Where to start investment journey

Question

Hello everyone,

I am new to real estate investment and live in the northeastern United States (New York). Property prices are very high in this region, and it seems unlikely that rental properties will generate positive cash flow due to the high cost of homes and current high interest rates. I am interested in starting my real estate rental journey and would like to know where I should begin. Additionally, I am seeking advice on how to find an out-of-state partner or agent. Thank you for the help in advance.

Matthew Irish-Jones · Answer

Sorry to be blunt, but if you chase cash flow you won't have a Real Estate investing career.  You should look to buy the best asset in the best location you can afford.

Kristine Ann · Answer

@Sam Gupta You don't need to go out of state!  Hop in your car and drive up three hours north to the Albany/Ballston Spa/Saratoga Area.  You can also look into Utica, Syracuse, Rochester and Buffalo, all within an 6-8 hour drive.  Look for small suburban areas or revitalized small towns with good schools.  Often people try to stay in a good school district and will rent a place in the district lines just for that reason.

Samuel Diouf · Answer

Welcome to BP Sam,

These forums are a great place to learn and meet people, whether you're just starting out or you're a seasoned investor.

When doing research on potential areas to invest in, I would look for different investment markets such as cash-flow focused or appreciation focused real estate. Identify markets with expanding industries, positive growth trends, and bright economic forecasts.

Columbus, Ohio is a great market to consider if you're leaning towards appreciation. Multiple, billion dollar companies are investing heavy in our area, such as Intel, Google, and Amazon. Which will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

Drew Sygit · Answer

@Sam Gupta

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at

Alfath Ahmed · Answer

Sam - I work with a lot of east coast investors. They tend to shift towards the midwest due to the cashflow and appreciation potential. I like a lot of the cities in my market. Lots of growth going on from OOS.

Brandon Goldsmith · Answer

Narrow down a buy box then target markets that have more of the inventory. Closer to home is always better to start out if you you are able to. As some of the others said, it doesn't really matter where you buy as long as you have a good team in place, being closer just mitigates risk in the beginning. @Sam Gupta

Logan Moir · Answer

Welcome, Sam! I bought my first investment property in WA (where I live) and my second in NC (not where I live). There was so much learning associated with that first deal, and I'm thankful I lived nearby. The second property had very few unknowns after learning most things with the first property.

Before you identify your market, have you already identified your goals?

You mentioned cash flow in your comment. While there are returns and security in substantial positive cashflow, you also get returns through appreciation, tax deductions, and loan paydown. Depending on your goals, you may be able to deal with lower (or even negative) cashflow to access greater appreciation/tax deductions. With greater appreciation, you can leverage that increased value through a HELOC or cash-out-refinance to purchase or rehab your next investment property.

Where to begin?

There are investors buying in every market every day. Many investors will tell you that they started where they live since they know the area and can physically visit the property if something goes wrong.

- You can find your local real estate investing meetups. You can learn investing vocabulary there (if you're not familiar already), meet potential partners, and get recommendations from active investors for local brokers, contractors, lenders, etc. You'll also learn what strategies are working well for investors in your area to make investment properties work (e.g., DADU development, AADU development, basement ADU conversion, rent-by-the room house hacks, etc.--all very popular in my WA market).

- If you're not familiar with investing vocabulary, there are plenty of books. The one that made me confident to start was this one. Feel free to PM me if you want to hop on a Google Meet call to run through a calculator spreadsheet together.

How to find an out-of-state partner or agent?

- After investing in your local market (if possible, even if you need to partner to fund the deal), you can search "agent recommendation in [CITY]" in the Bigger Pockets forums to see which agent other investors love working with or use the Bigger Pockets Agent Search.

- You can ask your local investor agent to recommend a investor agent in the out-of-state market you're interested in too. They likely know plenty of teams across the country from their own investing and networking.

- Your out-of-state investor agent should have plenty of recommendations for local contractors, lenders (conventional and hard money), property managers, etc. and be able to identify appropriate assumptions for your analysis (e.g., appreciation, vacancy, rent estimates, etc.).If you have questions, feel free to PM me--happy to help.

Jimmy Lieu · Answer

Hey Sam, 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!

April Rae · Answer

Hey Sam,

Starting your real estate investment journey in a high-priced market like New York can be challenging, but it's not impossible. Here are a few steps you can take to begin your journey:

• Education: Start by educating yourself about real estate investing. Read books, listen to podcasts, and join online forums like BiggerPockets to learn from experienced investors and understand different investment strategies.
• Market Research: While the New York market may be expensive, there are still pockets within the state and neighboring states where properties are more affordable and can generate positive cash flow. Consider looking at cities or towns outside of major metropolitan areas where prices may be lower.
• Out-of-State Investing: Another option is to consider investing out of state. Look for markets with lower property prices, strong rental demand, and potential for appreciation. Consider cities in the Midwest or South where property prices are more affordable and rental yields are higher.
• Networking: Attend real estate investment seminars, join local real estate investment groups, and network with other investors to learn from their experiences and potentially find an out-of-state partner or agent.
• Partnering: Finding a local partner or agent in an out-of-state market can be beneficial. They can provide local market knowledge, help you find investment properties, and manage them on your behalf.
• Financial Planning: Before making any investments, make sure you have a solid financial plan in place. Calculate your budget, including how much you can afford to invest, and consider factors like financing, property management, and potential vacancy rates.

Preston Dean · Answer

Hi @Sam Gupta

One thing to remember when you are getting into RE investing is to have your team of people or as Brandon Turner from the Bigger Pockets Podcast calls it your CORE 4

1. Your contractor

2. Your deal finder (agent/wholesaler)

3. Your property manager

4. Your Lender

My suggestion to find #2 & #4 would be to go to the top of this page and click on FIND AN AGENT  & FIND A LENDER. There you will be asked your criteria and then after answering a few questions you will be matched with 3-5 agents or loan officers in your area. My suggestion would be to select someone with the most forum posts or most reviews. That way you know they are active in the BP community!

In Texas here are some of the deals we have

Duplex by TCU sold for $310K

4Plex outside the city limits of Fort Worth on market for $539K

Where to start investment journey

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