Multi families in PA

[Chris Erato]

Hi guys , I’m new to investing . I looking for some good areas in Pennsylvania to buy multi families 3 to 7 units properties. I would appreciate any info on areas I can look into that cash flow ... thanks for your help !

[Cooper Bert]

There are many micro-neighborhoods in the Central PA metro market. Those from a retail background know it as the "Graveyard of big box chains" due to decision by statistical demographics instead of the reality of the market. First and foremost is the total misunderstanding of the relatively small river that divides this small populous metro market. This is like a wall that many will not cross unless the amenity they need is on the other side. Note that the Harrisburg market is small and one can travel from the outer suburb to the opposite outer suburb in about 15 minutes. Businesses have come to understand that entry into the market requires a separate presence on BOTH sides of the river when entering the market. The relatively easy access to all areas of the metro make surrounding cities outside the routine of most Harrisburg metro dwellers (York, Shippensburg, Lebanon, Carlisle)

This applies to the Central PA REI market in that everything from gross income, ethnic makeup, willingness to spend disposable income, credit status, average age, average length of employment, stability, family size, and so forth are dramatically different on each side of the river. And many of these factors are not what you would assume when looking at the stats.

Also remember that the city of Harrisburg, where most of the touted "cash flowing" properties and turnkeys are located, went bankrupt a while ago and has never really recovered on a financial or services basis. The property values and taxes to support the bankruptcy and other city financial debacles (google Harrisburg Incinerator) are going in opposite directions and will continue for some time. There is flight from the city by property owners as taxes skyrocket. Most of the larger local REI "value/cash flow" professionals have totally divested from anything within city limits.

The suburbs present their own mine-fields when purchasing REI of either SFR or MF. Several school districts have had MAJOR incidents of facility misconduct (google it, I don't want to get into specifics) and both purchasing and price value have declined and not yet fully recovered. One of the area's most prestigious developments is in this school district and the property values got incredibly wacked. We will not buy or build in this SD at this point. (disclosure - I've lived in this SD for over 20 years but do not have school-age children)

School districts in the Central PA market cross municipal lines and adjoining houses going to different school districts is common. Even the largest school district has an issue with two very large high schools, which drawn from a gerrymandering division of a number of municipalities. The problem is one high school is semi-desirable and the other is one tenants typically want to avoid. There are several such pitfalls with the school districts. This is hugely important for rentals in this market.

And one of the most desirable suburban townships, with a number of newer developments of both SFR and MF, has recently gone, as the zoning/building officer describes it off the record, "Wacko Green" in the new regulations and commissions it has imposed. Example: We recently had a plot of land under contract and while walking the land discovered that a corner portion of the lot was wet from the ground water runoff of a new development above it. We contacted the Twp to obtain plans from the development and found a quick remediation to the problem. However, within two days, a Twp commission told us that this area would be considered a "wet lands" and we couldn't build within 50 feet of the edge of the "wet land'. More to this story but we didn't buy the property, the owner never could sell the property and we don't look at properties in the Twp anymore.

Finally, there are a number of outer towns and cities where you can find "cash flowing" properties that are, IMO, money pits. Examples are Steelton (closed steel mill) and Middletown (very high Section 8 population). Even one of the most desirable areas near Hershey, with a great SD, has one of the world's biggest mobile home lots which kills values and rents.

Point to this long post is beware and do even more than typical due diligence in this area. It's unique. I'd also add that there is a large contingent of low-end flippers that overbid anything in the under $150K SFR market so we don't buy anything that hits MLS. Finally, I'd suggest using a local realtor that specializes in this market AND the SFR/MF/CRE field. And it wouldn't hurt to have a local partner, who has market experience, and has skin in the game.

Hope this helps!

Then there is TMI. Yes, from way back when. There is still this stigma in a large portion of the Southern suburbs after all this time. TMI is scheduled for shut-down soon, if not already...BUT it still sits on the skyline and is a reminder of what happened to properties AND people. There are many values to be found in SFR in this area as it has seen little development and there is a lot of rural vacant land and farm land.