Hello all, I'm thrilled to join this community as I embark on my real estate investment journey. I'd greatly appreciate advice from experienced individuals here on how to identify promising markets and deals remotely. Currently, my wife and I own a house in the Bay Area, purchased back in 2019. With a combined w2 income, we've managed to gather some funds for real estate investments.
My primary goal is to find passive investment properties that offer positive cash flow or at the very least break even after all expenses. As many of you might know, the Bay Area has become a challenging market to find such properties. As a result, I've begun exploring out-of-state (OOS) options like Austin, Joshua Tree, Raleigh, and the Sacramento area. However, after spending close to a year on and off searching, I've encountered difficulties such as lack of trust in some neighborhoods or uncertainty about the potential of these areas and overall unfamiliarity with the locality. I think it would become a lot easier for me to find deals if I am able to finalize potential couple areas.
To those who have successfully found such opportunities remotely, I'd love to hear your insights and learn from your experiences. How do you go about identifying promising markets? What strategies do you employ to spot potential areas? Any tips or advice on conducting due diligence in OOS markets would be invaluable. I am also open to building a partnership if you have any potential opportunities!
As I continue my search, I'm eager to tap into the collective wisdom of this community. Thank you in advance for any advice you can provide!
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Deepen Patel
Passive investments and owning real estate even with a property manager do not go hand in hand.
They still require some form of management and decision making. If you are ok with that then that’s awesome - just wanted to forewarn that it’s less work than self managing but it’s still active.
Real Estate Agent · Austin, TX · Member since 2023 · 57 posts · 27 votes
3y
Hey @Deepen Patel and welcome to bigger pockets all great areas to look into. Speaking for Austin there is a ton of opportunity in flips and rentals. The surrounding markets offer strong cash flow opportunities. If there's anything I can do to help regarding Austin feel free to connect!
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Deepen Patel
Passive investments and owning real estate even with a property manager do not go hand in hand.
They still require some form of management and decision making. If you are ok with that then that’s awesome - just wanted to forewarn that it’s less work than self managing but it’s still active.
Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 463 posts · 252 votes
3y
Great question Deepen!
The market I like for strong cashflow with appreciation is Lansing, MI.
You can positively cashflow in Lansing with a property manager and I work with two very good property managers there.
The other thing to think about is Michigan has plenty of water and natural resources and it does not have scorching hot weather or overly extreme storms.
Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
3y
Hi Deepen! I invest in the Bay Area and Indianapolis metro area. I used to live in Indiana before moving back to California so I was familiar with the area. I rented out my house in a sought after suburb in Indy - it's doubled in value since 2013. I would consider this a Class A property since it's has great schools, nice subdivision. My tenants have been great. If you buy Class A right now it'll be difficult to cash flow positive - your mortgage will be more than the rent but these areas appreciate more. There's a lot of development happening:
Elanco (animal science headquarters), business parks such as 16 Tech, is some of the development that's occurring. The Indy 500 attracts lots of visitors. FedEx has a major hub there.
Some of the major employers are: Eli Lilly, Indiana University Health, Anthem, UPS
I purchased a mostly turnkey (need a few minor repairs) SFH in March 2023 for $130,000. This is Class C potentially becoming Class B. I would not do Class D - seems like lots of potential problems. I would consider a cash flow of $150 to $200 to acceptable with current prices and interest rates. At the time buying turnkey using a realtor was less risky but having to put 20% down each time is a slow way to grow my portfolio. I have a team now so I'm looking to do BRRRRs, maybe flips. Property management companies in Indy usually charge 10% monthly management fee (of the rent), well worth the fee. I haven't done any creative financing (seller financing, subject to, etc) or bought off market deals yet so those are other strategies.
Indianapolis is really street by street. It's difficult to go by zip code. There are lots of transitional neighborhoods. In some areas you'll have $70,000 homes next to renovated $350,000 to $500,000 ones. This is a sign of development and the home values will go up. I flew out there recently so I got a much better sense of which areas to invest in vs. ones I'd avoid. My agent will send me video tours of the listings which has been helpful.
I look at factors: on a busy or noisy street or near railroad tracks? Do a Google Map view near the house you're considering and see what's around. What's happening in the surrounding area? Coffee shops, restaurants, other businesses going in? Near park or bike/walking trail? I would highly recommend flying to the OOS market you're strongly considering - pictures don't show everything.
One thing also is to consider property taxes and insurance rates. Indianapolis has 2.78% property tax rate, insurance is reasonable. Arizona and Nevada have much lower tax rates but their properties are more expensive. Other Bay Area investors have done well in Kansas City Missouri and Tennessee. Feel free to message me if you have questions and I can also give you my realtor's contact info. Good luck!
