Joe Calloway has bought 39 homes this year in the city of Pittsburgh, mostly in south Pittsburgh communities such as South Side Flats, South Side Slopes, Arlington, Allentown, Beltzhoover and Mount Washington.
His Allentown company, RE 360, finds properties selling for below-market value, either by word of mouth, industry sources or courthouse auctions. He renovates about 20 percent of them for resale and rents the other 80 percent to city residents.
"The city of Pittsburgh is attractive to me because I grew up here," he said. "I know the area, and it's important to invest in what you know."
While Mr. Calloway -- who has purchased more than $1 million in single-family homes this year -- is the largest buyer of investment real estate in the city, he is hardly alone. According to RealStats, a South Side-based real estate information service, real estate investors have bought 1,111 homes within the city limits so far this year for a total of $85.4 million.
In fact, roughly one out of every three homes purchased in the city of Pittsburgh this year was bought by an investor.
Aaron Sukenik, executive director of the Hilltop Alliance, an association of 11 neighborhoods in south Pittsburgh focused on community development, said the increased investor activity in the city is generally a good thing because many neighborhoods have seen significant disinvestment over the past three decades.
"Vacancy rates have gone up, properties have been demolished and many of the lots where houses used to stand have been left vacant," Mr. Sukenik said. "It does make sense for investors to buy city properties because many of these city neighborhoods are rich in assets. They are within two miles of Downtown. They're on public transit lines -- bus and light rail. They have commercial business districts and large city parks."
Investor dollars represented 19.6 percent of the total money spent on city houses, which is a significant increase from 13 years ago when investor dollars accounted for just 12.4 percent of the total dollars spent on city houses and about 1 in 5 city properties -- 22.7 percent -- sold were to investors.
Individual investors and hedge funds are buying houses in bulk around the country, according to the National Association of Realtors.
Walter Malony, spokesman for the association, said investor home buying is at higher levels in states that experienced extreme highs and lows during the real estate boom and bust, such as Florida, Arizona, California and Nevada.
He said 3 of 4 real estate investors nationwide pay cash for the properties, which could give them an advantage over buyers who must wait for banks to approve financing.
Pittsburgh did not experience the dramatic plunge in prices that affected other parts of the country, so hedge funds may not see as much opportunity here to buy hundreds of distressed properties in bulk.
But investors are still playing a greater role in the Pittsburgh housing market than in the past, and there is a population of investors outside of Pittsburgh who are interested in city properties, said Dan Murrer, vice president of RealStats.
"Housing in Pittsburgh is a conservative bet," Mr. Murrer said. "There is a lot of opportunity here. We see it all the time where an investor buys a house for $40,000 and resells it for $240,000. Even if he put $100,000 into the deal, his profit is still $100,000.
"The city's stock of abandoned homes makes homes available for $3,000," he said. "Those kinds of prices attract out-of-towners and people looking to get into profit-making ventures."
It's not always a sure bet. "These ventures are not always successful," he said.
Investors who buy homes in Pittsburgh have a lot to choose from: crumbling mansions, rowhouses and rundown single-family homes that are often auctioned off for pennies on the dollar on the courthouse steps. In many cases, municipalities will forgive past due property taxes for investors willing to make an abandoned home productive.
"Our mission is to purchase and rehabilitate homes in our target communities, with the end goal of creating value for our investors, partners and the communities we serve," Mr. Calloway said.
"Pittsburgh has an imbalance in the quality in housing stock, which is too low, versus the quality of employment, which is high," Mr. Calloway said. "We are fixing that."
Tim Grant: firstname.lastname@example.org or 412-263-1591. First Published October 17, 2013 8:00 PM