First-time out of state investor
Hi friends. I’ve been exploring alternative means to replace my 9-5 income and have settled on long-term rentals to do so. I am closing escrow selling my personal residence in San Diego to move to another part of the county. My expenses will ultimately drop significantly and I’ll have a nice chunk of equity to invest. I have been looking at some metros in Ohio, Wisconsin, and Indiana seeking more stable cash flow and price action. I am having a hard time settling on one specific area though. Does anybody have any resources evaluating neighborhoods, properties, management cos, etc? I could also be willing to provide the capital if someone knowledgeable provides the know-how for my first deal. For the first deal I would ideally like to put up to 40k down and keep another 10k or so for reserves, repairs, etc. thanks for any feedback.
Most Popular Reply
@Jacob MacIsaac Midwest markets are relatively similar, you'll find pro's and con's for each and no clear winner. I always tell people pick the market that gives you easier access, maybe you have family there, used to live there or at least you have a direct flight from where you live.
The Milwaukee is by far the biggest economic and population hub in Wisconsin with 1.6 million people and a GDP of a little over 102 billion. The City of Milwaukee represents a portion of the metro area with about 600k population. Home prices have gone up here as well, about 72% since 2015, but are still relatively low compared to the rest of the country with a median of about 220k, almost half of the 400k national median. More on my YouTube channel.
Demand for homes has remained fierce, even as most markets in the US have started softening over the last few months to 96% or 97% sold to list ratio (from 105-108%), Milwaukee is still clinging on to 100%. Rental demand is fierce too, we usually take our Zillow listings down once we have about 100 inquiries, which in December (off-season) takes less than a week.
But good, quality rental properties are not easy to come by, I estimate we have at least 1200-1500 local mom and pop type investors and naturally a lot of out of state investors. We have some cheap areas in the city of Milwaukee that get a lot of attention from OOS investors, you might call it fools gold and local investor know to stay clear.
Delinquent rent is not the biggest concern for me personally, a roughed up house is a much bigger financial damage - currently dealing with one (primary tenant, the mother moved out, left daughter in the house, could not afford rent, started sub-leasing to a bunch of different individuals living with her until I caught on to it; the house used to be in pristine condition with new kitchens, bathrooms, hardwood floors - we are probably looking at over 10k and a dumpster full of junk, plus a month of unpaid rent $1,800 and 1-2 months to get it rented again) We don't have that very often, because we are renting above median price and have usually A quality tenants, but once in a while we have a case like this.
For more on this, I wrote a post a couple years ago: What they don't tell you about cheap rental properties.