Are opportunities in the west gone?

Question

Hello!

We are looking for purchase our first investment property. The plan was single family home in Las Vegas or surrounding the Phoenix area and our goal is to cash flow. Maybe this is just the analysis paralysis speaking, but it seems like these are not the best markets to invest in as rent has not caught up to mortgage rates.

We are considering pivoting and changing our criteria- perhaps to long distance investing. Before we completely change our strategy, I'd like some insight/ guidance /opinion for investing in these areas.

Thank you!

Brett Deas · Answer

Deals aren't found, they are made. Take something that is ok on the surface and see how you can improve it.

Vicki X. · Answer

I hope the general info below would be helpful for you:

OOS investing has become quite common. Here are the major factors to consider in evaluating the market

• Your budget: are you looking to buy under $200K, $200-300K, $300-500K or higher? It can help you create a short list
• Population growth, employment growth, wage growth, composition of business types are the most important factors in the health of the market. There are many analysis, charts out there. Specifically. places where the millennials are attracted to are interesting as they are becoming the biggest renter and homebuyer group
(Note: Be careful with 'historical' data. The top growing markets in the last 2 years are unlikely the most sound choices. Good examples are Austin and Phoenix. Try to add the futuristic lenses into your analysis whenever you can. In the ideal case, there be a "new California" emerging somewhere in the next 10 years. But to be frank, CA's trajectory is impossible to replicate as working remote has become more prevalent, companies more “decentralized”, and more people think about not just professions, but also lifestyles these days).
• Are you able to find trustworthy realtors/PMs or even service providers? Do not get into a market before you know whom to work with. Many investors interview many to find the best one.  In my case, I started in the Houston area as my friend had very good recommendations for me. So use your network to get more ideas!
• Run the numbers to understand the cash flow, and pay attention to the major cost such as the effective property tax rates. It typically range from 0.5%-2%+
• Rental regulations as some States are more friendly to renters while some more friendly to investors
• Distance to you. If you find a good area 2-5 hours drive from you, it’ll be easier to meet your team and check out the properties in person
• Certain hazards or costs that you want to avoid.  Drought, flooding, snowstorms, tornados, just to name a few

Your budget: are you looking to buy under $200K, $200-300K, $300-500K or higher? It can help you create a short list

Population growth, employment growth, wage growth, composition of business types are the most important factors in the health of the market. There are many analysis, charts out there. Specifically. places where the millennials are attracted to are interesting as they are becoming the biggest renter and homebuyer group

(Note: Be careful with 'historical' data. The top growing markets in the last 2 years are unlikely the most sound choices. Good examples are Austin and Phoenix. Try to add the futuristic lenses into your analysis whenever you can. In the ideal case, there be a "new California" emerging somewhere in the next 10 years. But to be frank, CA's trajectory is impossible to replicate as working remote has become more prevalent, companies more “decentralized”, and more people think about not just professions, but also lifestyles these days).

Are you able to find trustworthy realtors/PMs or even service providers? Do not get into a market before you know whom to work with. Many investors interview many to find the best one.  In my case, I started in the Houston area as my friend had very good recommendations for me. So use your network to get more ideas!

Run the numbers to understand the cash flow, and pay attention to the major cost such as the effective property tax rates. It typically range from 0.5%-2%+

Rental regulations as some States are more friendly to renters while some more friendly to investors

Distance to you. If you find a good area 2-5 hours drive from you, it’ll be easier to meet your team and check out the properties in person

Certain hazards or costs that you want to avoid.  Drought, flooding, snowstorms, tornados, just to name a few

John Clarken · Answer

If you are confident in your numbers I'd see if the sellers have any flexibility and spam offers to the ones that work. With long distance investing you have to build an out of state team and the management can become time consuming/costly. Local markets you will always have more insider knowledge and be able to know cleared what is and what is not a good deal. In the midwest it is also a cashflow came with less appreciation ( in my experience). Good Luck

Osazee Edebiri · Answer

The west isn't dead! Haha

@Jordyn Lai Hello!

It's great to hear that you're looking to invest in real estate and are doing your research before making any decisions. It's true that the Las Vegas and Phoenix markets have seen a surge in housing prices in recent years, which has made it difficult for some investors to find properties that will cash flow. However, that doesn't mean it's impossible to find good investment opportunities in these areas.

One thing to keep in mind is that rental rates can vary greatly depending on the neighborhood and the type of property. Some areas may have higher demand for rentals than others, which could allow you to charge higher rents and achieve better cash flow. Additionally, if you're willing to put in some work to find properties that are undervalued or need some repairs, you may be able to acquire them at a lower price and increase your potential returns.

That being said, long-distance investing can also be a viable option. With advances in technology and the ability to work with local property managers, it's easier than ever to invest in properties that are located far away from where you live. However, it's important to thoroughly research the area and the property management company you plan to work with to ensure that they have a good track record and can provide the level of service you require.

Ultimately, the decision on whether to invest locally or long-distance will depend on your personal preferences, risk tolerance, and investment goals. It may be worth considering both options and weighing the pros and cons before making a decision.

If you're not House Hacking, start with a house hack, best with cost to entry and scaling.

Becca F. · Answer

@Jordyn Lai

I'm in California and have 2 properties here.  I'm buying in Indiana now. It is very difficult to cash flow or even break even (meaning rent covers mortgage PITI, not counting vacancy rates, capital expenses and repairs at current prices and interest rates. My first Indiana SFH is Class A in a nice suburb with excellent schools - I bought it 10 years ago but it was my primary residence, costs less than a Tesla and it had upgrades. The appreciation has been good, 70% since 2013 as of 2021 (when I did a cash out refi), might be worth a little more.

I recently bought Class C moving up to a Class B in Indianapolis, move-in ready except a few minor repairs. It's listed for rent with a property management company now. I'm ok with the seller getting the equity since I didn't want to do an OOS BRRRR. I did a local renovation and I thought it was very stressful and I was on site every week. Also it isn't cheap to hire a contractor in the Bay Area. I may consider a OOS BRRRR or flip now that she has trusted contractors but I would fly out there to look at distressed property before making an offer.  If can send you my real estate agent's info, if you would like. She works with lots of OOS investors. The other markets I've heard were good are Cincinnati, Columbus, Cleveland, Memphis, Kansas City Missouri.

Sean Bozigian · Answer

@Jordyn Lai Hey Jordyn. As many others have mentioned, there are still deals to be had out there, they are just a bit tougher to identify in this current market. I'd recommend getting connected to an agent & lender in each market who focus primarily on working with investors. It takes creativity and a solid team around you to find the gold right now.

Jacoby Atako · Answer

If you have cash (or cash equivalent) you can find really good deals.  I get sent a few deals a month that range from mediocre to awesome.  I only buy 1-2 longterm holds per year so a lot of these I pass on.  But they are out there if you network and know where to look.

Alli Breighner · Answer

I agree with @John Clarken, unfortunately there are a lot of factors that come with long distance investing. The expenses add up as well as it taking a lot of your time and effort. I would strongly recommend investing somewhere close by or out of state but in a market that you know like the back of your hand. I've seen a lot of people invest OOS and it has been more challenging due to the added expenses. With that being said, although it can be risky, I've seen it also go very well.

I'd love to hear more about your investment goals and chat!

Jordyn Lai · Answer

Thank you for this!

Mason Weiss · Answer

Hey Jordyn, the strong markets you are referring to still have plenty of opportunity. I wouldn't say it is easy, but by adding value to a property or putting more money down, you can still own a cash flowing SFR.

Are opportunities in the west gone?

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