where to invest for first time rental unit invester?

New York, New York
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where to invest for first time rental unit invester?

Jack Lin
Insurance Agent · Queens New York · Member since 2023 · 4 posts · 4 votes

I live in nyc it is really expensive to buy rental unit here. I have 50k and want to get my first rental unit , should I do this in another state?

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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Jack Lin:

I live in nyc it is really expensive to buy rental unit here. I have 50k and want to get my first rental unit , should I do this in another state?

@Russell Brazil it almost feels like a personal attack, but I know you are better than that. Please explain how Jack can spend $50,000 in your market and make "much larger sums of money" instead of the "small amounts of money" I make with my investments. With a comment like that, you must be worth $20 million or more!

I started in 2016 with $30,000 to invest. The median price of a home was $245,000 at the time. I bought a hoarder house off-market for $55,000 and grew from there. I now have 33 rentals, 135 storage units, my net cash flow is over $150,000, and my net worth is approaching $3 million. Russ is in a heavily populated area, whereas I accomplished this in a small market with 10,000 people.

My advice is for beginners to invest for cashflow in markets with affordable houses and fair Landlord-Tenant laws. Do a search for "worst markets for real estate investing" and you'll get a list that includes most of the east and west coast. Do a search for "best markets for real estate investing" and you'll find most of the east and west coast are never on the list. There's a reason for that and it's not just my personal opinion.  My advice generally matches what you'll hear on the BiggerPockets podcasts and from most of the experienced investors in the forums. As you gain experience and earnings, you will be in a better position to invest in riskier markets or play the appreciation game.

Russell has a different experience and different advice. It's your job to filter through the noise to decide what is right for you and your situation. 

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  • Nathan A.
    New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
    3y

    Long-distance investing is one option, but have you considered getting an FHA loan (so your $50K goes as far as possible) on a property you can house-hack?

    3Reply
  • Joseph Crunkilton
    Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes
    3y

    Hi Jack, 

    I was in the same boat as you a few years ago. 500k+ starter home prices in Portland made it difficult to jump in. That's when I found out of state investing. I've been doing it for a few years now. 

    @Zach Lemaster was critical to my success and helps new/experienced investors find deals in markets that are more investor friendly. Give them a look and see if they can help you. 

    9Reply
  • Michael Jacobs
    Developer · NY · Member since 2022 · 58 posts · 21 votes
    3y

    All depends on the kind of investor you would like to become. One way to look at it is how much cash on cash return are you receiving on your 50k and then what equity appreciation are you getting from the asset you have purchased. I am from NY and I know how expensive it is to get a bite out of the big apple but it is possible.

    If you would like to jump on a call with me for 30 minutes and ask me anything pertaining to real estate I charge 100 for half an hour. I can answer and help with lending, deal underwriting, scaling your real estate business, discuss a particular deal etc. There are almost no aspect of real estate that I have not been apart in my 10 years in the real estate business. I am so proud of helping so many people in this business and can happily call a few of those people who called me partners. Call me with any questions.

    https://calendly.com/mystakepropertygroup/30-minute-meeting

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Jack Lin:

    I live in nyc it is really expensive to buy rental unit here. I have 50k and want to get my first rental unit , should I do this in another state?


    Your market expensive and it has terrible laws and court systems for Landlords. I recommend you avoid states with tough laws, rent control, or court systems that treat Landlords unfairly. Some examples include NY, New Jersey, DC, Mass, California, Washington, Oregon, Maryland).

    Follow BiggerPockets own Dave Meyer because he regularly crunches the data and discusses the best markets to invest in: https://www.biggerpockets.com/...

    You want a state that has fair Landlord-Tenant laws. Then narrow it down to cities with a good future (population growth, good income, low poverty and crime, good schools, etc.). Once you lock in a few cities, narrow down to specific neighborhoods near good schools, low crime, and especially a good property manager. You can find many areas with good investments, but you can't find a good property manager. I would rather find a good property manager first, then let them help you find a good community to invest in.

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    9Reply
  • Ecaterina Katerina Morosan
    Real Estate Agent · Miami, FL · Member since 2022 · 238 posts · 102 votes
    3y

    Hey Jack! $50K is a good amount to start with, and the good thing is it gives you several options. Local FHA, out-of-state investing, syndication etc. I'd be happy to discuss different markets and strategies with you.

    0Reply
  • Damon Bodine
    Real Estate Agent · New York City · Member since 2014 · 359 posts · 195 votes
    3y

    @Jack Lin

    Have you considered FHA or community bank loan here? . You can do quite a bit here in the boroughs with those. Community bank sometimes more ideal if you're a first time home buyer as some will eliminate PMI. As others house hacking could be a good strategy to consider. Pragmatically speaking unlikely you'll cash flow but will build equity quickly. If you're dead set on buying a rental property first places like Philly, Buffalo could be good options.

