Ultimate Lehigh County Real Estate Investing Guide for 2024

The term BRRRR is a description of a long-term rental strategy — Buy, Rehab, Rent, Refinance, Repeat. This is a way to grow your investment portfolio rather than acquire one rental home. It is critical that you are qualified to do a “cash-out” mortgage refinance for the method to be successful.

When you have finished improving the asset, its value has to be more than your combined purchase and fix-up expenses. Then you withdraw the equity you generated out of the property in a “cash-out” refinance. You buy your next rental with the cash-out funds and do it anew. This assists you to steadily add to your portfolio and your investment revenue.

If an investor has a significant number of investment homes, it is wise to pay a property manager and establish a passive income stream. Discover one of the best property management firms in Lehigh County PA with the help of our exhaustive directory.

Factors to Consider

Population Growth

Population rise or loss tells you if you can expect strong results from long-term real estate investments. If the population increase in a location is strong, then additional renters are definitely relocating into the market. The location is attractive to employers and workers to locate, work, and have households. Increasing populations maintain a reliable renter pool that can handle rent growth and home purchasers who assist in keeping your property prices high.

Property Taxes

Real estate taxes, just like insurance and maintenance expenses, may differ from place to place and have to be looked at cautiously when predicting possible returns. High payments in these areas jeopardize your investment’s bottom line. Excessive property tax rates may predict a fluctuating city where expenses can continue to rise and should be thought of as a warning.

Price to Rent Ratio

The price to rent ratio (p/r) is an illustration of how much rent can be demanded in comparison to the market worth of the property. An investor will not pay a steep sum for an investment property if they can only demand a small rent not allowing them to pay the investment off in a realistic time. You will prefer to discover a low p/r to be assured that you can set your rents high enough to reach acceptable returns.

Median Gross Rents

Median gross rents are a significant sign of the vitality of a rental market. Hunt for a repeating rise in median rents year over year. If rental rates are being reduced, you can drop that area from consideration.

Median Population Age

Median population age will be nearly the age of a typical worker if a community has a good source of tenants. You’ll find this to be accurate in regions where workers are migrating. A high median age signals that the current population is leaving the workplace with no replacement by younger workers relocating in. That is a weak long-term financial scenario.

Employment Base Diversity

A diversified employment base is something an intelligent long-term rental property owner will look for. If the community’s employees, who are your renters, are employed by a diverse assortment of businesses, you can’t lose all all tenants at the same time (together with your property’s value), if a dominant company in the community goes bankrupt.

Unemployment Rate

You won’t be able to enjoy a steady rental income stream in a market with high unemployment. Out-of-job residents are no longer clients of yours and of related businesses, which produces a ripple effect throughout the community. The remaining workers could find their own incomes marked down. Current renters may become late with their rent in such cases.

Income Rates

Median household and per capita income levels let you know if an adequate amount of ideal renters dwell in that area. Increasing incomes also tell you that rental fees can be hiked throughout the life of the rental home.

Number of New Jobs Created

The more jobs are consistently being produced in a region, the more reliable your tenant supply will be. A larger amount of jobs mean more tenants. This enables you to buy more rental properties and replenish existing vacancies.

School Ratings

The reputation of school districts has an undeniable influence on real estate prices across the area. Well-endorsed schools are a necessity for companies that are considering relocating. Moving employers bring and attract prospective renters. New arrivals who purchase a home keep real estate market worth high. Good schools are an essential ingredient for a strong property investment market.

Property Appreciation Rates

Real estate appreciation rates are an integral portion of your long-term investment scheme. Investing in real estate that you intend to hold without being positive that they will grow in price is a formula for disaster. You don’t need to take any time reviewing regions that have low property appreciation rates.

Residential real estate where tenants reside in furnished spaces for less than a month are referred to as short-term rentals. Long-term rental units, such as apartments, charge lower payment per night than short-term rentals. Because of the increased rotation of occupants, short-term rentals involve additional recurring care and sanitation.

Home sellers standing by to relocate into a new house, people on vacation, and corporate travelers who are stopping over in the city for about week enjoy renting a residential unit short term. Regular real estate owners can rent their homes on a short-term basis with platforms such as AirBnB and VRBO. An easy method to enter real estate investing is to rent a residential property you currently possess for short terms.

Short-term rental units require interacting with renters more repeatedly than long-term rental units. This dictates that landlords deal with disputes more frequently. Ponder covering yourself and your assets by adding any of investor friendly real estate attorneys in Lehigh County PA to your network of experts.

