Are there any good markets in Pennsylvania ??

[Anthony Liguori]

Looking to possibly invest somewhere in Pennsylvania... I live in NJ and there aren’t any deals here. I was reading some blogs and was told Pennsylvania had some areas that were decent to invest... anyone have any experience in that area or have knowledge of any other markets in other states I can invest in ?

[Chris K.]

@Anthony Liguori

If you look at Pennsylvania as a whole, you have the following markets:

1.Philadelphia/Pittsburgh: the two largest markets. They have millions of people living there.

2. Allentown/Lehigh Valley Area: the third-largest market. This area has almost a million people living there.

3. Tertiary Markets: Scranton/Wilkes-Barre, Harrisburg, Lancaster, York/Hanover, Reading, and their suburbs. Typically they have around half a million people living in the area. 

4. Everything Else: places like State College, Stroudsburg, and Erie where fewer people live.  

Each market has its version of Class A areas and War Zone areas. But as a general rule, cap rates get higher as you go down the list. An investor can make money in any of them. But the strategy will need to change depending on what you want to do.

If you want to look at the Scranton market, look into the suburbs as well in both Scranton and Wilkes-Barre. Everything cash flows at least on paper. The number one mistake I see people make is underestimating reserves. Also, there's no meaningful natural appreciation in these tertiary markets. It more or less keeps up with inflation but not much more. Not an expert in other markets, but I would say that's true for other areas like Harrisburg, Lancaster, York/Hanover, and Reading.

My number one advice to remote investors is to: (1) pick a market; and (2) create a good team around you. Most remote investors do not fail because they picked a bad market. They fail because they don't have a good team. Now the common problem is that most remote investors cannot build a good team because they cannot afford them. Savvy team members understand the Pareto distribution --- so they want to work with investors that they can get consistent work from. Your goal is to make sure your incentives line up with your team members. In my opinion, that requires the investors to focus on a market to get to a point where they have enough projects there to sustain a good team. 

Just my two cents.

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.