201: Season Two Opener—The History of Lehigh Valley and The Current Real Estate Market
Old Bethlehem Steel mill
Episode Transcript
Why is the Lehigh Valley such a hot place to invest? Well in this season, we're going to talk about understanding the real estate potential of the Lehigh Valley and it's going to be jam packed with facts and information to help you make educated decisions on where your investments should be placed. Welcome to growing empires hosted by real estate entrepreneur and trusted investment advisor Jennifer de Jesus. Growing empires provides insight to building wealth, through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.
00:36
I'm super excited about this season because the Lehigh Valley is my home and has been my home for 44 years. I was born and raised here and haven't left. It's where I choose to have my own investment properties and it's where I choose to set up and prepare for my children's future. I think that throughout this season, you're going to find that the Lehigh Valley has some major components that make real estate investing easy as well as safe.
01:00
You're gonna hear me say three words over and over again throughout season two that's balanced, diversified and growing. Those are the three words that I would use to describe the Lehigh Valley. So what can you expect from season two? Well, we're definitely going to have some special guests episodes, we're going to have the infamous Question and Answer segment as well as our myth buster segment, some tips and tricks regarding investing in the Lehigh Valley, and specifically what you need to know what's the sweet spot? What should you invest in when you get here? And how can you be sure that your investments are going to be recession proof and/or bullet proof, as I like to reference. So let's get started here on some key facts. The Lehigh Valley is named because it's composed of an actual Valley formed by the Lehigh River and it lies between two mountain ranges, the Blue Mountain to the North and the South Mountain to the south. The Lehigh Valley is composed of two counties, Lehigh and Northampton County, and in those counties we have three major cities Allentown, Bethlehem and Easton. Those three cities are going to be really important to many topics because they are really the hub or the center of the investment activity and or rental community in our local area. Easton, which borders New Jersey, is the smallest of the three. It's very much a commuter population or commuter town, I should call it and it is home to one of the largest open air outdoor markets and festivals in the area. Easton is also home to Lafayette College and the Crayola factory. Bethlehem, which is roughly 70,000 people is home to Lehigh University, as well as Just Born Candies and the Bethlehem market is unique in the sense that it gets a higher dollar per square foot for an average rental than any of the other cities. I think part of that is because the demand is really high for this area. Because of its central location. Bethlehem is definitely the hub for all warehousing on the East Coast. So it makes it very good for commuter population as well as being in close proximity to all the attractions to this area. Allentown which is the largest or the three ironically has the lowest taxes and you need to know that because obviously that impacts your net operating income Allentown is the home to the PPL center which hosts the Lehigh Valley Steel Hawks and the Lehigh Valley Phantoms. JB Rileyville, the area's largest developer, is building many office and retail structures as well as hundreds of apartments to keep up with the demand of the growing population.
3:28
The top five industries in this region are finance, manufacturing, education, professional services and health care. The top five employers are the Lehigh Valley Hospital and Health Network, St. Luke's Hospital and Health Network, Amazon, Lehigh Valley's Physicians Group, and Mack Trucks. The Lehigh Valley is home to 11 colleges and university and it's known for its nightlife, entertainment, arts and outdoor activities. The Lehigh Valley is booming with opportunity and according to Site Selection magazine, we were in the top five of the fastest growing regions with less than 1 million in the United States. The Lehigh Valley has been named the most affordable place in the most desirable market in the United States. So the Lehigh Valley is located 90 miles west of New York City, 60 miles north of Philadelphia and 80 miles east of Harrisburg. The Lehigh Valley has been a perfect place for companies seeking to operate in the East Coast and that's why several nationally known companies have established their headquarters here. Those include Air Products, PPL Corporation, Martin Guitar, Crayola, Just Born, Olympus and many more. We're the 69th largest metropolitan city. The population of Pennsylvania is 821,173 people. The two county population, Lehigh and Northampton county, is 674,603 - a huge, huge amount of people. So essentially almost three quarters of the amount of people that live in Pennsylvania live in the Lehigh Valley. Our gross domestic product reached $41.2 billion. The median age here is 40.5. The median household income is $64,000. The unemployment rate as of March of 2020 was 5.8. Historically, it's been 4.2 and in the last three years prior to COVID, has not been about 5%. During COVID, in the month of April, the unemployment rate hit as high as 16.5% and it has been trending down ever since. The labor force here is 355,600 people. The percentage of residents with college degrees here is 31.7%. And our population growth since the last decennial census has been 4.2% in growth. In 2018 and 2019 we were ranked the third best region for development below New York City and Philadelphia, with more than 15,000 businesses contributing to the industrial base.
