Newbie Investor Choosing a Market

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Newbie Investor Choosing a Market

Nicole Blankenship
Investor · Arlington, VA · Member since 2023 · 4 posts · 20 votes

Hello BP community-

I've been an avid listener to this podcast ever since my interest in real estate peaked last year. I just read David Greene's long distance real estate investing book and am now trying to choose a market that is out of state from me. 

I am currently in Arlington, VA (DMV area) where housing prices are pretty expensive. I'd like to purchase a rental property (SFH 3/4BR) out of state that is either turnkey or needs minor rehab done with it. My full time job is flexible so I am able to fly out to this location to get a look at the property & make connections in the area. I have about $40K cash (and other investments if needed to withdraw) saved up for this purchase, now I just need to zero in on a location. I have narrowed down my options to the markets below:

Dayton, Columbus, or Cleveland, OH
Fayetteville, NC
St. Louis, MO
Detroit, MI
Columbia, SC
Indianapolis, IN
Louisville, KY

I know these are a lot of options.. I am looking to connect with any investors, agents, lenders, etc. in these areas OR any that you are currently in and recommend to other investors starting out. Thank you in advance and I look forward to connecting with you :)

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2y

@Nicole Blankenship

welcome.  i lived in Northern Virginia for 16 years and still own property there, so i totally understand the desire to find a lower cost market to invest in.  I want to strongly caution you, though, to really do thorough due diligence.  a lot of investors in DC, CA, etc. find a property in the midwest that looks great... and then just turns into a money pit, and deferred capex consumes years and years of cash flow.  and with the jump in interest rates cash flow is even more challenging at the moment.

as an example... see this really thoughtful thread.  i'd argue this investor did everything right... and the cash flow just wasn't as much as hoped for, because the midwest is not a panacea.

https://www.biggerpockets.com/forums/48/topics/1159104-overl...

and unfortunately... if you're looking for something turnkey, $40K just isn't going to get you very much.  you might get 1 property in a decent neighborhood... and then be at about break even on cash flow each month.  i just don't see how that's a good use of your entire RE budget, and/or liquidating other investments to not get a return.

i am encouraged that you said that you plan to fly to the chosen market in person, but one or two trips just isn't going to get you very much.  have you considered house hacking?  it's tougher in the DC metro because of the lack of small multifamily so you'd be looking at roommates.  another option is to pick a DC exurb like Hagerstown or Culpeper or Winchester or even the nicer areas of Baltimore (get some local experts to guide you if you go that direction) and start going there every weekend and really put some time in.

hope this helps, feel free to ask any follow ups or PM me

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  • Kyle Spearin
    Real Estate Agent · Boston, MA · Member since 2016 · 451 posts · 214 votes
    2y

    @Nicole Blankenship I have properties in STL and near Fayetteville. The first thing I'd recommend is determining what your goals/strategy are-- looks like cash flow based on price to rent ratios in these areas.

    The reason I'm saying this is because rentals or managing properties in general out of state present additional challenges, so you have to understand that going in and know that things will come up. 

    Second, decide if you REALLY want to invest out of state or if it's just a cost thing. Plenty of opportunities to house hack nearby I'm sure.

    Third, if you want to invest out of state for sure, research the economics and growth patterns of each area. Build connections and even fly there yourself to understand the lay of the land before buying.

    Good luck!

    0Reply
  • Jason Allen
    Attorney · Columbus, OH · Member since 2023 · 193 posts · 145 votes
    2y
    Quote from @Nicholas L.:

    @Jason Allen

    can you post an example of a turnkey, high quality deal that can be purchased with $40K and cash flows more than trivially?


     What kind of financing will you be using? 

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    DSCR loan, 25% down

    0Reply
  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Nicole Blankenship:

    Hello BP community-

    I've been an avid listener to this podcast ever since my interest in real estate peaked last year. I just read David Greene's long distance real estate investing book and am now trying to choose a market that is out of state from me. 

    I am currently in Arlington, VA (DMV area) where housing prices are pretty expensive. I'd like to purchase a rental property (SFH 3/4BR) out of state that is either turnkey or needs minor rehab done with it. My full time job is flexible so I am able to fly out to this location to get a look at the property & make connections in the area. I have about $40K cash (and other investments if needed to withdraw) saved up for this purchase, now I just need to zero in on a location. I have narrowed down my options to the markets below:

    Dayton, Columbus, or Cleveland, OH
    Fayetteville, NC
    St. Louis, MO
    Detroit, MI
    Columbia, SC
    Indianapolis, IN
    Louisville, KY

    I know these are a lot of options.. I am looking to connect with any investors, agents, lenders, etc. in these areas OR any that you are currently in and recommend to other investors starting out. Thank you in advance and I look forward to connecting with you :)


     Nicole, I would look in the Columbus market. Tons of economic development and growth going on in the area. Large companies like Intel, Amazon, and Google are investing billions of dollars here. If you do look in Columbus, I created a neighborhood grade map that I can share with you. Very helpful tool. 