    Happy to brainstorm if ever helpful.  

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    If you want to make small amounts of money, listen to @Nathan Gesner. But if you want to very easily make much larger sums of money, then invest in the places he says to avoid. All it takes is owning a few properties in those areas to become a multimillionaire in a pretty short period of time instead of trying to eek out $50 or $100 a door in those other markets.

    Youre already located in one of the best markets in the county @Jack Lin, invest locally. 

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    1Reply
  • Nathan A.
    New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
    3y

    @Jack Lin in case the source of the disagreement isn't obvious, in some markets you can get decent cash flow. In other markets (generally on the coasts) you are banking on appreciation. What is right for you depends on your own situation and what your goals are. There isn't one objective "best."

    1Reply
  • Kevin Manafi
    Realtor · NJ · Member since 2020 · 277 posts · 138 votes
    3y

    Hi @Jack Lin,

    You can consider investing across the river in NJ! I'm an investor and investor-agent in North Jersey. Happy to connect and discuss more.

    0Reply
  • Nick Benjamin
    Real Estate Agent · Kansas City, MO · Member since 2022 · 28 posts · 19 votes
    3y

    Jack,

    Kansas City is seeing a ton of growth lately and is still one of the most affordable metro areas in the US. My inbox is open if you'd like to discuss this more.

    Happy New Year!

    0Reply
  • John WilliamsBusiness Member
    Property Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
    3y

    Make sure you check out Clarksville, TN (where cash flow meets appreciation!). We've got a great, stable, recession resistant market. Our growth prospects are catching the attention of investors and businesses across the country!

    [email protected]931-272-3065
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    2Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Jack Lin:

    I live in nyc it is really expensive to buy rental unit here. I have 50k and want to get my first rental unit , should I do this in another state?

    @Russell Brazil it almost feels like a personal attack, but I know you are better than that. Please explain how Jack can spend $50,000 in your market and make "much larger sums of money" instead of the "small amounts of money" I make with my investments. With a comment like that, you must be worth $20 million or more!

    I started in 2016 with $30,000 to invest. The median price of a home was $245,000 at the time. I bought a hoarder house off-market for $55,000 and grew from there. I now have 33 rentals, 135 storage units, my net cash flow is over $150,000, and my net worth is approaching $3 million. Russ is in a heavily populated area, whereas I accomplished this in a small market with 10,000 people.

    My advice is for beginners to invest for cashflow in markets with affordable houses and fair Landlord-Tenant laws. Do a search for "worst markets for real estate investing" and you'll get a list that includes most of the east and west coast. Do a search for "best markets for real estate investing" and you'll find most of the east and west coast are never on the list. There's a reason for that and it's not just my personal opinion.  My advice generally matches what you'll hear on the BiggerPockets podcasts and from most of the experienced investors in the forums. As you gain experience and earnings, you will be in a better position to invest in riskier markets or play the appreciation game.

    Russell has a different experience and different advice. It's your job to filter through the noise to decide what is right for you and your situation. 

    The DIY Landlord Book4.7247 Reviews
    WebsiteView Page
    11Reply
  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    With an FHA loan, you can invest in a property with as little as 3.5% down, so your $50K goes farther than if you were investing in long-distance real estate. House-hacking allows you to live in the same property while renting out other rooms/units and using that rent income to pay for your mortgage. It's a great way to get involved in real estate without the large upfront costs of purchasing a property outright. Plus, you get all the benefits of living in your own home! What more could you ask for? If you do go this route, make sure to consult with an experienced, knowledgeable real estate professional so you understand all the rules and regulations. Good luck!

    [email protected]832-889-5607
    2Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    3y

    Hi @Jack Lin you may want to connect with @Mohammed Rahman he is very creative in NYC.

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  • Harris Miller
    Real Estate Agent · Nashville · Member since 2022 · 14 posts · 5 votes
    3y
    Quote from @Jack Lin:

    I live in nyc it is really expensive to buy rental unit here. I have 50k and want to get my first rental unit , should I do this in another state?


     Hey Jack, you already do live in a great market. Thought I would just give a little info on Nashville where I am based. Nashville single family home prices have only dropped about 4% from the highs of 2021 according to realtor data in Tennessee compared to places like Dallas or Atlanta which have dropped around 13% and 9% according to those cities realtors data. Hope I was of some use.

    0Reply
  • Adrienne Green
    Real Estate Consultant · Chattanooga, TN · Member since 2018 · 384 posts · 330 votes
    3y

    @Jack Lin the first question should be what is your personal goal with real estate investing?  Everyone wants to make passive income, it helps to get a lot more specific and personal for you.  Do you want cashflow or appreciation?  What's your risk tolerance?  Are you willing to self manage, or overall how much involvement do you want? All of those factors will determine what is the best market for you, as the best market should be decided after you decide the best strategy.

