Brand New Investor

Denver, Colorado
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Brand New Investor

Peter Vercellin
New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes

Hi,
I'm brand spankin new!  Not even 1 deal yet. YET.  Is it crazy that I have my eyes set on an out of state market? I already have a realtor and contractor lined up.  Working on lender and property manager now.

4Reply
95 views

Most Popular Reply

Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
1y

@Peter Vercellin

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

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

  • Property Tenant Pool: closely linked to location, but not always.
  • Property Location: closely linked to tenant pool, but not always.
  • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.

Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Logical Property Management4.9454 Reviews
WebsiteView Page
3Reply
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33 Replies

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  • Brandon Campbell
    Sacramento California · Member since 2019 · 30 posts · 19 votes
    1y

    I love it! You are off to a good start. I'm rooting for you!

    0Reply
  • Austin McClainBusiness Member
    Real Estate Agent · OH · Member since 2021 · 348 posts · 602 votes
    1y

    Good luck! If yo plan to buy and hold, make sure you have a good property management company ready as well 

    [email protected]614-710-4827
    0Reply
  • Peter Vercellin
    OP
    New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
    1y
    Quote from @Brandon Campbell:

    I love it! You are off to a good start. I'm rooting for you!

    Thanks Brandon!

    0Reply
  • Peter Vercellin
    OP
    New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
    1y
    Quote from @Austin McClain:

    Good luck! If yo plan to buy and hold, make sure you have a good property management company ready as well 

    Agreed. Thanks Austin!
    0Reply
  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    1y

    @Peter Vercellin Congrats on getting started.  Focus on deal analyzing so that you know what constitutes a "Deal" to you.  Additionally, develop some real estate metrics so that you may measure markets evenly and objectively. 

    As a NY'er what was important to me was 1. cost of market entry 2. price to rent ratio 3.  availability of multi-family 4. ability to write my own contracts(Go off market) 5. landlord tenant laws etc......and some others.

    If you plan to hold long term, think of what would be most important to this type of investing i.e 

    All the best!

    0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y
      Quote from @Shawn Ackerman:

      @Peter Vercellin Congrats on getting started.  Focus on deal analyzing so that you know what constitutes a "Deal" to you.  Additionally, develop some real estate metrics so that you may measure markets evenly and objectively. 

      As a NY'er what was important to me was 1. cost of market entry 2. price to rent ratio 3.  availability of multi-family 4. ability to write my own contracts(Go off market) 5. landlord tenant laws etc......and some others.

      If you plan to hold long term, think of what would be most important to this type of investing i.e 

      All the best!


       Thanks Shawn! Is 1% still the benchmark for price to rent ratio?

      0Reply
    • Shawn AckermanPro Member
      Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
      1y
      Quote from @Peter Vercellin:
      Quote from @Shawn Ackerman:

      @Peter Vercellin Congrats on getting started.  Focus on deal analyzing so that you know what constitutes a "Deal" to you.  Additionally, develop some real estate metrics so that you may measure markets evenly and objectively. 

      As a NY'er what was important to me was 1. cost of market entry 2. price to rent ratio 3.  availability of multi-family 4. ability to write my own contracts(Go off market) 5. landlord tenant laws etc......and some others.

      If you plan to hold long term, think of what would be most important to this type of investing i.e 

      All the best!


       Thanks Shawn! Is 1% still the benchmark for price to rent ratio?


       1% will typically allow you to break even.  I'd say 1% deals are going to be more of an appreciation play rather than a 2% deal which will undoubtably cash flow.  I don't look for 1% deals which is why as a NY'er I chose to invest in the Mid-West vs East Coast.

      0Reply
  • Ryan Harrell
    Memphis, TN · Member since 2023 · 100 posts · 24 votes
    1y

    Hey Peter, 

    Congratulations! Where do you plan on investing?

    0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y
      Quote from @Ryan Harrell:

      Hey Peter, 

      Congratulations! Where do you plan on investing?


       East Kansas. Daughter going to KU in the fall.

      0Reply
    • Ryan Harrell
      Memphis, TN · Member since 2023 · 100 posts · 24 votes
      1y
      Quote from @Peter Vercellin:
      Quote from @Ryan Harrell:

      Hey Peter, 

      Congratulations! Where do you plan on investing?


       East Kansas. Daughter going to KU in the fall.


       Nice - I love Kansas City from a buy and hold perspective. I worked with an institutional buyer for a few years, and they focused on areas like Overland Park, Lee's Summit, and Leavenworth. Good luck! 

      0Reply
  • Peter Vercellin
    OP
    New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
    1y

    East Kansas. Daughter going to KU in the fall.