    If you want to invest in Columbus with $40k, you can find deals in Franklinton, Hilltop, and North Linden for ~$145k with a 25% down. You want to make sure you find a good agent that can find you off-market deals.

    [email protected]614-802-5698
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    2Reply
  • Mark Faulkner
    Real Estate Consultant · Roswell, GA · Member since 2023 · 50 posts · 26 votes
    2y

    @Nicole Blankenship

    If you have a few moments, check out the Atlanta & Savannah, GA markets. Georgia has been seeing consistent net migration into the state for a decade or more. I am an owner, investor, consulting agent, and work for a large professional property management company in those markets. Let me know if I can help answer any questions!

    Mark 

    3Reply
  • Roger Flot
    Investor · Mississippi Gulf Coast · Member since 2019 · 56 posts · 53 votes
    2y

    Its not required, but it sure gets easier when you have boots on the ground in your desired destination.

    People who can drive by and get a look at things, get a feel for neighborhoods on weekdays, weekends... night and day.

    Like I said, its not required, but another set of eyes that you trust or know can provide intrinsic insight when investing from a distance.

    0Reply
  • Robert EllisBusiness Member
    Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
    2y
    Quote from @Nicole Blankenship:

    Hello BP community-

    I've been an avid listener to this podcast ever since my interest in real estate peaked last year. I just read David Greene's long distance real estate investing book and am now trying to choose a market that is out of state from me. 

    I am currently in Arlington, VA (DMV area) where housing prices are pretty expensive. I'd like to purchase a rental property (SFH 3/4BR) out of state that is either turnkey or needs minor rehab done with it. My full time job is flexible so I am able to fly out to this location to get a look at the property & make connections in the area. I have about $40K cash (and other investments if needed to withdraw) saved up for this purchase, now I just need to zero in on a location. I have narrowed down my options to the markets below:

    Dayton, Columbus, or Cleveland, OH
    Fayetteville, NC
    St. Louis, MO
    Detroit, MI
    Columbia, SC
    Indianapolis, IN
    Louisville, KY

    I know these are a lot of options.. I am looking to connect with any investors, agents, lenders, etc. in these areas OR any that you are currently in and recommend to other investors starting out. Thank you in advance and I look forward to connecting with you :)


    you can do new construction DSCR loans with 10% down and we have a house we can build in Columbus Ohio for $260k. 4 bed, 3 bath, 2 car garage. 25%+ equity. I have all the underwriting and plans approved that we use. Existing inventory is saturated, no pricing wars, you control every decision in new construction. this is an investor based product that we designed. 40k is tight for buying a house that is 100 years old or 50 years old. why not have everything brand new? I sold existing inventory for 8 years and there isn't one reason not to build.

    [email protected]786-494-6766
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    2Reply
  • Lily Wang
    Investor · Houston, TX · Member since 2022 · 24 posts · 9 votes
    2y

    @Nicole Blankenship

    I recommend Houston.

    It’s possible to buy a new construction(4-5b) in some parts of houston under 40k and get a cash flow close to 2k/month and good appreciation.

    I myself are buying and holding too.

    1Reply
  • Josh Bowser
    Real Estate Agent · Atlanta, GA · Member since 2020 · 416 posts · 233 votes
    2y

    Would recommend you go where you can build a team on the ground and an area the area that is growing the fastest. Target the path of progress. 

    1Reply
  • Peter MacKercherBusiness Member
    Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
    2y

    @Nicole Blankenship If you want to know about the STL market. Let's set up a time to chat.

    [email protected]
    1Reply
  • Min ZhangBusiness Member
    Real Estate Agent · Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Hi Nicole! Columbus has experienced so much growth for the past few years, partly due to the influx of tech giants like Intel ($20 billion), Meta, Amazon, and Google building warehouses and data centers in the area, which has contributed to an increase in property prices and more people moving into the city for job opportunities. I also invest in Cleveland and Dayton. Let me know how I can help!

