Pittsburgh Investing

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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.

[J Scott Hamilton]

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.