Hello all, I'm thrilled to join this community as I embark on my real estate investment journey. I'd greatly appreciate advice from experienced individuals here on how to identify promising markets and deals remotely. Currently, my wife and I own a house in the Bay Area, purchased back in 2019. With a combined w2 income, we've managed to gather some funds for real estate investments.
My primary goal is to find passive investment properties that offer positive cash flow or at the very least break even after all expenses. As many of you might know, the Bay Area has become a challenging market to find such properties. As a result, I've begun exploring out-of-state (OOS) options like Austin, Joshua Tree, Raleigh, and the Sacramento area. However, after spending close to a year on and off searching, I've encountered difficulties such as lack of trust in some neighborhoods or uncertainty about the potential of these areas and overall unfamiliarity with the locality. I think it would become a lot easier for me to find deals if I am able to finalize potential couple areas.
To those who have successfully found such opportunities remotely, I'd love to hear your insights and learn from your experiences. How do you go about identifying promising markets? What strategies do you employ to spot potential areas? Any tips or advice on conducting due diligence in OOS markets would be invaluable. I am also open to building a partnership if you have any potential opportunities!
As I continue my search, I'm eager to tap into the collective wisdom of this community. Thank you in advance for any advice you can provide!
I invest in both direct real estate (via residential rentals) and syndication/crowdfunding passive investments. And in my opinion, both have their pros and cons and neither is 100% superior to the other. And I feel the ideal portfolio can benefit from the diversification of both.
But you seem to be thinking about investing in directly owned real estate as a passive investment. And if so, then, that's not really the case.
Directly owned properties are great because they give you maximum control and the ability to tweak them exactly how you want. So for example I'm very conservative and don't want any debt on them because I feel this hardens them in case of a severe recession. That's unusual and it would be very difficult to find a passive investment like that.
Also direct control means you know exactly what's going on. And, for those people who have more time than money, they can put in sweat equity into directly owned real estate. This will increase the return above what can be obtained on a passive investment.
The flipside of having the power to control everything is that can be alot of work (and a full-time job if you are putting in sweat equity). Not everyone wants that or is willing to put up with that. It also requires gaining a level of sophistication and knowledge that not everyone has the time, inclination or ability to do. And someone jumping into this as a complete newbie can expect that they have a decent chance of making some expensive newbie mistakes.
On the other hand, one of the main advantages of passive investments (via syndication/crowdfunding) is that you can hire a manager who has years more experience than you can ever hope to obtain yourself. And once you finish the due diligence, your work is done: it's completely passive. Also, rather than taking a large amount of money and investing into one single directly owned property, you can split it up into much smaller chunks across many different passive investments. This can allow a person to get much better diversification protection across geographies, asset types, strategies, investment subclasses etc. Versus putting all the eggs into one basket.
The downside is that someone has to be comfortable with turning over control to someone else. That means learning how to vet a manager. Not everyone can do that and not everyone feels comfortable turning over control. So it's not a fit for everyone. Also there is a management fee to pay for all of the above. So someone who is looking purely to maximize potential return (and has unlimited time) is unlikely to find this a good fit.
You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:
Our analysis is a template you can follow for any city. Doubt you'll find this much info for any other market in the US. So, why would you invest remotely anywhere else?
if you're in the Bay Area, I like Sacramento - this gets you a lower price point but would let you be hands on. if you're willing to invest the time, you could go to REIA meetings, build a team, meet contractors and agents, visit as many properties as you want.
but as others have said this... is the total and complete opposite of passive.
if you want something truly passive then it's not owning and managing individual properties. even with a property manager... you manage the manager.
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
3y
Hey Deepen, I'm also here in CA but down in the Central Coast. I invest in Detroit and have 12-doors there. The cash flow is still strong in Detroit but it's getting more attention now that other markets have become increasingly tough.
Happy to talk about my experience there. I also help others get started in Detroit so you don't have to start from scratch. Shoot me a DM if you want to dig in.
Real Estate Agent · Sacramento, CA · Member since 2019 · 497 posts · 272 votes
3y
Hey Deepen,
I'm a strong believer in the Sacramento market. I'm an agent and investor in Sacramento and have built a portfolio of SFH's and Small Multi Family properties. While cash flow has become more difficult to find with increased interest rates, I shifted my focus to buying properties in better locations with the intent of holding them for a longer time horizon. The job market is solid, and Sacramento is the #1 place people are moving to from the Bay Area. Vacancies are low, and rents remain high. Class A properties may not cashflow, but they are the best bet to hedge the inflationary economy that we are in right now. Let me know if you'd like to chat about the Sacramento market further. Best of luck.