    That's a macro level bit of wisdom, to address your micro question of market, I would say like @Nathan Gesner I recommend focusing on landlord friendly states.  One tenant issue in a tenant friendly state can cost you a lot of time and money.  In contrast, eviction for a non-paying tenant in TN and GA, the two markets I serve, happens in anywhere from 3-6 weeks typically.

    Best of luck in your investing!

    2Reply
  • Danny Liu
    Investor · NY · Member since 2022 · 22 posts · 17 votes
    3y

    basically anywhere but nyc =)

    0Reply
  • Jeff Castro
    Rental Property Investor · San Diego, CA · Member since 2019 · 61 posts · 27 votes
    3y

    @Nick Benjamin hi I’m interested. Can we discuss?

    1Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Stay in your state, it is vital you are close to your first property. There are thinks you are going to learn the hard way not being able to physically be at your property. If 50k isn't enough I would try to partner up with someone.  

    2Reply
  • Michael Gansberg
    Investor · New York City, NY · Member since 2015 · 388 posts · 563 votes
    3y

    @Jack Lin - you get what you pay for. So many real estate investors like buying cheap houses, because, hey, they're cheap! But what if the cheap houses stay cheap? And they're likely to attract people who like cheap things(maybe not the best tenant base.) Also, don't focus on number of doors, that's another fetish common among RE investors. I'd rather have 1 door which produces $500/mo in cash flow than 10 which produce $60 of chump change apiece. You may be priced out of Manhattan- but how about nearby in Jersey? Or Pennsylvania? 

    High yield in the stock market is known as a value trap by most investors, real estate is no different. If you find a deal that appears to offer 20% cash on cash(with or without financing, or whatever,) then you're missing something- like the roof will need replacing very soon, the likely tenant base is untenable, the house is hot with lead paint/asbestos, your sewer line was plumbed through your neighbor's basement because 50 years ago the neighbor's were super chummy and wanted to save some dough, but now the fancy lady who just bought the adjacent house has uncovered this fact and guess what! You have to re-plumb your sewer line and hire the excavators to dig up the sidewalk(yes, this happened to me, and yes, the home inspection missed it.)

    I refused to buy an apartment in Manhattan because they were too expensive(IMO,) then my wife convinced me. Sold it 14 years later, and I'm glad I listened to my wife- things can stay (apparently) expensive when the demand is there. And things can stay persistently (apparently) cheap when demand is lacking.

    4Reply
  • Diane Perry
    Member since 2018 · 37 posts · 11 votes
    3y
    Quote from @Eliott Elias:

    Stay in your state, it is vital you are close to your first property. There are thinks you are going to learn the hard way not being able to physically be at your property. If 50k isn't enough I would try to partner up with someone.  

    @Jack Lin If you are interested, I would love to talk with you about an area I have purchased a rental house in, in Pennsylvania. It’s not too close to Queens, but close enough. If you think you’d like to partner up, I am interested in partnering with someone too, as I often find some great deals, more than I can invest in myself. I purchased a home for not too much more than the $50k you are considering getting in for, and it is great to not have to risk paying a mortgage just in case there are months with no tenant. 


    My biggest rule for myself is, I do NOT want to be a slumlord. There are a lot of investors, and whole companies, that buy and supply rentals that are just barely habitable. I find that renters are more forgiving (in many markets) of dated stuff, but they don’t stay long, or respect property that is in really bad shape to begin with. (why should they?) A decent but dated place to live will attract families, people with good jobs, responsible tenants, and then both the tenants and the homes are very little trouble, and rent gets paid on time.

    1Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    3y

    @Jack Lin

    look into house hacking locally

    0Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    3y

    @Jack Lin

    Hi Jack, 50k will get you a lot, in a lot of places! If you are looking for cash flow, I would recommend Ohio. Cleveland, Columbus, Cincinnati. As an agent in Cincinnati, I would recommend here! Good for cash flow, some appreciation. Let me know if you interested so I can help!!!

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  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    3y

    @Jack Lin
    If you can't invest locally by getting an owner-occupant, I would look at investing out of state. Look in the midwest in markets with good cashflow. I would recommend checking out Cleveland OH. 

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  • Jay ThomasPro Member
    Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
    3y

    If you're looking to buy a rental property, other cities like Philly and Buffalo might be better options for you. However, if you're a first-time homebuyer in the boroughs, there are FHA loans or ones from community banks available which may make it more feasible. In some cases, community banks can even waive PMI, so make sure to check them out! House hacking is also an option worth considering as it may help you build equity more quickly. Let me know if I can be of any further help in brainstorming suitable options for you!

    [email protected]832-889-5607
    0Reply
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