In the Bowery neighborhood of New York City, Slip Mahoney and his friend Sach run the Bowery Boys Club, an athletic club for local children, in the back of their friend Louie's ice cream shop. When Sach recovers from a knockout by little Herbie while they are sparring, he discovers that he can read minds. Shortly after, Louie's friend Eddie asks him to buy his detective agency for two hundred dollars. Slip believes that Sach's new ability could be a goldmine for a detective agency, and encourages Louie to buy the business. Slip is chagrined, however, when the first telephone call at their new business is from the landlord demanding five months' worth of unpaid rent. Not long after, Myra Hagen, wearing a luxurious fur coat, rushes into the office claiming that someone is trying to kill her. She gives Slip an envelope that contains information for the district attorney in the event of her death. Sach places the envelope in their safe, unwittingly enclosing the safe's combination as well. Sach then hides under the desk when a shadowy figure appears outside the office door. Slip runs into the corridor to investigate but finds no one, and returns to discover that Myra has also disappeared. On the street, Myra is taken hostage in her car by a man with a gun. When a policeman stops by the detective agency, he examines the fur coat that Myra left behind and determines that it is one of many valuable fur coats stolen the night before. Myra is taken to a health farm where Prof. Damon operates a theft ring that alters stolen coats from around the country for resale. Myra, who has been part of the racket but now wants to get out, warns Damon about her incriminating letter. At the detective agency, Slip tells John Graham, who claims to represent the insurance company investigating the fur coat thefts, about the letter. Slip wants the reward Graham offers for the letter but cannot open the safe to get it out. Slip later berates Sach for locking the combination in the safe, and Sach attempts to correct it by blowing up the safe with gunpowder. Although Sach is unharmed, the explosion causes him to lose his psychic powers and the envelope still is not found. Myra telephones them and, under duress from Damon, asks them to return the envelope. Two of Damon's thugs arrive to retrieve the letter, but because the boys are unable to find it, the thugs kidnap Herbie, who had been brought to the office to restore Sach's powers. Karl, a dim-witted thug working for Damon who is fond of Myra, tells her about Damon's plans to kill her and Herbie. Myra takes Karl's keys and finds Herbie, who then telephones to tell Slip that he and Myra are being held at the sanitarium. Having finally found the envelope, Slip and Sach go to the sanitarium disguised as a doctor and his elderly female patient. After nurse Aggie takes the feminized Sach to his room, he and Slip search for Herbie. Sach encounters Graham, who is the ringleader of the racket, and after revealing his identity, gives Graham the envelope in hopes of receiving the reward. Graham tells him to wait, but then sends his thugs after Sach. Sach eludes them with Slip's help, and they then disperse in separate directions. Slip soon finds Myra and Herbie but when the door opens, Herbie strikes Sach, anticipating a thug. The blow restores Sach's psychic powers. After a brawl during which all of the thugs are trapped in a boiling vat, Herbie grabs the envelope from Graham and returns it to Slip. Much later, the Bowery Boys Club celebrates its grand opening in a new location. Sach explains to a party guest that he and Slip used the reward money to open the improved club to keep kids out of trouble. However, several boys get into a food fight and Slip, Sach and Louie are hit in the face with pies.