    [email protected]614-412-2912
    Reafco.512 Reviews
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  • Peter Dorinsky
    Real Estate Agent · Columbus, OH · Member since 2020 · 149 posts · 193 votes
    2y
    Quote from @Nicole Blankenship:

    Hello BP community-

    I've been an avid listener to this podcast ever since my interest in real estate peaked last year. I just read David Greene's long distance real estate investing book and am now trying to choose a market that is out of state from me. 

    I am currently in Arlington, VA (DMV area) where housing prices are pretty expensive. I'd like to purchase a rental property (SFH 3/4BR) out of state that is either turnkey or needs minor rehab done with it. My full time job is flexible so I am able to fly out to this location to get a look at the property & make connections in the area. I have about $40K cash (and other investments if needed to withdraw) saved up for this purchase, now I just need to zero in on a location. I have narrowed down my options to the markets below:

    Dayton, Columbus, or Cleveland, OH
    Fayetteville, NC
    St. Louis, MO
    Detroit, MI
    Columbia, SC
    Indianapolis, IN
    Louisville, KY

    I know these are a lot of options.. I am looking to connect with any investors, agents, lenders, etc. in these areas OR any that you are currently in and recommend to other investors starting out. Thank you in advance and I look forward to connecting with you :)


    Hi Nicole, there's lots of great opportunity in the Ohio markets. If you're looking for a market that is rapidly growing and has long-term appreciation potential I'd also suggest looking into the Columbus market. It's quickly becoming a hub for tech-companies that are expanding their business and creating lots of new jobs. Ohio is also a landlord friendly state that offers low taxes and price-points. Cleveland and Dayton are good markets to look into as well, especially if you're looking for cash-flowing deals. Happy to connect if you have questions!

    0Reply
  • Aditya S.
    Real Estate Agent · VA · Member since 2022 · 49 posts · 6 votes
    2y

    I would echo some of the other posts and save up more before diving in. This will better prepare you for any ugly surprises. I may also go local for my first door - the learning will be better and then you can apply the lessons to more far flung properties. 

    0Reply
  • Gladimir Lobo
    Real Estate Broker · Cleveland, OH · Member since 2023 · 242 posts · 85 votes
    2y

    Nicole,

    Glad to hear you want to get started.

    You must get with a local team and coach/mentor in your chosen market. While the stock of homes for potential renovation and renting in Cleveland is still strong, finding the right property that matches your investing profile, performing renovation work and, finally, managing properties can be a daunting task- and nearly impossible to do profitability without the right local team.

    We put our experience and expertise to work for you by providing investor services from the beginning to the end of the investment lifespan.

    Connect with me to learn more.

    1Reply
  • Tim JacobPro Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
    2y

    As has been stated about Baltimore I would consider it.  You can get always get a decent single family for around that in a B grade area that is relatively turnkey and mught be able to get a duplex with 2 1 bedrooms as well.  With closing costs and very minor startup stuff it would be possible.  The most important thing is to pick the right asset class.  With Baltimore you can be there for showings to ensure that.  I think me and most people are fairly honest here but after a while of you get some agent working remotely fit you they will just want you to buy something so they can get paid.  If you invest somewhere you need to fly to it might not be good if you have to fly there a few times.  I'd recommend at minimum for the inspection.  Another thing is if it's Baltimore you could save on a pm charge which could save you a lot of cashflow or maybe leasing though with that I would really consider your time.  I have worked with other investors in the DC area and its worked for them.  They purchased B grade stuff which for me means you can get someone with a 700 plus credit score who always pays on the 1st and you lose no piece of mind about that.  If you go into some midwest C grade asset where that can't happen you have a high likelyhood ofmuch more stress.  Furthermore if things break and you are only in Arlington again you might not need a pm but if it's way out in Ohio or Michigan having a pm makes sense. Than deduct the pm fee and there could go your cashflow.  Also if you have a mostly remote job you could have it be a primary residence and be in a great part of town and have a roommate where they have the basement with their own entrance and live in a great part of town so you would attract young professionals or maybe a duplex for that.  

    2Reply
  • Jessyka Mathews
    Member since 2022 · 10 posts · 15 votes
    2y

    How exciting! 

    My 2 cents about asking a Realtor for advice on locations to purchase, DONT DO IT! You need to do the research yourself. Like everyone else said to be careful where you choose. If its your first investment I would chose as close to you as possible.

    I would start first with figuring out what are your lending options. That will narrow down your budget because some loans require more or less down. So knowing those numbers first can help you focus on an area.

    To focus on an area I would look into areas with a large Military population. They are great to work with. Also maybe consider areas with a large retirement population. They have consistent income and most likely will stay in the home for a long period of time if not forever.

