NYC New Member Introduction - First Deal in NEPA

[Ian F.]

Hey everyone! My name’s Ian, long time reader, first time poster. Great to meet you all and just want to say this community is amazing. I’m from Kansas but now live in NYC, where newbie real estate investing seems practically impossible. I’ve been looking in the surrounding area for more cash flow positive deals, and found that northeast PA seems to offer a lot of cashflow and little appreciation (which is fine).

As a first deal, I found a motivated seller, who owns three properties (8 units) outside of Scranton in Lackawanna County. The three were listed individually for a total of $217k. I made an offer of $185k for the portfolio and he accepted, on the condition that that was an ‘as is’ price (no further price reductions or repairs). All units are rented with cumulative gross rent amounting to $5,000 (2.7%).

One of the properties has been inspected and needs new roof, which I got quotes for in the $7-10k range. Even if you assume a 60% expense ratio (far higher than reported, for cushion), and that the other properties need a ~$10k of capex, this still seems like a good deal.

As a newbie to real estate, I’m wondering what the main pitfalls here could be. It seems like I’m getting these cheap enough where there’s significant cushion built in for capex and other contingencies. For reference, the $185k price = $28/sqft ($32/sqft after $30k capex), where other similar properties in the area are being sold for $40-60/sqft.

For you experienced investors, I’d love to hear what your main concerns with this would be, or if anyone else has invested in NEPA how you’ve found the experience. Thank you all for your invaluable advice all over these forums. Can’t say how exciting it is to be so close to the other side (post first deal) – would never have gotten past halfheartedly browsing Zillow if not for this site!