I see you guys are in San Francisco and probably accredited investors. I went through the OOS turnkey rental phase myself back from 2012 to 2015 when I wasn't accredited yet. You learn a bit, but honestly, it can get risky, especially when you're buying properties with low rent-to-value ratios or in tougher class C areas.
With prices going up, it's getting trickier to invest in California and deal with those anti-landlord laws. So, most of my portfolio is now in those red states and out-of-state markets.
My suggestion, as we discussed in our podcast, is to connect with other accredited investors. Consider whether rehabbing units on your own is worth the risk, especially if you're making more than $150,000 at a day job. It might be better to be a passive syndication investor and let the experts handle the heavy lifting. That way, you can still enjoy the benefits without as much stress.
Developer · San Antonio, TX · Member since 2019 · 176 posts · 81 votes
3y
If you are buying retail it's going to be difficult to cash flow unless you go to markets in the midwest. That is preference. You can, however, structure retail deals creatively in any market and you can cash flow. For example, I am looking to sell a duplex in San Antonio, TX on seller finance to free up some capital for new developments.
The markets are looking at are pretty "hot". You might want to look on the outskirts if you want cash flow. I do everything in San Antonio. If you need anything in the Texas Triangle, let me know
if you're in the Bay Area, I like Sacramento - this gets you a lower price point but would let you be hands on. if you're willing to invest the time, you could go to REIA meetings, build a team, meet contractors and agents, visit as many properties as you want.
but as others have said this... is the total and complete opposite of passive.
if you want something truly passive then it's not owning and managing individual properties. even with a property manager... you manage the manager.
This is spot on! I feel that RE investing is more semi-passive compared to clicking on a button to buy stocks or index funds. I renovated a Bay Area SFH and was on site every week and self manage it - I call the plumber or the contractor to fix things. Not passive but I have appreciation with this property and I can raise the rent every year.
I have properties in Indianapolis with a property manager and while they do the advertising and screen the tenants, I'm managing the manager. I have had pretty minor issues so far but had to pay for repairs between tenants and a stolen AC unit. I've spent weeks analyzing numbers to do a BRRRR or possible flip. I've lost out on 2 cash offers and another one where the seller wouldn't come down on price. And I haven't even started any renovations yet. I have a team in place with contractors, inspectors, roofing companies, etc. This is causing me a lot of stress, to be transparent.
I'm starting to consider going more passive and talked to two possible syndications - one an apartment building and one who has multiple investment strategies, apartment buildings, car washes, storage facilities, and a debt fund with 6% to 8% return (depending on how much you put in). With the debt fund it's funding people doing flips. I wouldn't get the RE tax benefit or appreciation with the debt fund. As Ian above said it's weighing giving up control to someone else vs. solely owning a property and the effort involved with that.
Rental Property Investor · Kansas City, MO · Member since 2016 · 116 posts · 49 votes
3y
I wanted to share a valuable research method that I use for analyzing potential investment real estate markets. It's called the VMAR method, which stands for Value Creation Catalyst, Modest Appreciation, Affordability, and Rent to Value Ratio. This approach helps us identify markets with strong potential for long-term growth and profitability. Let's break down each component of the VMAR method:
Value Creation Catalyst:
The first step in researching investment real estate markets is to look for a value creation catalyst. This could be anything that positively impacts the market's growth potential, such as major infrastructure development, population growth, new job opportunities, or urban revitalization projects. Identifying these catalysts can give us valuable insights into the future appreciation and demand for properties in the area.
Modest Appreciation:
While rapid appreciation might seem attractive at first, it's crucial to focus on markets with a history of modest yet consistent appreciation. Markets that experience extreme fluctuations can be risky and may lead to unsustainable price bubbles. Modest appreciation ensures a stable and predictable growth in property values over time, which is ideal for long-term investment strategies.
Affordability:
Affordability plays a significant role in determining the potential demand for rental properties. Look for markets where the cost of living and housing is reasonable compared to the income levels of the local population. Affordable markets tend to attract a steady stream of renters and buyers, reducing the risk of prolonged vacancies and ensuring a stable cash flow.
Rent to Value Ratio:
The rent to value (RTV) ratio is a critical metric that helps us evaluate the income potential of an investment property. It's calculated by dividing the property's expected annual rent by its current market value. Aim for markets with higher RTV ratios, as this indicates a better potential return on investment. Higher rental income relative to the property's value means better cash flow and profitability.
