Is Now the Time to Buy in Central PA?

Are you asking yourself  “Is now the time to buy an investment property?”

Money Crowing

That is a great question. Is the economy going to continue to grow as well?  Indication from GDP is that we continue to maintain a fabulous growth in our economy. The GDP grown was 3.2% in first quarter of 2019. A ‘Regular’ grown rate is 1.9%, so this number is well above the average.

What does this mean for investments? Well, it means rents are growing, demand is strong and your units will be easily filled, which results in the best cash flow.

If you wait to purchase until we have another recession, it may be a long wait. In the meantime, the low vacancies and higher rents provide a return that balances out any higher sale price.

Take these examples:

Scenario 1. If you purchase a four unit building for $250,000.

The building stays fully rented, so your Net Operating Income is a strong $25,000. This is a 10% CAP Rate.

Scenario 2. In a recession, you get a great deal on the same 4 unit at $200,000.

The building always has one unit empty, and rents are lower to keep the tenants you have. Your Net Operating Income is $13,800. This results in a 6.9% CAP Rate.

See the point? Purchase good deals in a strong economy, you will come out on top in the cash flow game.

The above scenarios are based solely on cap rates, which are an important measure of value. However, there is also the growth rate to consider as well. Buying in a downturn may mean that your potential for growth in value is much greater, which will grown in relation to the overall economy.

The Internal Rate of Return is a measure of how the property performs with both income and growth taken into consideration. In scenario #2 above, to really understand the outcome the growth rate should be added in as well.

Let’s say after five years, your income grows to $25,000. The value of the building has now increased to $250,000. You sell for a $50,000 profit. The overall rate with growth added in is 12.64%.

The growth rate now increases your return beyond just looking at income. Many factors play into what may be your best scenario. For some investors, the income stream is much more important. For others, it is the shelter from taxes. These factors may outweigh the benefits of just looking for growth in the investments.

If you would like to learn more, contact us for a consultation, and let us prove the value of professional service with results to your bottom line.

3 Reasons to Build Rentals in Central PA

What is the hardest part of being a Landlord? If you have good tenants, the hardest part is staying on top of maintenance and dealing with the calls of a broken toilet late at night.

If you could avoid that headache, buying more rental property would be an easy choice, right? The best solution is to purchase newer rentals, to minimize the cost and frequency of repairs.

Just one problem: finding good newer property to purchase! Most newer single family homes sell at a price that is not cost effective for rentals. Individual townhomes are not an easy solution, as many condos and townhomes restrict rentals. If you do find townhomes that are not restricted in rentals, then the condo/HOA fee can make it less efficient of a rental.

Solution? Find a community and build some rentals yourself. This is easier than you think. If you have a good builder partner, they can handle the work, while the investor handles the capital.

If you are interested in working on a development project, the time to build that stock is now. During the recession, building almost ceased, so now there is pent up demand for new housing stock in rentals and sales. This provides the investor the opportunity to enter a hot market and build future appreciation.

The reasons Central PA makes the ideal place for an multi-family development right now:

  1. Cap rates are higher in smaller markets. Contrast a CAP Rate of 6.36% (10 Year average) in Philadelphia with 6.91% in Lancaster and 7.34% in York County

2. The demand for rentals are strong. With many manufacturing and supply chains       housed in the area, jobs are plentiful which boosts the housing demand.

3. A low inventory of newer units means the developer will be rewarded when time comes to sell with a healthy investor demand.

For a list of options to build rentals in Central PA, and builder partners,  contact us for further details. Call Naomi at 717-819-2825 or email naomibrownhomes@gmail.com

Comparing CAP rates in Central PA

As investors, we are always looking to make a smart purchase. You have heard the saying: ‘The money is made when you buy, not when you sell’.

Weighting the CAP rates on an investment is an art. As the ‘Artist’ for your painting, the decision of what CAP rate to apply takes into account the factors of the area around it. Considering the CAP rates of the different Counties in Central PA is a useful tool to use as you paint your future.

Here is a look at the prevailing economics for Multi-Family Investments.

Dauphin County

-Currently at 8.16% average. The 10 year range is 8.99%.

Cumberland County

-Currently at 7.70% average. The 10 year range is 7.83%.

York County

-Currently at 10.04% average. The 10 year range is 11.04%.

Lancaster County

-Currently at 9.60% average. The 10 Year range is 10.48%.

Interesting to note, both York and Lancaster County are at the lowest point of their 10 year average range. This reflects the rising prices in the market and improving economy.

All counties show a lower than average CAP rate, which means that the deals are harder to find and in higher demand than ever before.

If you are looking to maximize your profit and find better than average returns, call for a consultation. Together we can create a masterpiece for your future.

Naomi Brown 717-819-2825

Hit me: Investments 101

Just starting out as an investor?  Have no fear, it is simple.

Why choose real estate as your investment? Here are a couple reasons:

  • -It is inflation protected, and grows in value as the inflation rate increases.
  • -Once a loan is paid off, you enjoy ongoing cash flow for years to come.
  • -Costs to operate and own the real estate are all deductible.
  • -‘Passive Income’ from investments are subject to less tax.

