NEPA - single family vs. multi-family

5 Replies

I'm a NEPA native, currently living as a "displaced Pennsylvanian" in New York. I've talked with a few of you investors in the area, and I'm looking for advice on single vs. multi-family investments in the area. My brother and I are hoping to invest in rental properties.

Having followed listings, sales, and rentals on the MLS and other websites for about two weeks, how profitable is single-family home investing in NEPA? The prices for what I would consider B-class homes in B-class neighborhoods seem high ($80k+) for the rental income ($300 or so per bedroom). Is this accurate?

I don't necessarily want a turnkey, move-in ready house, but I also don't want to do with $20k-50k in rehab. It seems that multi-family in NEPA offers the best return, especially considering cash-on-cash.

Multifamily is the way to go.. If you have a 4 unit building and one tenant leaves, you only lose 25% of your income and can still operate with a margin. If you had a single family home that asset becomes a liability very quickly once it becomes vacant. Single family homes make better flips. 

My strategy is (and has been) to buy single family homes to flip, and using the profits from my flips as acquisition funds for my buy and hold properties.

@Harrison Russin in my situation for my first 2 properties I got best of both worlds, I got 2 properties near 3 colleges here in Kansas city and am renting out private rooms with shared common area, So even if 2 rooms are filled in my 3 bedrooms one, worst case scenario is I have 1 room filled and I make sure that amount of money I set is little higher than my mortgage so I am set. There are plenty of strategies to go by it!

Hi Harrison, 

I am very active in the Lehigh Valley and live in NYC. You are absolutely right the cash on cash returns are much better in PA. If you are interested in hearing about the Allentown/Bethlehem/Easton market and possible returns PM me.

Good luck!

@Harrison Russin

For cash-on-cash, multi-family will almost always win. That's especially true in NEPA where there is a limit on the amount of rent that an SFR can bring. While there is a market for very high-end rentals (+$2k rent per month), there are not too many tenants in NEPA that can afford that.

From an IRR perspective, it's hard to say. Too many variables to say one class is better than the other. You'll have to play around with the numbers and see what the IRR looks like.

One other x-factor is the new tax law. I really haven't had the time to sit down, talk to my CPA, and really digest it. Based on what I've read so far, there seems to be a lot of interesting changes and new concepts (e.g. Opportunity Zones). But I also can't say if the new changes made any significant impact on buy-and-hold versus flipping.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Harrison Russin I suggest to go with multi in NEPA - but I learned a few things from previous failures:

1. Make sure your heat system is separated before renting the units out. Believe it or not, Wilkes-Barre utility unit price is much higher than New Jersey. We as owners don't want to be any part of it.

2. Spend most of your upfront work on finding a good property management company, if you are also a remote investor like I am.

3. Returns on paper doesn't tell you the true story - but at least look for a higher return on paper. Sometimes you will find properties that match 2-3% rule, or even 4% rule, but you may still not cash flow without proper PM and enough upfront rehab work being done.