Factors to Consider

Short-Term Rental Income

You should imagine the range of rental income you’re aiming for based on your investment analysis. A glance at a market’s recent average short-term rental rates will show you if that is a strong location for your project.

Median Property Prices

When acquiring investment housing for short-term rentals, you need to determine the amount you can spend. The median price of real estate will show you whether you can manage to participate in that city. You can fine-tune your property search by examining median values in the location’s sub-markets.

Price Per Square Foot

Price per square foot gives a general picture of property values when looking at similar units. If you are examining similar types of property, like condominiums or separate single-family residences, the price per square foot is more reliable. Price per sq ft may be a quick way to analyze different sub-markets or homes.

Short-Term Rental Occupancy Rate

The number of short-term rental units that are currently filled in a community is important information for an investor. A high occupancy rate indicates that an extra source of short-term rentals is wanted. Low occupancy rates signify that there are more than enough short-term rental properties in that community.

Short-Term Rental Cash-on-Cash Return

Cash-on-cash return is a means to assess the value of an investment venture. You can determine the cash-on-cash return by taking your Net Operating Income (NOI) and dividing it by your cash investment. The result is a percentage. High cash-on-cash return indicates that you will recoup your investment faster and the purchase will be more profitable. Sponsored investment purchases will reach stronger cash-on-cash returns because you will be spending less of your own cash.

Average Short-Term Rental Capitalization (Cap) Rates

One measurement illustrates the value of real estate as a revenue-producing asset — average short-term rental capitalization (cap) rate. An income-generating asset that has a high cap rate as well as charging average market rental prices has a high market value. If cap rates are low, you can prepare to pay more for investment properties in that region. The cap rate is calculated by dividing the Net Operating Income (NOI) by the price or market worth. This shows you a ratio that is the year-over-year return, or cap rate.

Local Attractions

Short-term rental units are desirable in communities where visitors are drawn by activities and entertainment venues. Individuals go to specific communities to attend academic and sporting events at colleges and universities, see competitions, cheer for their children as they compete in fun events, party at annual fairs, and stop by amusement parks. At specific times of the year, locations with outside activities in the mountains, oceanside locations, or near rivers and lakes will bring in crowds of visitors who require short-term rentals.

To fix and flip a home, you have to buy it for below market value, conduct any required repairs and improvements, then dispose of it for better market price. To get profit, the flipper has to pay below market value for the property and determine what it will cost to renovate the home.

It’s a must for you to understand what properties are selling for in the city. You always want to investigate the amount of time it takes for homes to sell, which is determined by the Days on Market (DOM) metric. Selling the property immediately will help keep your costs low and maximize your returns.

In order that home sellers who have to get cash for their house can easily find you, showcase your availability by using our list of companies that buy houses for cash in Lehigh County PA along with top real estate investing companies in Lehigh County PA.

Additionally, work with Lehigh County bird dogs for real estate investors. Professionals in our directory specialize in procuring desirable investment opportunities while they’re still under the radar.

Factors to Consider

Median Home Price

Median home price data is an important benchmark for evaluating a potential investment area. Lower median home prices are a hint that there may be an inventory of houses that can be purchased for lower than market value. This is a primary feature of a fix and flip market.

When regional data shows a quick drop in real property market values, this can highlight the accessibility of potential short sale houses. Investors who work with short sale specialists in Lehigh County PA receive regular notices regarding potential investment properties. Find out how this works by reviewing our guide ⁠— How Do I Buy a Short Sale House?.

Property Appreciation Rate

Are real estate prices in the community moving up, or on the way down? You are looking for a constant increase of local home values. Unpredictable market value shifts aren’t good, even if it is a substantial and quick growth. When you are acquiring and liquidating quickly, an erratic environment can harm your venture.

Average Renovation Costs

Look closely at the potential repair spendings so you’ll find out whether you can achieve your goals. Other spendings, like permits, can increase expenditure, and time which may also turn into additional disbursement. To make a detailed budget, you’ll have to find out if your construction plans will have to use an architect or engineer.

Population Growth

Population information will show you whether there is steady need for residential properties that you can produce. When the number of citizens isn’t growing, there is not going to be an ample supply of purchasers for your properties.

Median Population Age

The median residents’ age is a contributing factor that you might not have taken into consideration. When the median age is the same as the one of the usual worker, it’s a good indication. A high number of such residents reflects a stable source of home purchasers. People who are about to exit the workforce or have already retired have very specific residency requirements.