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So you are ready to go find a property? Here a a few things to know first:

  • -Loans will require a 25-30% down payment, plus closing costs, and funds needed to fix the home up when needed. If you have cash, a discount can be expected.

 

  • -It is a wise idea to have your property in an LLC, so plan ahead. They are easy to create, but it will take a little time.

 

  • -Consider your strategy first: will you manage it yourself? Hire a property manager? If you will manage yourself, being close by makes it much easier.

 

  • -Research what rental rates are, so you know how much you will make on your investment.

 

  • -Learn to figure a CAP rate. This is a simple calculation where the money made after expenses is divided by the sale price. The ratio is your CAP rate. Rates vary in this area from 6-12%.

Make THIS YEAR the time you take action to ensure your future financial freedom.

Call or text with questions and get started making money!

 

Opportunity Zone: Investments in Columbia, PA

Looking to take advantage of some local opportunity zone investments?

Columbia is experiencing gentrification with many signs of growth. Local census tracts have been designated as opportunity zones, which increases the return.

columbia

Focus on quality lifestyles have drawn attention here as well. With a large riverfront park and bike trail, local festivals, antique malls and new restaurants cropping up, many people have been drawn to the area. Easy commutes to both York and Lancaster make it a logical location for access to work.

All of these increasing signs of growth make it the perfect time to work on redevelopment projects in the area, while also taking advantage of tax saving with opportunity zones.

Here is a list of properties that could be high in potential.

  • 239 Poplar Street, Columbia:

A multi-use brick building with 7,500 SF and prominent location. Asking $424,900. High Density Residential.

 

  • 28 N. 2nd St, Columbia:

Three story multi-purpose building with 5,970 SF. Close to river and main shopping area. Asking $302,500. High Density Residential.

 

  • 360 Chestnut Street, Columbia:

Classic Victorian property, formerly a Bed and Breakfast. Approximately 5,000 SF, asking $350,000. Medium Density Residential, Light Business.

 

  • 411-413 Locust & 13 N 4th Street, Columbia:

Mixed uses with Warehouse, Retail and Residential units, 13, 225 SF. Asking                         $412,500. Downtown Commercial.

 

  • 401-417 N 3rd Street, Columbia:

Commercial and Residential mixed use, currently housing Antique Business with 13,500 SF. Asking $450,000. Downtown Commercial.

 

  • 185 N Front Street, Columbia:

Large development site right across from river and next to Olde 462 bridge. Asking $650,0000. Riverfront Commercial.

 

  • 309-315 Locust St, Columbia:

Formerly Hotel and Restaurant, Mixed Retail and Residential use. Building is in need of complete rehab, 23,000 SF. Asking $225,000. Downtown Commercial.

Not sure how the Opportunity zone works?

The summary is that there are tax savings that are offered to the investor who does a re-development project in one of these zones.

  • Much like a 1031 Exchange, the capital gain from current investment may be rolled into a new project. If left in for 7 years or longer, 15% of the original capital investment is excluded from tax. (The other 85% must still be paid)
  • If held for 10 years, there is no tax on the capital gain of the new investment. Your basis is ‘stepped up’ one time to current market value.
  • Investments must be in a ‘Fund’ that then develops and holds the real estate.
  • The property purchased must be ‘Improved’ by 50% or more of building value. (Land is excluded.)

As an Investment Realtor in this local market, contact us for detailed information on these properties, and information on opportunity zones. Naomi Brown 717-819-2825

river

Love Parades? Come see the Home Parade this weekend!

Love to see decked out model homes?

Come see a ‘Parade’ of them all over York County this weekend!

The Parade of Homes is a weekend event where many model homes from all the local builders are open for extended hours. Many offer prize entries, and staff is on hand to answer all your questions.

The Parade Main Page can be found here:  https://yorkbuilders.com/events/parade-of-homes/

September 15th & 16th, 10 A.M. to 5 P.M.

The Carr, Cleaver and Pendergast Team represent:

Jeff Henry Builders: https://yorkbuilders.com/home/jeffreylhenry2018-entry/

Dombach Builders: https://yorkbuilders.com/home/dombach2018-entry/

Come join us at these locations to see how easy building your dream home can be!

 

When the call comes

“I need your help”

My friend’s words came through the phone with a high level of anxiety.  “My husband just had a stroke, and we need to move. I can’t bring him home because we have all these stairs.”

My heart goes out to them, and I go immediately to help. But now, their lives have been stressed to the breaking point, trying to move while he is recovering from a stroke.

I have encountered this as a Realtor more times than I want to count. Every time, seeing the struggle I wish we could prevent this from happening again.

If you are in a place where you wonder, “Is now a good time for me to make a move, before we are in a stressful situation?”  I can answer yes, please take action now to prevent the anxiety and stress later.

As a Realtor intimately familiar with the market, we can save you many hours of time by matching you with the best options for your needs and budget. Call for a no obligation consultation to make an easy move, before it becomes a call for help.