Also, considering your goal is to find passive income, I would recommend researching turnkey companies in Midwest markets. It is just really important to vet the companies to develop trust.
Here are some recommended questions to ask:
1. What is their track record:
Some turnkey providers might have a privacy policy in place to avoid such communication. This should be a red flag. Although clients’ privacy is very important, if the turnkey company has a good track record, they should have at least a few clients that are more than willing to be contacted on their behalf. Also, take the time to look for references and testimonials on the turnkey provider’s website/BiggerPockets account.
2. Do they offer maintenance warranties?
I think it is important for turnkey providers to provide a warranty over what they repaired or improved on the property, but I agree that there should be a limitation on what they cover, and if there is not, then this should be a red flag for the investor. Turnkey companies that have experience and a good track record should never warranty tenant caused damage. It is irresponsible for the company to do so. They would be risking going out of business for unforeseen events that are impossible to track. This is not a smart way to run a business. At Turnkey Property Group, we stand by our product. We offer a one year warranty over the entire scope of work, but acts of God and tenant caused damage are not covered under our warranty for good reason: we would not be able to adequately forecast the company’s performance and overhead costs, which would impact not only our owners, but our employees as well.
A turnkey provider that follows this approach is more likely to be experienced and built for longevity.
3. Will they manage your property in-house or leverage a third-party relationship?
I think that if the company has a good track record and adequate experience while providing in-house property management, it is the best case scenario. I believe this for a number of reasons: 1. It holds them accountable for their product, 2. Not being in property management for their primary revenue stream reduces the chances for inflated fees and trip charges, 3. It is, in my opinion, the only true turnkey experience. I am not saying it’s an automatic red flag if the company does not provide in-house property management, but it does add an additional step to the due diligence process.
5. What systems do they have in place to ensure you have transparency into your investments at all times?
This is the most important factor when choosing your turnkey partner, and that is how investors should look at it. As a partnership. If an investor can’t frequently get a hold of their turnkey provider, or is always talking to a different person, this should raise an immediate red flag. This is a good indicator about whether the turnkey company is in it for a volume play, or a quality play based on superior customer service. You should always be able to get a response from your turnkey provider within 24 hours at the latest. If it takes more than 24 hours to in contact with the provider, this is a red flag situation.
Finally, I want to touch on the heart of your investment: Property Management. Get information on these bullet points, and look out for these red flags.
Key Bullet Points:
1.Is property management the company’s primary revenue stream?
2.How many doors do they manage?
3.How many employees do they have?
4.How is their response time?
5.What software do they use?
6.Do their fees seem fair?
7.What is their average leasing period?
8.Do they talk negatively about other property management companies or turnkey providers?
9.Do they offer routine maintenance programs?
10.Do they have good reviews online (be fair in your judgement)?
Hi Deepen, I would recommend looking towards the midwest. More specifically, Ohio. Columbus, Cincinnati, and Cleveland. Each have their own specialty.
Cleveland: Cash Flow
Columbus: "appreciation friendly"
Cincinnati: A mix of the 2, especially where you invest.
I believe Cincinnati is great because not as many people look here so it isn't filled up like Cleveland or Columbus, quite yet. Let me know if you have questions or how I can help!
Hello all, I'm thrilled to join this community as I embark on my real estate investment journey. I'd greatly appreciate advice from experienced individuals here on how to identify promising markets and deals remotely. Currently, my wife and I own a house in the Bay Area, purchased back in 2019. With a combined w2 income, we've managed to gather some funds for real estate investments.
My primary goal is to find passive investment properties that offer positive cash flow or at the very least break even after all expenses. As many of you might know, the Bay Area has become a challenging market to find such properties. As a result, I've begun exploring out-of-state (OOS) options like Austin, Joshua Tree, Raleigh, and the Sacramento area. However, after spending close to a year on and off searching, I've encountered difficulties such as lack of trust in some neighborhoods or uncertainty about the potential of these areas and overall unfamiliarity with the locality. I think it would become a lot easier for me to find deals if I am able to finalize potential couple areas.
To those who have successfully found such opportunities remotely, I'd love to hear your insights and learn from your experiences. How do you go about identifying promising markets? What strategies do you employ to spot potential areas? Any tips or advice on conducting due diligence in OOS markets would be invaluable. I am also open to building a partnership if you have any potential opportunities!
As I continue my search, I'm eager to tap into the collective wisdom of this community. Thank you in advance for any advice you can provide!
Hey Deepen, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
