Good areas in eastern PA for 1% + appreciation?

Question

Looking for areas in eastern PA (as close to NJ as possible) where I can find 2-5 unit properties ideally in the $200-400k range, hitting 1% rule and also having good appreciation potential.

David Krulac · Answer

@Luka Milicevic  I was driving as fast as I could on the interstate around the stadium, I'm sure I missed a bunch.  Point being, the economy there is way better than places with zero construction cranes.

Alan NA · Answer

Interesting.. is there a particular reason 1% is so hard to find in PA? I've been looking in Ohio and it seems not uncommon there, but ideally I'd like to find an area to focus on closer to where I live.

David Krulac · Answer

@John Williams Just bought a property in Clarksville, might be 1% or close to it, I'm projecting 0.00919%, so close but no cigar.  I like Clarksville and Nashville, when I was in the capital this year I counted 16 construction cranes in downtown. Davidson is the fastest growing county in the state and 6 of the 7 fastest growing counties are surrounding Davidson/Nashville.  The one fastest growing county not in Middle TN is Knox County at Knoxville

@Alan NA I've been investing in Central PA, which includes the fastest growing county in the state, Cumberland County.  Prices are up here, as well as rents, but rents haven't kept pace with prices.  To find higher returns and lower prices, I'd suggest looking counties more rural, at least 50 miles away from any metro area, beyond commuting distance from any large job center.  Perry County, PA could be one such county with a population of 46,000 and a density of 83.1 per square mile.  There are no hospitals and in 2010, Perry County got its first traffic light.  The eastern part of the county has more population and is commutable to Harrisburg, while the western part is more rural. Prices are lower in counties that have little to no growth.

Jonathan Greene · Answer

You are asking for a needle in a haystack, best-case scenario which usually means that you will get stuck in analysis paralysis because nothing will "pencil". The one percent rule does not exist much in PA and when it does, especially in the 200-400k range, it comes with a lot of cap ex and harder tenants. When you seek cash flow expectancy, you get way more issues. If this is your buy box, you will find nothing but Monets (look good from far away on your spreadsheet, but ugly in person).

Stuart Udis · Answer

1% rule is a flawed underwriting technique that's not at all indicative of a properties performance. Should be removed from underwriting all together but that's not happening anytime soon so I will focus on the sub $100K unit acquisition objective. It's a difficult asset to manage with razor thin margins. Spreadsheet underwriting rarely matches up with the realities of owning these assets. That's something you should consider before proceeding.

Shawn Mcenteer · Answer

Hi @Alan NA if you are open minded to different strategies 1% rule is alive just over the river in NJ.  I have close on multiple properties in 2024 that are 1% or great in New Jersey.  The price to enter is a bit more expensive but we are seeing 1% on certain deals.

John Williams · Answer

That's impressive! You purchased an A or B class property that will rent for $2350 and meets that 1% rule in Clarksville in 2024! Must have been a nearly turnkey home purchased at 50-60% of value. I would say that is the exception rather than the rule though, even if the pro forma pans out. Investors still shouldn't rely on the 1% rule. Instead they should focus on long term, and short term goals, and not so considered with this rule of thumb.

David Krulac · Answer

@John Williams  I've sold all my condos, semi-detached, townhouses, apartment buildings (except 1), and don't own any mobiles, modulars, or manufactures homes.  And I don't own any C, D, or E homes. I sold all my commercial and retail buildings.  Used to own an attorney office, commercial kitchen and retail store, none of which I was the tenant. But I am intersted in single family detached houses built after 2000 in Montgomery or Davidson Counties.

David Krulac · Answer

@John Williams It is neither a manufactured home or a war zone home. Its not rented, it was an owner occupied house.  The rent from several sources is to be $2,350, I was told, obviously the proof is in the pudding , so we'll see if that figure works out when it is actually rented.  I have another house that is smaller, and older that rents for $2,500. and another house smaller and older that rents for $2,295.  Therefore, don't think $2,350 is far off the mark.  Can't say that I never bought a mobile home.  I think I bought 5 mobiles homes, but really bought the land and they happened to be on the land.  Of those I demo-ed 2 of them on site, 1 of them did nothing and sold the land as-is with the mobiles.  And 1 I sold to somebody who moved it somewhere else and I subdivied the land into 5 building lots.  The remaining one, the buyer got his friends to come over one weekend while he supplied the beer and they demo-ed the mobile, so that he could build his $500,000 home there.

John Williams · Answer

Is that a manufactured home or is it in a war zone?

If not, is that 1% pro forma rents or actual rents?

Good areas in eastern PA for 1% + appreciation?

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