(this was written on September 3, 2020. I expect these results to be very time-specific and may not be relevant months into the future, especially with real estate fluctuating as much as it has in recent times!)
If you are reading this, you are well aware of the demand for investment properties in the Poconos, which is a pretty big area! So naturally, one of the questions we often get is “what community is best?”. This is tough for us to answer; there are a lot of great rental areas and, in many cases, the home is more important that the community. However, that’s a cop out answer and no fun so we decided to roll up our sleeves and dig into the numbers!
How to Calculate?
If you’ve read our posts before, you’ll know we like to look at things through an objective lens and leave are biases at the door. So in order to do this, we use our favorite analytics tool, AirDNA, to help us solve for this!
As we evaluate this, we decided to look at the properties on a ROI basis:
Gross Annual Revenue (GAR) / Purchase Price (PP)
We are taking the GAR from AirDNA and the PP from Zillow’s active listings. We will look at 5 homes in each neighborhood, with 3 bedrooms in or near a purchase price of $175k.
Communities being evaluated:
West: – Indian Mountain Lakes (IML) – Towamensing Trails (TT) – Lake Harmony (LH) – Split Rock (SR) – Brier Crest Woods (BCW)
Central: – Arrowhead Lakes (AL) – Locust Lake Village (LLV) – Lake Naomi (LN) – Emerald Lakes (EL) – Stillwater Lake (SL)
East: – Villages and Northridge (VN) – Pocono Country Place (PCP) – Pocono Farms East (PFE)
The biggest difference between Lake Harmony / Split Rock and the surrounding area (IML, BCW, TT) is the availability of homes between $150-200k. The purchase price in LH/SR is FAR higher than in IML/BCW/TT. This high purchase price isn’t justified by the GAR, leading me to believe that these homes are over-priced compared to their GAR estimates.
However, I will say there is an intrinsic value in having a home in LH/SR. It is a highly sought after area (as seen in the purchase price) and if we are in a real estate bubble, these homes will keep their value better than in the surrounding communities (IML/BCW/TT).
Winner – Brier Crest Woods
(while BCW and IML are nearly the same on an ROI perspective, BCW is closer to skiing, dining and is seeing growing demand. I give BCW the win for an intangible tiebreaker)
AL and LLV (neighboring communities) both came in with the lowest ROI. This is likely due to a high level of homes, driving down the GAR (too much competition).
LN saw a slightly better ROI but it’s important to note the very high HOA fees that come with owning in the community. This pushes down the ROI and doesn’t make it the best rental community.
In this region, we saw the best ROI within the Emerald Lakes and Stillwater Lake communities. When looking at Stillwater Lake, some homes came in with a irrationally high GAR. This leads me to believe there is an outlier home that is pushing up the GAR and ROI in turn.
Winner – Stillwater Lake
(even with the outlier effect, we still believe that Stillwater Lake is the best ROI prospect in the region)
The Eastern Region saw a decline in ROI results. PCP and PFE were amongst the worst performing areas with lead to VN winning the ROI competition by default. VN sees a bump in demand for being on the slopes of Camelback, which sees strong performance in the Summer months (waterparks) and Winter months (skiing/tubing).
Winner – Villages / Northridge
(however, this region saw lesser ROI results than the others evaluated)
Overall, the Poconos has a lot of strong investment opportunities. From what we evaluated, Brier Crest Woods, Indian Mountain Lakes, Stillwater Lake and Emerald Lakes are amongst the best investments.