Unemployment Rate

You aim to have a low unemployment rate in your target city. An unemployment rate that is lower than the nation’s average is preferred. When it is also lower than the state average, that’s much more attractive. Unemployed people cannot purchase your houses.

Income Rates

Median household and per capita income amounts tell you if you will find adequate purchasers in that market for your houses. When people buy a home, they usually have to obtain financing for the home purchase. To be eligible for a mortgage loan, a borrower should not be using for a house payment a larger amount than a specific percentage of their wage. You can figure out from the area’s median income whether a good supply of people in the area can manage to buy your homes. In particular, income increase is critical if you need to grow your investment business. When you need to raise the purchase price of your houses, you want to be certain that your clients’ wages are also going up.

Number of New Jobs Created

Knowing how many jobs appear yearly in the community adds to your assurance in an area’s investing environment. Houses are more conveniently liquidated in an area with a robust job environment. With a higher number of jobs appearing, more prospective homebuyers also migrate to the region from other towns.

Hard Money Loan Rates

Investors who acquire, repair, and liquidate investment real estate opt to enlist hard money and not typical real estate loans. This strategy lets investors complete profitable ventures without holdups. Locate private money lenders for real estate in Lehigh County PA and contrast their rates.

In case you are inexperienced with this financing type, understand more by using our guide — How Does a Hard Money Loan Work in Real Estate?.

As a real estate wholesaler, you sign a sale and purchase agreement to buy a residential property that other real estate investors might need. However you don’t buy the home: once you have the property under contract, you get someone else to become the buyer for a fee. The investor then settles the transaction. The wholesaler does not sell the property — they sell the rights to purchase it.

Wholesaling relies on the involvement of a title insurance company that is okay with assignment of purchase contracts and understands how to deal with a double closing. Discover investor friendly title companies in Lehigh County PA on our website.

To understand how wholesaling works, study our insightful guide How Does Real Estate Wholesaling Work?. When using this investment method, list your firm in our directory of the best real estate wholesalers in Lehigh County PA. That will allow any likely clients to see you and get in touch.

Factors to Consider

Median Home Prices

Median home values in the area will show you if your designated price range is viable in that location. Lower median values are a solid indication that there are plenty of properties that can be bought under market worth, which real estate investors have to have.

A rapid depreciation in the market value of real estate may generate the abrupt appearance of homes with owners owing more than market worth that are hunted by wholesalers. Short sale wholesalers can reap perks using this opportunity. But, be cognizant of the legal risks. Find out about this from our extensive explanation Can You Wholesale a Short Sale?. Once you are keen to start wholesaling, look through Lehigh County top short sale legal advice experts as well as Lehigh County top-rated foreclosure lawyers lists to locate the right counselor.

Property Appreciation Rate

Median home value movements clearly illustrate the home value picture. Investors who want to sit on investment assets will want to know that residential property values are constantly going up. Both long- and short-term investors will avoid an area where home market values are decreasing.

Population Growth

Population growth statistics are an indicator that investors will look at carefully. An increasing population will need new housing. This combines both rental and resale real estate. When a population isn’t multiplying, it doesn’t require additional residential units and investors will search in other locations.

Median Population Age

A dynamic housing market necessitates residents who are initially leasing, then transitioning into homeownership, and then buying up in the residential market. For this to be possible, there needs to be a steady employment market of prospective tenants and homebuyers. That is why the market’s median age should be the age of skilled workers in the workplace.

Income Rates

The median household and per capita income should be increasing in an active residential market that investors want to participate in. If tenants’ and home purchasers’ wages are getting bigger, they can manage surging lease rates and residential property purchase costs. That will be important to the real estate investors you need to draw.

Unemployment Rate

Real estate investors whom you approach to close your contracts will deem unemployment stats to be a crucial bit of insight. High unemployment rate triggers more renters to pay rent late or miss payments altogether. Long-term real estate investors won’t purchase a property in a place like this. High unemployment creates poverty that will stop interested investors from buying a house. Short-term investors will not take a chance on being cornered with a property they can’t liquidate easily.

Number of New Jobs Created

The frequency of jobs produced yearly is an essential component of the residential real estate framework. New jobs produced mean plenty of employees who look for properties to rent and purchase. This is beneficial for both short-term and long-term real estate investors whom you rely on to acquire your contracted properties.

Average Renovation Costs

An important variable for your client investors, specifically house flippers, are rehab costs in the market. Short-term investors, like house flippers, can’t make money if the price and the renovation costs amount to a higher amount than the After Repair Value (ARV) of the house. Give preference to lower average renovation costs.