5:49
Manufacturing is alive and well in the Lehigh Valley for sure. We've got 700 manufacturers employing nearly 34,000 workers and manufacturing is the region's third largest sector, in terms of jobs, and the second largest in terms of economic output. Manufacturing makes up 18.4% of the Lehigh Valley's 41.2 GDP and is larger than even in the days of Bethlehem Steel. Some of the major manufacturing employers in this area are B. Braun Medical, Bosch, Lutron Electrics, Mack Trucks, OraSure, Victaulic and quite a few others. Our healthcare and education segment certainly cannot be denied. It's one of the Lehigh Valley's greatest quality of life assets and it provides residents and companies immediate access to some of the nation's greatest hospitals and health networks. The Lehigh Valley is home to a multitude of World Class institutions for education, both technical and vocational schools. Some of the top just to name a few: Lafayette College, Lehigh University, Lehigh Valley Health Network, Moravian College, St. Luke's University Health Network. The rise of e-commerce has increased the importance of transportation, warehousing, and logistics which is the fastest growing sector in the Lehigh Valley economy. With a 9.5 year over year growth in economic output this sector is added 10,000 jobs in the region within the last five years. Lehigh Valley’s central location, as we'd mentioned before, makes us the prime location for transportation and logistics companies. Some of the major facilities out here are Amazon, BMW, FedEx, Walmart, NFI, and more. From the food and beverage segment, Lehigh Valley’s prime agricultural areas and abundance of fresh water and natural resources as well as a proximity to major East Coast population centers, have long made it the ideal location for food and beverage companies. Some of those that you can find here a Boston Beer Company, Coca Cola, Fresh Pet, Nestle Waters, Niagara Waters, and Ocean Spray.
07:45
The episode will continue in just a moment.
07:49
As a real estate investor, understanding the nuances of the market is critical to sourcing the right property for your portfolio. Knowing what the market will support in terms of lease ability and potential rental income is a vital part of that equation. You want your property to be in good condition and in a location that's attractive to high quality tenants. If you wish to acquire a property that becomes the gem of your portfolio, you're going to need help to do it right. The good news is you have a great resource who can help you slice through the challenges of finding your ideal property and that's me. So whether you're just getting started and are unsure of which market to start with, or whether you know the market but can't find the right property, I can help. Visit GrowingEmpires.com and schedule a call with me today. One simple conversation can help you avoid wasted hours, days and weeks, and also help you avoid costly mistakes that will weaken your portfolio. Schedule that call with me today at GrowingEmpires.com, that's GrowingEmpires.com and I'll make sure that I help you find that home run property to add to your portfolio.
08:53
So let's move on to the Lehigh Valley housing market. So the Lehigh Valley housing market has been favoring sellers for quite some time, as inventory has hit record lows. The most recent 2020 data shows a very healthy buyer demand and constrained supply, which continues to be the story for much of the country. In the Lehigh Valley specifically, it's had a drastic impact on investments. It's made us focus on finding creative measures and ways to invest in the Lehigh Valley. You heard a little bit about that in season one, and we're going to talk a lot more about it in season two. Because the thing that you can't deny is, as I said before, balanced, diversified, and growing, those are the metrics that you want behind any investment area, or location. Those are the metrics behind stable investments. Those are the metrics behind investments that become recession proof. So knowing that the Lehigh Valley is home to those three things, it's essential that no matter what the market is, whether it's a buyers market, a seller's market or anything in between, we are able to constantly source deals that make great investments to add to your portfolio.
