Hanging out in Mike Clancy's (Percy Helton) diner, the Bowery Boys are engaged in their usual loafing sessions; Sach (Huntz Hall) works on a puzzle book; Duke (Stanley Clements) chows down on Clancy's Iris stew special, and Myron (Jimmy Murphy), Chuck (David Gorcey) and Blinky (Eddie LeRoy)are looking at the pictures in the eatery's library of comic books.
Two diner, real-estate agent Harry Shelby (Bill Henry)and his assistant, Dolly Owens (Darlene Fields), hear that Mike has been ordered by his doctor to take a long rest in the country. They sell him "Cedar Crest," -a paradise in the mountains---which actually had been a robber's hideout. Mike and the Bowery Boys move to the place and find a dilapidated farmhouse. While doing repairs, they find a secret compartment containing new banknotes. Thinking they have found a recluse's treasure, they pay off the mortgage on Cedar Crest.
This draws the attention of three hoodlums, Snap (Peter Mamakos), Ziggie (Ben Welden) and Ernie (Robert Christopher), who order Shelby to buy back the place. Sach, Duke and Mike refuse the offer, even when told the place is haunted. Meanwhile Dolly has vamped Sach---an easy task---into revealing how they got the money to pay off the mortgage, and she and Shelby devise a plan of their own of obtaining the house with many greenbacks in deposit.
A few nights later, the six residents find themselves harassed by a pair of phantom-like goons, and attacked by three loot-hungry gangsters.