Investing in mortgage notes (loans) pays off when the mortgage note can be obtained for less than the remaining balance. The debtor makes subsequent payments to the mortgage note investor who is now their new mortgage lender.

Performing notes are loans where the homeowner is consistently current on their loan payments. Performing loans earn you monthly passive income. Some mortgage note investors look for non-performing notes because if the mortgage investor cannot satisfactorily re-negotiate the mortgage, they can always take the property at foreclosure for a low price.

One day, you could grow a group of mortgage note investments and lack the ability to oversee the portfolio without assistance. When this happens, you might select from the best loan servicers in Lehigh County PA which will designate you as a passive investor.

If you choose to take on this investment strategy, you ought to put your business in our list of the best real estate note buyers in Lehigh County PA. Joining will make you more noticeable to lenders providing lucrative opportunities to note investors like yourself.

Factors to consider

Foreclosure Rates

Mortgage note investors looking for valuable loans to purchase will hope to see low foreclosure rates in the market. High rates might signal investment possibilities for non-performing mortgage note investors, however they need to be careful. But foreclosure rates that are high often signal a slow real estate market where selling a foreclosed unit will likely be challenging.

Foreclosure Laws

Mortgage note investors want to know the state’s regulations concerning foreclosure before investing in mortgage notes. They’ll know if the state dictates mortgage documents or Deeds of Trust. With a mortgage, a court has to approve a foreclosure. A Deed of Trust allows the lender to file a notice and continue to foreclosure.

Mortgage Interest Rates

The mortgage interest rate is determined in the mortgage notes that are bought by note investors. This is an important element in the investment returns that lenders achieve. Regardless of which kind of investor you are, the note’s interest rate will be critical for your predictions.

The mortgage loan rates charged by conventional lending institutions aren’t identical everywhere. Private loan rates can be slightly more than traditional interest rates due to the larger risk accepted by private lenders.

Profitable mortgage note buyers routinely search the rates in their market set by private and traditional mortgage companies.

Demographics

A community’s demographics data help mortgage note buyers to streamline their efforts and properly use their resources. It is crucial to know if a sufficient number of citizens in the market will continue to have good employment and incomes in the future.
Performing note investors look for clients who will pay on time, creating a repeating revenue flow of mortgage payments.

The same place might also be beneficial for non-performing note investors and their end-game strategy. When foreclosure is necessary, the foreclosed collateral property is more easily liquidated in a strong market.

Property Values

Note holders need to find as much equity in the collateral property as possible. If the value is not much more than the loan amount, and the lender needs to start foreclosure, the property might not generate enough to repay the lender. As mortgage loan payments reduce the amount owed, and the value of the property increases, the homeowner’s equity grows.

Property Taxes

Usually homeowners pay property taxes via mortgage lenders in monthly portions when they make their mortgage loan payments. The lender passes on the property taxes to the Government to make sure they are paid promptly. If the homeowner stops paying, unless the mortgage lender takes care of the property taxes, they will not be paid on time. If a tax lien is filed, the lien takes first position over the mortgage lender’s note.

If property taxes keep going up, the customer’s mortgage payments also keep increasing. This makes it tough for financially challenged homeowners to meet their obligations, and the mortgage loan could become delinquent.

Real Estate Market Strength

Both performing and non-performing mortgage note investors can do business in a strong real estate environment. As foreclosure is a crucial element of note investment strategy, appreciating property values are key to finding a desirable investment market.

Strong markets often offer opportunities for note buyers to generate the first loan themselves. For experienced investors, this is a useful segment of their investment strategy.

Many real estate investment organizations are conceived as trusts called Real Estate Investment Trusts or REITs. Before REITs were created, real estate investing used to be too costly for most investors. REIT shares are not too costly for the majority of investors.

Shareholders in these trusts are completely passive investors. The liability that the investors are taking is distributed within a group of investment assets. Investors are able to sell their REIT shares anytime they choose. Participants in a REIT aren’t able to recommend or submit assets for investment. You are confined to the REIT’s selection of real estate properties for investment.

Real estate investment funds are basically mutual funds that focus on real estate companies, including REITs. The fund doesn’t hold properties — it owns shares in real estate firms. These funds make it doable for more people to invest in real estate properties. Whereas REITs are meant to distribute dividends to its members, funds don’t. The value of a fund to an investor is the expected increase of the value of the shares.

You can choose a fund that specializes in a targeted kind of real estate you’re aware of, but you don’t get to select the location of each real estate investment. Your choice as an investor is to select a fund that you believe in to supervise your real estate investments.