Real estate can be one of the safest investments you can make, but that doesn’t make it less intimidating. It’s challenging to know if you’ve picked the right property or if you’ll get a good return on your investment.
The Pennsylvania housing market continues to increase in value each year, and according to Zillow, it often takes just 12 days to go under contract. Industrial properties have also experienced growth, exceeding its 10-year average by more than 30 percent.
These trends are visible throughout the state, including the North Penn area. The statistics indicate that Pennsylvania is a good bet for real estate investments. Still, there is still risk you need to mitigate when it comes to investing, and here are five tips to guide you through the real estate investment process.
The location of a property can significantly affect the success of your real estate investment. According to Redfin, Pennsylvania's hottest real estate markets include Bethel Park, Weigelstown, Norristown, Allentown, Wilkes-Barre, Levittown, Erie, Reading, Harrisburg, and Bethlehem.
That’s not to say other boroughs in Pennsylvania won’t be successful, including those just outside Philadelphia. These are simply the top cities with the fastest growing sales price. The demand is high in these areas, so if you can secure a real estate investment, you should yield a high return.
When considering locations, check out the neighborhood, including school ratings, crime statistics, demographics, and more. Local amenities and access to public transportation can also affect the desirability of rental properties.
Economic stability is another critical factor when evaluating real estate investment properties in Pennsylvania. The unemployment rate remains at 3.4 percent, well below the national average of 4.1 percent. The low rate suggests job market stability, which can be a good indicator of overall economic stability.
With many companies issuing return-to-office mandates, there continues to be a steady demand for rental properties, apartments, condos, office spaces, and more. Pennsylvania residents are staying put thanks to job security and economic stability.
Lenders offer a variety of loans for investment properties, including Pennsylvania debt service coverage ratio (DSCR) loans. These are popular loan types because you don’t need traditional documentation to qualify.
Instead, many lenders want you to prove that the income you’ll generate from the investment property will be enough to cover your monthly mortgage payments. Lenders want to be sure that their investment will have a positive cash flow after all of its obligations and expenses are met.
If you don't want to pursue DSCR loans, you can also consider conventional loans, FHA loans, hard money loans, and other types of financing.
The state in which you buy the building will determine how much capital you need to invest to make it livable. Rundown or older buildings may require updates to modernize their features enough to attract potential tenants. However, that may not be a problem if you flip the property quickly and have a skilled team of professionals on hand.
Investors who are more interested in long-term investments may want newer properties to reduce the upfront repair and renovation costs. The Pennsylvania housing market is hot, so you have options.
Investment properties come with their own expenses. Not only do you need to maintain the facilities, but you also have to consider various tax implications. Pennsylvania property taxes are also some of the highest throughout the United States, which can also eat into your profits.
Many investors opt to hire a property manager to handle the daily operations of the investment property, but that, too, comes at a cost. These miscellaneous expenses can add up if you’re not careful, so it’s vital that you keep an eye on your spending to make sure you are still getting a high return.
On the other hand, your investment in the property can increase its overall value. Replacing the windows, renovating the kitchen, or adding a bathroom can all add value to your investment property. When you add value, you can increase the amount you can charge potential renters. Set aside money for miscellaneous expenses to help mitigate the cost.
Like any state, there are pros and cons of buying investment properties. However, Pennsylvania has a good housing market that can yield a good investment return. Property values are up, and there are low unemployment levels. The economic stability makes it an attractive location for investors.
However, there are some drawbacks. The property taxes are high, and the harsh weather conditions can cause damage over time. Both of these can reduce a property’s profitability, which can cause some investors to pause.
Regardless of these drawbacks, the market in Pennsylvania and the North Penn area continues to be hot. It’s worthwhile to check it out to see how you can generate new income streams through Pennsylvania investment properties.
