Unfortunate pump and dump with shoddy rehab in Allentown

Omar Hamza · 2022-08-02T22:06:35-07:00

Hey folks, for all the good this community does I think we should also highlight bad and morally questionable practices that would harm this business. I have been searching for low COI cities with a focus on transit-oriented development and seeing what cities could be candidates for growth. I was surveying Allentown and came across a property that had been purchased in early 2022. In that time, rents were increased on 2 units from about $900/M in rent to $1300/M in the span of a month all of who are low income. One unit has vacated and another is in the process. There is shoddy work all over the house, such as drywall covering areas where the roof leaked and obvious bubbling and mold smell in the top unit I got a picture of the roof but not the drywall in the tenants apartment. This is cleverly hidden in the listing.Clearly, besides the fact that that property is overpriced on bogus numbers, it is a pretty deadbeat move that hurts this business. RE investors should bring value to their communities, not milk them.This was at 510 N 9th St

Jordan Sachs

Member since 2022 · 32 posts · 17 votes

4y

That's unfortunate indeed. I bought a property from the biggest slumlord in Allentown (live and learn) and the place was a disaster but the low income tenant was paying way more than she should have been. I would definitely not be surprised if he were the owner of this property because he owns a ton of them there and he takes really poor care of them does incredibly shoddy work. It's actually really kind of sad how he takes advantage of low-income folks.

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Randy Gutierrez

Investor · NY · Member since 2019 · 171 posts · 80 votes

4y

There is a notorious landlord in the area, wouldn't be surprised if it was one of his.

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Omar Hamza

OP

Member since 2020 · 8 posts · 5 votes

4y

That's really unfortunate. I hope this property ends up in better hands, because it's on a great lot but needs a lot of repairs and updates and less taking advantage of low income people.

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Ronald Bowser

Real Estate Agent · Bethlehem, PA · Member since 2016 · 64 posts · 51 votes

4y

Hello everyone, I remember going to this property when it was Available back in October of last year. I still have the email highlighting the water damage and shoddy work/deferred maintenance. I do not disagree with the OP and comments regarding the unethical approach taken by a number of investors. Unfortunately, it is all too common in our area and no doubt nationwide. I only need one guess who @Jordan Sachs is referencing. This particular property is/was not theirs. Allentown/Lehigh Valley is an old area, most buildings are over 100 years old and were larger properties that have been converted to multis over the years. Properly maintaining the property is key to protect your investment of course and it is not uncommon for listing pictures to not capture "issues".

My only comment is that this isn't the worst strategy in my opinion. I typically work with B&H investors and if you are able to purchase a property, force value with increased rents because the last landlord didn't bother to keep up with market rate (or properly maintain), it can be a great strategy. A number of investors I work with followed that strategy over the last year and factored in the turnover expenses in anticipation of increasing the rents to market rate.

Placing tenants that can't afford the unit is a terrible strategy any way you slice it, you are setting yourself up for vacancy and hassles with evictions, turnover, re-renting, etc. and as OP implied, not putting the tenant in a good position either. Properly vetting them and verifying employment and income and all the other factors is vital, but if the rent is inline with market rate I would consider it a good strategy actually.

With the above said, I absolutely agree that we should be bringing value to the communities we live and invest.

1 Reply

Sam C.

Lehigh Valley, PA · Member since 2016 · 144 posts · 91 votes

4y

That is not how it works, unfortunately. It is always a "Buyer Beware" environment. The only way that I have been able to keep a clear conscious AND make money is to work with anyone, buy anything that works for me and then bring my standards into the game. I don't see the buyers as the root problem because there are a number of reasons why properties that you mention exist. The real problem with small cites like Allentown is the city government and the how zoning applies the laws and ordinances. (i.e.: I had a beautiful 8-unit planned for a piece of land that made sense economically and put the land to its highest and best use. There was absolutely nothing wrong with the project and would have brough 8 affordable, decent 2 bedrooms to the market. But it was rejected by the zoning board. All for political nonsensical reasons. There is absolutely no way that allowing thousands of units in center city high rises at unbelievably high rents makes sense for the community. There is no way that a conscientious small investment property buyer can keep up with zoning requirements, fees, inspections, politics, greasing, etc. without having to pass the cost on to the renter. Or even worse, trying to slide in under the radar and "skip" bringing safe, habitual units to market and then trying to get a high rent to make the numbers works. I worked Allentown for most of my career in RE. And the local gov't burdens, the ratios and the renter's ability to pay stopped working a number of years back.

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Unfortunate pump and dump with shoddy rehab in Allentown

Unfortunate pump and dump with shoddy rehab in Allentown

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