Best Markets in PA/NJ/NY for 1st MultiFamily Cash Flow Purchase?

Question

Hello everyone, I'm brand new here. I currently live in Manhattan, travel between NY and eastern PA weekly to see family, and am looking to buy my first multifamily property. If I had to choose, I'm more interested in cash flow than appreciation/equity, but I don't want the property to go under water in the next 10 years. I want the purchase to be within two hours of Manhattan, which includes:

1. Hudson river commuter towns like Ossining, Peekskill, Hastings, Beacon

2. Northern NJ commuter suburbs

3. Scranton and the Poconos (which I know well, I was born there)

4. Lehigh Valley

5. Philadelphia

I do not want to invest in any of the five NYC boroughs.

Which of these markets would YOU choose for your first investment if you were looking for as much cash flow as possible? I have enough cash for a healthy down payment, but a freelance income as a writer that's not "great on paper." I would prefer not to go too far above $500K on the purchase price. I'm super-curious to hear your expertise and opinions. Thanks.

Sean Mcevoy · Answer

Hi Robin,

I just bought a 3 unit property in the Lehigh valley and it was a great deal. If you are looking for cash flow I would say the Lehigh valley is the way to go. If you want to know more just pm me and I can explain my deal and the different areas of the Lehigh valley.

Josh Gruber · Answer

Hi Robin,

You should go where there is the best job growth relative to market yield. Hudson River towns vary, but the region as a whole is depressed. Northern Jersey and the entire state has incredibly high taxes and property values are among the highest in the US, therefore cash flow most likely won't be at the level you're looking for. Scranton/Poconos could be solid, but then again compare those markets with the other two Pa markets you mentioned. Lehigh Valley is having a market renaissance at the moment. The one downside at the moment is demand has become so great, inventory has taken a nose dive...not a bad thing though. Philly is a major US city, where you probably can't go wrong, but as a rule of thumb, most major metropolitan areas aren't going to present the cash flow opportunities the non major city markets will.

Gregory DeRosso · Answer

I'm also in Manhattan thinking of a similar strategy.  I'm going to a REI tonight in North Jersey trying to get a glimpse of the market there and I'm going to venture north and west until I find the numbers that I'm ok with.

David Ribardo · Answer

Robin, I work running a team of investor agents in the Lehigh Valley, so I'm a little biased. However, I'm also a buy and hold investor, and most of my properties are out of state.

Allentown has a few interesting areas. The downtown area has a ton of large commercial development going on, but no real opportunities for a newer investor. The center city area is a great cash flow neighborhood - purchase prices are cheap, vacancy rates are low, and rents are high. The standard of living there for tenants has a bit of sticker shock to a new investor to the market - think, tons of slum lord properties. However, by being a reputable landlord, you can definitely have a good experience and make them work. The Lehigh Valley has plenty of economic growth going on - Fedex and Amazon are both expanding their footprints around the airport, Air Products built a new 5,000 job headquarters, and the college communities (especially Lehigh university) are strong as ever. These jobs have led to new construction in the 4-5 bedroom, $350k+ price range. This has also led to a shortage of affordable housing, and that makes it easy to rent out any vacant units you may have.

As far as the Southeast goes, I have rental properties in Lousiana and Georgia - I'd be happy to talk about them and my experience as an out of state investor separately!

Account Closed · Answer

To add to my thoughts about Scranton: Lehigh Valley was chosen as a business hub due to its proximity to 4 major cities right in the NE. Pittsburgh, NY, Boston and Philly. Scranton is essentially just as close. 81 and 80 are Major national highways. It is no wonder Allentown and Bethlehem have seen the explosion that they did.

For transit purposes, you can get anywhere in the country fairly easily.

Account Closed · Answer

I grew up in a suburb of Scranton, Lived in Allentown for a year: A few comments. I love the Lehigh Valley. I think Allentown as a city will continue to expand to a point. Deals are harder and harder to find at the moment obviously . I looked at several. Not necessarily at the peak of the market as business continues to move in, but let me make a point.

I am a forex trader part time, and my motto is value investing. Scranton gets a bad name(horrible politics..old folks, etc.) but, IMO, nowhere to go but Up. As the prices in Lehigh Valley continue to skyrocket, businesses are viewing the Scranton/Wilkes-Barre Area as a good value to move into. Chewy, Adidas, Online Labels, and many other national level companies have DCs in the Scranton Beltway.

Properties up here seem to cash flow..really really well. And prices stay fairly stable. The down is desperate for new leadership, and with a few scandals going down, it may happen. I always have the idea that investing when others are fearful is a good idea. For years I’ve heard “ stay away from Scranton.”

I’ve been toying back and forth, but I may make my first move on an FHA 3 or 4 unit. Have a few picked out. My 2 Cents.

Romeo E. · Answer

Hey Robin, I'm an agent an investor in Central NJ and can only speak to my knowledge of my local market, but I would say CNJ could be an option to explore. Hour into the NYC, 1.5 from Lehigh Valley. Cash flow is strong in this area if you know where to look.

Andrew Giunta · Answer

Lehigh Valley! It is booming, the rental market ! There are no vacancies and people are waiting for apartments

Chris K. · Answer

@Robin Rinaldi

Welcome to BP!

I can't say anything about the NJ/NY market. But in terms of Pennsylvania markets, you are looking at three different class of markets. Philadelphia is obviously the primary market in Pennsylvania and Scranton is one of the tertiary markets. I consider Lehigh Valley to be a secondary market --- no where close to Philadelphia/Pittsburgh in terms of size but clearly bigger than the other tertiary markets (e.g. Scranton/Wilkes-Barre, Harrisburg, Lancaster, Reading, etc.). So it behaves in its own unique ways.

You can make money in all three types of markets. But they behave very differently.

Some other thoughts:

• One could theoretically argue that tertiary markets are better for cash flow since the market cap rate is higher. In practice, that is not always the case for many reasons. But something to keep in mind.

• You can always make your cash flow higher by leveraging less. But your returns typically suffer if you don't leverage. Not sure whether you care about the overall returns or just cash flow. If the latter, buying in a primary area may ultimately be "safer."

• I would say that folks are generally better off looking at a market that they have the most connections to. Notably, until you start investing in bigger properties, you will mostly hire and work with smaller, "mom-and-pop" businesses. The consistency of service from such businesses are not always consistent. So you will likely find that you need to micromanage them to get the best results. That being the case, having connections to the area can be very helpful.

I think all three markets could work for you. If I had to pick one, you may want to start by looking at the Scranton area since it sounds like you may have family/friends/connections. If you don't, I would try to figure out what exactly you want from the investment. Higher cash flow doesn't always mean higher returns in the grand scheme of things.

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.

Lane Donatelli · Answer

Hi Robin,

I’m from the Poconos and now live in Whitehall (outside Allentown). I would definitely say that LHV would be the best for cash flow. I’m always tempted to look at property up north for the lower prices, but the development in the LHV definitely makes it stand out from your other options. Happy to discuss if you want to message me

Best Markets in PA/NJ/NY for 1st MultiFamily Cash Flow Purchase?

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