10:00
Our inventory of homes -ranked at 929, which is down from the 2,176 in 2018. We have approximately 1.4 months of supply. Our average days on market is 32 days. The percentage of list price received from list to sale is 99.2% and the reason that that is such an incredible number to track is that if you have investments here, timing is everything, right? So, investments to me are very much like a game of chess. And you've got to know when to make the move to buy, you got to know when to make the move to sell. And every investment is going to have a ceiling and the ceiling is caused because you have max rents, your area your demographics, your economics will only allow a certain rent to be achieved. And no matter how fancy you make the building, or no matter what kind of amenities you put in, you're never going to be able to push run above what the average income is assuming that you want a building that has paying tenants, right? So it's really important to know what the threshold is, because you need to know when to buy and you need to know when to sell. I've had this conversation many times recently with a lot of our investors that have held properties for a couple of years. And the reason that this is coming up now is being that it's a seller's market, the demand is really high. There's a lot of buyers coming into this market that want to buy. And creating competition amongst those buyers allows you as the seller, to be able to create the highest price and the best terms for your property. So if you've gotten to a point with your investment, where you have reached the max capacity of what you think you can push the rents to, now is as good a time as any to sell off that asset portrayed up to an asset that would allow you to double your income. If you're a new investor trying to break into the market, we've talked about this being a seller's market, which is not the most ideal, but it doesn't mean that you're out. It just means that you've got to be more creative and you've got to have somebody on your side that's going to help you navigate the paths of finding the best investments. Real Estate has cycles. Every market has cycles, ours is no different here. But it's knowing what to do when those ups and downs that make your investments really sing, and super profitable. Right now, if you hold investments in the Lehigh Valley, I urge you to talk to your real estate professional, or call me and I'll be happy to analyze your assets to see if now is the best time to sell. But in a seller's market is definitely something to consider. And if you're a buyer looking for your first investments, or maybe to add to your portfolio, we'll help you navigate that as well.
12:52
But the reason I want to point out that 99.2% of list prices being received is going back to what we set in season one, the days of those lowball offers have come and passed. If you want to buy a property here, you're going to need to make a fair offer. And if you're buying something on market, please understand that things are trading at or slightly below asking price. And in many cases, the best investments are trading way above asking price. People are getting smarter as they price their properties to and they're pricing them to sell, not pricing them hoping for, you know, a negotiation. So keep that in mind when you're looking for investments in the Lehigh Valley. Our average sale price is $265,000. And we also like to measure our housing affordability. Right now our housing affordability is at 152. This is an index that measures the affordability of the region. For example, an index of 120 means that the median household income is 120% of what is necessary to qualify for the median priced home under prevailing interest rates. A higher number means greater affordability. So we want to always see that the Lehigh Valley is growing and our housing affordability index is growing and right now we are very well positioned at 152. So we talked a little bit about Allentown, Bethlehem, and Easton, the three major cities that make up the Lehigh Valley, but what we didn't talk about is any of the surrounding areas and I'm often asked what other areas are good to invest in Lehigh Valley. So the surrounding areas, really is our suburban population or what we consider here to be the suburban population. Those areas make up Whitehall, Northampton, Coplay, Catasauqua, Macungie, Hellertown, Lower and Upper Saucon, Nazareth, Forks Township, Palmer Township, Wilson, and many more. Those are the surrounding communities outside of Bethlehem, Allentown and Easton. If you go north of there, you reach the Poconos. And although that market is a little less populated, we are starting to actually navigate some of our investment purchases up in the north. One of the reasons is we like to follow the hospitals and what they're doing here and St. Luke's Hospital, as well as Lehigh Valley Health Network, are in constant competition for territory. Both Lehigh Valley Health Network as well as St. Luke's Hospital have been acquiring land in and around the Lehigh Valley for many years. Some of which is for hospitals and others are for their pop up locations or satellite locations. And most recently, they've been acquiring land to the north of us, which is up near the Poconos. Some of the towns up there Lehighton, Slatington, Weissport, also north of us would be like Bangor, Pen Argyl, Wind Gap, Roseto and different areas like that. Although those areas have much lower populations than you would find in Allentown, Bethlehem and Easton, we're finding that there's people that want to live there and the demand is really good. A lot of these people are commuting to the Lehigh Valley for work, but they like to live in an area that's less congested. We just recently helped an investor rehab a three unit complex. And I'm not even joking when I say within a matter of 24 to 48 hours, we had applications on all three of those apartments and rented them in less than probably two days. That's how tight the demand is. So although the population may not be as much as the Lehigh Valley, the close proximity to the Lehigh Valley also makes it a very viable area. And we also can get great pricing up there. So that has a lot to be said about the potential of the surrounding markets as well. So in a nutshell, what I hope you took from this episode is that, you know, the Lehigh Valley has an abundance of jobs, and it has an abundance of support for a real estate investor. The balanced, diversified, and growing population allows your investments to be very safe. And when you can have safe, calculated investments, your assets are going to continuously grow. And when you combine that with the opportunity to have passive income, where you don't have to take your time or energy to be involved, you're going to find an incredible amount of wealth. I hope you enjoyed today's episode and you stay tuned for the rest of season two. Until next time, take care.
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