor working with Investors. I have also lived in Pittsburgh my whole life and am available if you want to talk further about your areas of interest.
Hi all, I'm an investor/agent living in the Homestead area. I chose Homestead because one, I grew up in nearby West Mifflin. Two, I wanted a cheap place to live with nearby shopping that I went to anyways (the waterfront complex). Three, I wanted a place that would be easily rentable after move out. Four, I considered the chance at appreciation and liked where this market was at the time of purchase. Five, I like to ride bikes and love the simple access to the great allegheny passage Homestead offers. Six, I like the thought of being a part of the challenge in getting an area back on its feet.
Chris, Keller Williams Realty
Carnegie, Brookline/Beechview, Westview, Bridgeville, Shaler, Glenshaw, Stowe township, Crafton, Ingram.
There are plenty of great areas around Pitt to buy - n - hold.
If you would like to chat more feel free to reach out.
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