All Forum Posts by: David Ribardo

@Christopher Morris, it sounds like you have a pretty solid read on things here. I've got a portfolio throughout the Lehigh Valley and would be happy to answer any questions you have about the area. 

I personally look at job growth, appreciation, and overall return on investment projections. Big companies expanding in the area means employment and a strong tenant pool and high occupancy rates. Historical property data makes it easy to pull the numbers and see how investment property values are growing. I've enjoyed some pretty massive appreciation over the past years around here. For example, when I first started in 2018, I was buying duplexes for $75k each. Now they are going for $275k! Overall, though the cash flow in my market may be lower, the strong appreciation has made for a higher total ROI and I've continued to buy here.

Hello and welcome to the forums! If you have any questions about the market, strategies, or need to get connected with any resources, please let me know!

@Ryan Klein welcome to the community! @Justin Brown runs a great investment community and I'll second his advice. Go to his meetup, if you can!

The market is tight right now, with higher interest rates, limited inventory, and high purchase prices making acquisitions challenging. A few years ago we had plenty of these BRRRR deals on the MLS. Now, I have had most success with off-market opportunities.

As a new investor, focus on building your team. Be patient, and set reasonable expectations. If you try to swing for the fences with an aggressive BRRRR strategy, you may find it frustrating. If your goal is to get in the game, have a profitable investment, and build a team to set you up for future growth- the Allentown market will treat you well, even in its current state.

Hello, and welcome to the forums!! 

As an agent, I can't give you any advice... but I can put you in touch with the attorney our team works with to help our clients with this decision. Shoot me a message and I'll put you in touch.

I started off in the exact same way, with my first personal residence becoming a rental. I kept in my own name for ten years, and am now finally selling it. As my portfolio grew, having one in my own name never felt like a major liability or administrative headache.

My first Lehigh Valley property was a three unit, purchased with a partnership under our own names. We chose this since back then we were able to get some better financing terms. As our business grew, we started an LLC and transferred the property in. That triggered us having to pay transfer taxes, as the state treats an LLC as a disregarded entity, even if it contains the same members.

Most of our clients invest using an LLC as their preferred corporate structure. Some of our more active investors use S-Corps, and a few are buying in their own name or with trusts. A brief phone call with an attorney will help you decide on the right fit for your situation.

Hello! Welcome to the forums. Though inventory has gotten tight, the numbers still work here in the Lehigh Valley market. This past month has brought quite a few good deals to the table.

Five years is quite a bit of time to be learning, I'm sure that has set you up for success. What is the biggest barrier to closing on your first deal that you see? 

Hello Jiwon, welcome to the forums. I have quite a few successful clients that are in the NJ/NYC area and invest in the Allentown market. I'm also an out of state investor myself, with experience in Georgia, Louisiana, New Jersey, and North Carolina. 

Allentown is a high-demand market. It has had strong appreciation, excellent job growth and we maintain a large pool of tenants. It's also extremely competitive, with limited on-market opportunities. I chose this location to personally live and work in. I've also spent some time around the NEPA / Wilkes Barre & Scranton areas. Overall those have lower purchase prices that can look attractive. However, it costs the same amount for a hot water heater there as it does in the Lehigh Valley... so assuming maintenance costs are fixed, you will need significantly more units to achieve the same passive income goal. 

Please let me know if you have any more specific questions and I'd be happy to provide you with the data!

Hi @David Pagan, welcome to the forums!

Allentown is my home turf. The Lehigh Valley (Allentown, Bethlehem, and Easton) areas is incredibly investor friendly. The cities are easy to work with, though Eason can be a bit... detail oriented, when it comes to their inspections. There are opportunities in each of the main urban areas that range from low-end row home rentals to high end luxury flips. There are very few HOAs to contend with. The biggest problem you will have is the competition. The investor market here bottomed out after the 2008 crash, but led by downtown revitalization efforts and strong demand from NJ/NYC investors, purchase prices keep going up and inventory remains at all time low levels.

