Small western PA markets (Edinboro, Franklin, Punxsutawney, etc)?

Question

Hello all -

I'm curious if anyone has any insight on small western PA markets (Edinboro, Franklin, Punxsutawney, Meadville, Clarion, Indiana, etc).

There is a lot in these forums about Pittsburgh, but finding info on some of these other areas is harder to come by. I am mainly interested in 2-4 unit multi-family properties for cash-flow purposes. Does anyone have any thoughts on the viability of these markets for cash-flow investment, what one should expect to pay per-unit for a decent property, and any "gotchas?"

I'm looking to invest from out-of-state and would like to familiarize myself with the region.Thanks!

Jared McCullough · Answer

I am currently investing in Indiana County and plan to build most of my inventory their as that is where I would like to relocate after I semi-retire as well as I have family their to assist with PM and Rehab efforts. Right now my (2) markets seem to be Homer City and Blairsville but I am open to just about anywhere in the area whenever the deal is right.

I noted that many of the areas you speak have near by campuses which offer a little different perspective than just SFR in small rural towns. My market is really focused on what I would call "blue collar" or "Coal" towns probably "C" areas for the most part. My focus is sub $50k housing that rents at $700+ a month.

I think one key thing you are missing is the "local tribal" knowledge. Growing up in the area allows me to be successful in deciphering deals as there is a decent amount of inventory but you have to know where you are going to get decent rent vs. not. Plenty of areas Pittsburgh where cheap housing can be bought but the issue is understanding the market cap for rent.

The reality is I could have a $200k house and I am going to struggle to get above $1000+ rent in most areas of Indiana County. That is why I try to find my pockets where I know I can get close to $700 and then try to buy the cheapest "decent" houses I can. There are plenty of "slums" around though so that is probably the hardest thing to recognize being out of state. Ford City, Vandergrift, New Castle, Tarentum, New Kensington, Johnstown,....I could go on and on but these areas just have a low market rent (i.e. Sub $600 a lot of times), have generally saturated markets, and break the threshold of what I would say is "C" to "D" class rentals.

As far as Indiana County feel free to ask away as I have a lot of working knowledge. Regarding Multi's....small towns avoid for the most part but in places like Indiana you are going to overpay as people inflate because its a school town so it is just a hard business to get into in general.

Andy Brown · Answer

@Jeff C.

I agree with @joe m.

OOS investing lives and dies with the property manager. Can't stress this enough. I have about 6 units in Erie and am recovering from a brutal 7 month experience with a shady pm up there. The pm is as critical as the deal itself. Pay close attention to the contract fees and be sure to shop multiple pms.

And I'll add on to what @Karl. B said. Be cautious about the towns that are based around the state colleges there (Edinboro, clarion, Indiana, etc.). The whole liberal arts game is being shaken up right now and in 2017/2018 they were looking at closing a number of the aforementioned state schools due to enrollment issues. You would really need to heavily evaluate the viability and long term health of the local economies you're looking into. Also be sure to check zoning/occupancy issues in those towns as some of the schools have successfully changed the local laws to favor on campus housing.

Corey Murphy · Answer

@Jeff C. I am too. I grew up just outside Meadville. My sister currently lives in Edinboro, my other sister is in Franklin.  I haven't lived there for over ten years so I can't speak to market conditions but have been talking off and on with an agent out of Erie. Personally stuck in paralysis mode but definitely interested in the area.

Joe M. · Answer

Im in Erie so not too far out, a hesitation about out of state would be finding a good property managers in these areas.

Josh Caldwell · Answer

I have had several students who did deals in Franklin and Punxy, as well as similar towns like Kittanning, Grove City, Mercer, etc.  Places like that can be super bargains but there is a catch.  The cash flow is great, but vacancy rates are high. The reason is that not many people want to live there.  The same is true on the buying and selling end. IT is easy to buy, but harder to sell. So flipping and wholesaling strategies are a bit more challenging.  It can be done but not as easily as in a larger metro area.

Karl B. · Answer

With Edinboro you have the University but unlike Behrend and Gannon (two Erie colleges) who are expanding, Edinboro has some enrollment/money issues.

David Krulac · Answer

@Jeff C.  There are plenty of small towns located in PA.  Here's some of the things I would look at:

1.  What is the population of the area and how has it changed in the last 10, 20, 30 years?

2.  How are the schools in the area, and how has the school population changed in the last 10, 20, 30 years?

3.. Are there any new industries moving into the area, OR old industries moving out?

I talked to an aquantance of mine who told in his small town that the number of high school graduation class was the same as it was in 1964.  He also told me the town population was the same as 55 years ago.  That mean essentially that there has no been any growth in the area in the last 55 years and that young people graduating from high school and college are moving away for jobs.

From an investment point of view, that means, you have to buy super low, expect no appreciation, expect lower rents that more sought after areas, and expect to have a hard time when you do decide to sell.  In some towns sellers end up selling for the same price as they bought maybe decades before.

I once applied for a building permit in one such town, and the town officials didn't know what to do because it had been 20 years since they had issued such a permit.  Some investor I met were moving their portfolio from Philly to rural coal areas, and buying houses for $20,000 and rent for $450 a month for 3 br house.

Matthew Mueller · Answer

Bumping this thread as I am genuinely curious about it, having evaluated a few investments myself but as of now yet to act

Justin Peace · Answer

Hey Jeff, I am a wholesaler located in Punxsutawney (born and raised). These types of properties are available if you know where to look. A good place to start would be Pennswoods.com go to classifieds and look under both houses and investment properties. Also many of the small towns such Dubois have their own website with a classifieds section. Also Facebook marketplace usually has a few of these types of properties at any given time. Hope this helps.

Joe M. · Answer

When Mercyhurst made students stay on campus, I wonder what that has done to values of off campus properties around the area

...or any school that has done this for that matter

Small western PA markets (Edinboro, Franklin, Punxsutawney, etc)?

Most Popular Reply