    DSCR which in my opinion is a great option.There are stipulations but it's a pretty streamline process and easy to follow. If you're going hard money the thing to know is that hard money lenders will charge you anywhere from 10%-15% or more and require you to refinance the loan in less than 2 years. The issue you run into hard money is what if the price depreciates buy the time you refinance you might be sp a creek with no paddle. I would go the DSCR route.

    Let's say if I have $40k to use and decided to use the DSCR loan option I might be able to acquire a $250k loan. That's using all of the money allocated for the purchase. You might need some reserves for any repairs needed and lending requirements.

    3Reply
  • Mike Klarman
    Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes
    2y

    So, when I choose a market for my investors i do some google searches like "Top 10 cities for the BRRR" or "best cities to hold real estate in", "list of cities with the best real estate appreciation over last 5 years.

    The choice also depends on your capital.  Each of those cities have a cost as to what the small deals will cost through their life cycle: closing - rehab - sales/refi.  I have my clients in a market that allows affordable entry and the cheapest life cycle I've had last 20 deals was about 23k.  That's down payment, loan costs, insurance, holding costs, utilities, inspections.  So if you have like 30k, then you need to be in one of those markets that offers such opportunity.  If you have 100k, it is more wide open, but then again even with 100k - how much would you want to put in play in one deal?  25k should be about it.  Having 100k and going 80k deep into one deal is risky and can turn on you, with risk of course comes reward and if your cash on cash return is 100% you can profit 80k in one deal and now have 180k not 100k.  But if things go sideways it can wipe you out of the game.

    From Pittsburgh going west through Ohio (Akron, Cinn, Columbus, Dayton, Toledo, certain areas of Clv) and into Indiana all have similar markets that allow for entry for those that are limited on experience and limited on money.  I set up such pipelines for my clients.

    1Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    2y
    Quote from @Nicole Blankenship:

    Hello BP community-

    I've been an avid listener to this podcast ever since my interest in real estate peaked last year. I just read David Greene's long distance real estate investing book and am now trying to choose a market that is out of state from me. 

    I am currently in Arlington, VA (DMV area) where housing prices are pretty expensive. I'd like to purchase a rental property (SFH 3/4BR) out of state that is either turnkey or needs minor rehab done with it. My full time job is flexible so I am able to fly out to this location to get a look at the property & make connections in the area. I have about $40K cash (and other investments if needed to withdraw) saved up for this purchase, now I just need to zero in on a location. I have narrowed down my options to the markets below:

    Dayton, Columbus, or Cleveland, OH
    Fayetteville, NC
    St. Louis, MO
    Detroit, MI
    Columbia, SC
    Indianapolis, IN
    Louisville, KY

    I know these are a lot of options.. I am looking to connect with any investors, agents, lenders, etc. in these areas OR any that you are currently in and recommend to other investors starting out. Thank you in advance and I look forward to connecting with you :)


     Columbus, OH is a great market. For single families, you can find some good 3bd ones in C class areas right around $175k turnkey where market rents will be $1300-1450/mo. If you want fixer uppers here, you can find some closer to $120-150k that may only need $10-25k of work to tidy up. If you only have $40k of cash to work with, I'd probably recommend 20% down for something turnkey.

    [email protected]614-363-2787
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  • Max FeinbergPro Member
    Real Estate Agent · Pittsburgh, PA · Member since 2017 · 151 posts · 70 votes
    2y

    @Nicole Blankenship Pittsburgh is another market that I would add to this list. With 40k, using traditional investment financing, you will be able to find a SFH in a nice B- to C+ type area that needs minimal work. If you are valuing cash flow, I'd consider small multi as well. Plenty of options for both in western PA

    0Reply
  • Ramesh T.
    Investor · Member since 2021 · 1 post · 1 vote
    2y

    Nicole ,

          I appreciate that you are thinking about buying your first investment property and have already done some research . Based on my personal experience with rental unit upgrades/vacancies/insurance costs/other expenses you need to be very conservative when you are analyzing properties . It becomes much more difficult with out of state rental units . 
    I agree with some of the members who have suggested to save up more before you start Out of state Investing to take care of any  surprise costs and  unforeseen expenses in the current market.