I've taken a look at expanding into other geographic areas. Harrisburg is too far for me to be interested in the drive out there, but too short to make it worth hopping in my plane for the flight. I spent a good deal of time around the Scranton area. Purchase prices are significantly lower, but so are rents. With comparatively much less growth, I'd need a portfolio that was more than double the size to hit my goals. I like a smaller, easier to manage portfolio for the same amount of profits. Reading is similar. The Poconos is another decent market, but it is largely reactive to the demand coming from NYC and North Jersey. The AirBNB market there has been saturated in recent years, and there are big differences from one HOA to another.

Hope this helps!

@Michelle Maldonado Yes, I'd be happy to add you to the list so you have our latest and greatest information. More importantly, awesome work transitioning out of your condo. That's a fantastic and lower stress way to get started with investing!

The short version: Looks like you live in Allentown, so invest there.  

I'll define Allentown as the Lehigh / Northampton county areas. Overall this has been my favorite out of the four major areas I've invested in (Georgia, Louisiana, New Jersey, and Eastern PA). Landlord / tenant laws are very reasonable, and there is strong economic growth in the local area. There are huge numbers of jobs here that pay $25 an hour, which based off a 40 hour work week, make tenants qualified for a $1,350 a month apartment. Aside from Easton, code requirements are pretty reasonable.

I've looked at expanding to NJ, but the landlord / tenant laws and higher taxes are a killer. Most of my clients are from the NY/NJ areas and come here because of these things. I've looked at expanding into the Wilkes Barre and Scranton areas. That looked like it had great potential, since purchase prices were significantly lower. Appreciation there is low, rents are low, and assuming maintenance as a fixed cost (for example, a hot water heater costs $450 from Lowes in Allentown, $450 from Lowes in Scranton, installation takes the same time, and labor costs aren't all that different), the ROI isn't great. I'd need three times as big of a portfolio to achieve my goals up there. Yes, I could scale up quicker because of the low costs, but I'd much rather have a smaller portfolio of higher-profit units.

If you intend to self-manage the property, I'd immediately cross out everything that is more than an hour drive away. I have inherited quite a few property management clients that were formerly self-managing remotely. The belief that "no one takes better care of my own properties than myself" is commonly held, as well as thinking that the extra profits would help them scale up quicker. The reality for many is that life gets busy, the half-day trip to the property is difficult to cram in, and that property management is tough. One bad decision can kill the profitability of a unit for years.

What happens when someone needs to be there for a rental inspection, or for the utility company to inspect a meter - do you go yourself? How much time do you spend, and what is the value of that time? What happens when a tenant needs to be evicted because they are running a car in the garage and causing carbon monoxide poisoning to the tenants above it? What happens when your tenants call you and say "I think the neighbor below me died, can you do something?" Or one of my favorites... the tenant reports the roof is leaking. Three roofers all tell you that the roof needs to be replaced, but you are skeptical. Do you walk the place yourself, and realize that all the contractors are wrong, it's that the top floor tenant has four puppies that are peeing everywhere, and it is urine coming through the ceiling? That one walkthrough by my maintenance coordinator saved our client over $10,000. 

Welcome to the forums David! Keep these questions going so we can help you be successful!

Hi Nina! What kind of a property management company are you looking for? 

Overall, there are a variety of options here that can fit just about any investing style. I run the Allentown office of Neo Management Group. I've built around the way I want my own personal rental properties managed. I have personally had good experiences with KPMM and Empire, which are large companies with consistent performance. Whenever one of their management clients sells a property, it's always been an easy addition to our portfolio. There are plenty of others, ranging from huge portfolios with digital systems to one person, yellow notepad based operations.

Some things to think about: 

How involved do you want to be? If you want to be active in managing your properties, a smaller, more flexible company will probably be adaptable to your requests. A bigger company may not be as willing to customize systems based on your preferences.

Do they have in-house maintenance? This can be great, in terms of responsive service and not competing against other sources of business. It can also lead to higher overall costs due to a lack of competition.

How are they structured financially? Most of the companies around Allentown are between 7-10% for management fees, and a one-month rent tenant placement fee. The odds and ends are important here and add up to a huge difference. Do they charge you for evictions? For management of full renovations? If they collect late fees, do they go to the company, to you, or get split? 

I encourage you to interview several property managers. That will let you move ahead confidently, knowing you have the one who is the best fit for you!