    1Reply
  • Nicole Blankenship
    OP
    Investor · Arlington, VA · Member since 2023 · 4 posts · 20 votes
    2y
    Quote from @Nicholas L.:

    @Nicole Blankenship

    welcome.  i lived in Northern Virginia for 16 years and still own property there, so i totally understand the desire to find a lower cost market to invest in.  I want to strongly caution you, though, to really do thorough due diligence.  a lot of investors in DC, CA, etc. find a property in the midwest that looks great... and then just turns into a money pit, and deferred capex consumes years and years of cash flow.  and with the jump in interest rates cash flow is even more challenging at the moment.

    as an example... see this really thoughtful thread.  i'd argue this investor did everything right... and the cash flow just wasn't as much as hoped for, because the midwest is not a panacea.

    https://www.biggerpockets.com/forums/48/topics/1159104-overl...

    and unfortunately... if you're looking for something turnkey, $40K just isn't going to get you very much.  you might get 1 property in a decent neighborhood... and then be at about break even on cash flow each month.  i just don't see how that's a good use of your entire RE budget, and/or liquidating other investments to not get a return.

    i am encouraged that you said that you plan to fly to the chosen market in person, but one or two trips just isn't going to get you very much.  have you considered house hacking?  it's tougher in the DC metro because of the lack of small multifamily so you'd be looking at roommates.  another option is to pick a DC exurb like Hagerstown or Culpeper or Winchester or even the nicer areas of Baltimore (get some local experts to guide you if you go that direction) and start going there every weekend and really put some time in.

    hope this helps, feel free to ask any follow ups or PM me


    Hi Nicholas, thanks so much for your input! I've really thought about this and I think I am now leaning towards a house hack around Northern VA.

    0Reply
  • Nicole Blankenship
    OP
    Investor · Arlington, VA · Member since 2023 · 4 posts · 20 votes
    2y
    Quote from @Jessyka Mathews:

    How exciting! 

    My 2 cents about asking a Realtor for advice on locations to purchase, DONT DO IT! You need to do the research yourself. Like everyone else said to be careful where you choose. If its your first investment I would chose as close to you as possible.

    I would start first with figuring out what are your lending options. That will narrow down your budget because some loans require more or less down. So knowing those numbers first can help you focus on an area.

    To focus on an area I would look into areas with a large Military population. They are great to work with. Also maybe consider areas with a large retirement population. They have consistent income and most likely will stay in the home for a long period of time if not forever.

    DSCR which in my opinion is a great option.There are stipulations but it's a pretty streamline process and easy to follow. If you're going hard money the thing to know is that hard money lenders will charge you anywhere from 10%-15% or more and require you to refinance the loan in less than 2 years. The issue you run into hard money is what if the price depreciates buy the time you refinance you might be sp a creek with no paddle. I would go the DSCR route.

    Let's say if I have $40k to use and decided to use the DSCR loan option I might be able to acquire a $250k loan. That's using all of the money allocated for the purchase. You might need some reserves for any repairs needed and lending requirements.


     Hi Jessyka, thanks for your response! I think I am going to take your advice and do a house hack in my area.

    0Reply
  • Nicole Blankenship
    OP
    Investor · Arlington, VA · Member since 2023 · 4 posts · 20 votes
    2y
    Quote from @Tim Jacob:

    As has been stated about Baltimore I would consider it.  You can get always get a decent single family for around that in a B grade area that is relatively turnkey and mught be able to get a duplex with 2 1 bedrooms as well.  With closing costs and very minor startup stuff it would be possible.  The most important thing is to pick the right asset class.  With Baltimore you can be there for showings to ensure that.  I think me and most people are fairly honest here but after a while of you get some agent working remotely fit you they will just want you to buy something so they can get paid.  If you invest somewhere you need to fly to it might not be good if you have to fly there a few times.  I'd recommend at minimum for the inspection.  Another thing is if it's Baltimore you could save on a pm charge which could save you a lot of cashflow or maybe leasing though with that I would really consider your time.  I have worked with other investors in the DC area and its worked for them.  They purchased B grade stuff which for me means you can get someone with a 700 plus credit score who always pays on the 1st and you lose no piece of mind about that.  If you go into some midwest C grade asset where that can't happen you have a high likelyhood ofmuch more stress.  Furthermore if things break and you are only in Arlington again you might not need a pm but if it's way out in Ohio or Michigan having a pm makes sense. Than deduct the pm fee and there could go your cashflow.  Also if you have a mostly remote job you could have it be a primary residence and be in a great part of town and have a roommate where they have the basement with their own entrance and live in a great part of town so you would attract young professionals or maybe a duplex for that.  


     Hi Tim, thanks for your response! I looked in the Baltimore MD area but I do not know enough about the area to know where the good/safer spots are. Would love to chat about this.

    0Reply
  • Tim JacobPro Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
    2y

    @Nicole Blankenship sent you a message

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Nicole Blankenship

    sounds good, feel free to PM any more questions you have

    0Reply
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