    P

    0Reply
  • Eric DeNardoPro Member
    Real Estate Agent · Denver · Member since 2020 · 366 posts · 151 votes
    1y

    @Peter Vercellin - Nice! Not crazy at all, it's much cheaper out of state compared to Colorado. If you were interested in investing in Colorado, please reach out! There are strategies that make the numbers work, you have to be creative. 

    Would love to connect and learn more about your goals!

    [email protected]
    0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y
      Quote from @Eric DeNardo:

      @Peter Vercellin - Nice! Not crazy at all, it's much cheaper out of state compared to Colorado. If you were interested in investing in Colorado, please reach out! There are strategies that make the numbers work, you have to be creative. 

      Would love to connect and learn more about your goals!

      Sounds great!  Let's connect Wednesday afternoon or Thursday if you have time.  I'll take the guidance for sure.

      0Reply
  • Allie McAlister
    Memphis, TN · Member since 2024 · 180 posts · 223 votes
    1y

    @Peter Vercellin  

    Welcome to BP and congratulations on your first steps. Looks like you're definitely headed in the right direction. What market are you getting started in?

    Best of luck!

    1Reply
  • Peter Vercellin
    OP
    New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
    1y

    Thanks Allie!

    Eastern KS.

    0Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    1y

    All of those markets on the KS side are strong. If you are being by KU you'll be in Lawrence area. There are PM's that manage on that side, Kansas City property managers don't generally travel that far. Which kind of lender are you looking for?

    0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y
      Quote from @Caleb Brown:

      All of those markets on the KS side are strong. If you are being by KU you'll be in Lawrence area. There are PM's that manage on that side, Kansas City property managers don't generally travel that far. Which kind of lender are you looking for?


       Hi Caleb,

      Hard money to get started on flips.  Ideally flipping to build up some capital then holding when it makes sense.

      P

      0Reply
    • Dalton O'Donnell
      Member since 2023 · 19 posts · 3 votes
      1y
      Quote from @Peter Vercellin:
      Quote from @Caleb Brown:

      All of those markets on the KS side are strong. If you are being by KU you'll be in Lawrence area. There are PM's that manage on that side, Kansas City property managers don't generally travel that far. Which kind of lender are you looking for?


       Hi Caleb,

      Hard money to get started on flips.  Ideally flipping to build up some capital then holding when it makes sense.

      P

       Peter, I am a local hard money lender with direct decision making, underwriting, in house valuations, and soft pull on credit. We have out own cash. We like KC area the most but can venture out, even into other states. Would be more than happy to help. @Caleb Brown can vouch for me.

      1Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y

      @Dalton O'Donnell sounds good. Let's chat when you have a minute.

      0Reply
  • Drago Stanimirovic
    New to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 458 votes
    1y

    Hey Peter, not crazy at all—plenty of investors start out-of-state, especially if their local market isn’t ideal. Since you already have a realtor and contractor, you’re off to a strong start.

    The key is making sure your numbers work and that your team is solid, especially with property management. A good lender who understands out-of-state investing can also make a big difference. If you need financing options, I’d be happy to help.

    Excited to see you land that first deal! Let me know if you need any guidance.

    Drago

    0Reply
  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    1y

    @Peter Vercellin

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

    Why is Property Class so important for investors to understand and apply in their investing strategies?

    Because the Property Class dictates the Class of the tenant pool that the property will attract.

    The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

    Both Property Class and Tenant Class affect what type of contractors, handymen and property management companies will work on a property.

    If you buy & renovate a property in Class D area to Class A standards, what Tenant Class will rent it?

    Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

    So, if you fail to apply the correct assumptions to a property, your expectations won’t be met and it may even be a financial disaster.

    We use the following to rank Property Classes, in order of importance:

    • Property Tenant Pool: closely linked to location, but not always.
    • Property Location: closely linked to tenant pool, but not always.
    • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

    Key metrics for each Property Class:

    Class A Properties:
    Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
    Tenant Default: 0-5% probability of eviction or early lease termination.
    Section 8: Class A rents are too high and won’t be approved.
    Vacancies: 5-10%, depending on market conditions.
    Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

    Class B Properties:
    Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
    Tenant Default    : 5-10% probability of eviction or early lease termination.
    Vacancies    : 10-15%, depending on market conditions.
    Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
    Section 8: Class B rents are usually too high for the Section 8 program.

    Class C Properties:
    Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
    Tenant Default: 10-20% probability of eviction or early lease termination.
    Section 8: Class C rents usually meet program requirements, proper screening still recommended.
    Vacancies: 10-20%, depending on market conditions and tenant screening.
    Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

    Class D Properties:
    Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
    Tenant Default: 20-30% probability of eviction or early lease termination.

    Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
    Vacancies: 20%+, depending on market conditions and tenant screening.
    Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

    Where did we get our FICO credit score information from?

    Check out this chart:

    FICO Score

    Pct of Population

    Default Probability

    800 or more

    13.00%

    1.00%

    750-799

    27.00%

    1.00%

    700-749

    18.00%

    4.40%

    650-699

    15.00%

    8.90%

    600-649

    12.00%

    15.80%

    550-599

    8.00%

    22.50%

    500-549

    5.00%

    28.40%

    Less than 499

    2.00%

    41.00%

    Source: Fair Isaac Company

    Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

    Logical Property Management4.9454 Reviews
    WebsiteView Page
    3Reply
  • Logan Lambert
    Lender · Kingsville, MD · Member since 2023 · 103 posts · 35 votes
    1y
    Quote from @Peter Vercellin:

    Hi,
    I'm brand spankin new!  Not even 1 deal yet. YET.  Is it crazy that I have my eyes set on an out of state market? I already have a realtor and contractor lined up.  Working on lender and property manager now.


     Hey Peter,

    Congrats on getting started. What market are you looking in? Also, what are you looking for in a lender when you are connecting with them?

    0Reply
  • Tanner PileBusiness Member
    Real Estate Broker · Colorado Springs, CO · Member since 2019 · 389 posts · 326 votes
    1y

    @Peter Vercellin What strategy to you plan to use for renting out?

    Tanner Pile4.931 Reviews
    WebsiteView Page
    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    1y

    Welcome to BiggerPockets Peter and good luck investing!

    Podcast Guest on Show #121
    0Reply
  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    1y

    If you want to look at multifamily in Kansas City let me know. There are some great pockets to invest in for every budget and investor type. 

    1Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y

      @Alex Olson Yes! Seems like a good place for me to start. Where should I focus? N,S,E or W? Looking to fix/flip or hold depending on property. 

      0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y

      @Alex Olson let's talk. 

      0Reply
    • Peter Vercellin
      OP
      New to Real Estate · CO · Member since 2025 · 19 posts · 8 votes
      1y

      @Alex Olson sounds good. I'll call you Monday. Shoot me your number.

      0Reply
  • Tyler Chavez
    Member since 2023 · 31 posts · 6 votes
    1y

    I work with a lot of out of state investors in the Kanas City market. Would be more than happy to help and connect.

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

    @Peter Vercellin

    it's not crazy, but it's also more difficult, and more expensive, than advertised.  the macro environment for long term rentals (and lots of other niches) is just about the worst it could possibly be right now for a new investor to pick a random market in a random state, and shell out $50K or more to get a random property, and then turn it over to random people you haven't met. and then, the HVAC goes, and your first tenant roughs the place up on their way out, and that $10K turnover eats up your "cash flow" for 12 years. and you are now sad.

    so, 

    1. don't give up on investing in state.  it's too expensive?  so is the scenario i outlined above.  can you go an hour or two out from Denver?  can you find a niche?  can you house hack?  can you live in flip?  

    2. IF you choose to invest out of state, don't pick a random market. pick one you have ties to or know well or can drive to or went to college in or hope to move to eventually or like to vacation in or where you have two handy uncles.  price point alone is not a great metric to choose by and gets new investors burned all the time.

    3. read these threads and don't do what those OPs did.


    https://www.biggerpockets.com/forums/963/topics/1195280-expe...

    https://www.biggerpockets.com/forums/48/topics/1160450-run-i...

    https://www.biggerpockets.com/forums/48/topics/1137397-balti...

    https://www.biggerpockets.com/forums/52/topics/1010977-12-00...

    not trying to be discouraging, just realistic

    hope this helps

    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    1y

    I know a lot of people who have made a lot of money in real estate here in Colorado. I don’t know a single person who has regretted owning property here (I’m sure there are some of course, but pretty rare and probably their own fault they didn’t succeed, not the market’s fault). I know 1 or 2 people who live here and have done well investing out of state. However I know many, many more people who have tried that and have failed miserably. Probably 9 out of 10 people who I know that have tried investing out of state have run into the same problems: turnovers costing too much, cap ex, tenant issues, management issues, etc. have erased anticipated cash flow and they have ended up losing money every month instead of making money, then sold after a few years. Some have made money on the sale and were lucky that the market had moved in their favor. Others broke even, most lost money. And that was when market conditions were much more favorable for this type of investing than they are now. A few friends of mine were just straight up taken advantage of and ripped off and lost a lot of money even despite the market moving in their favor. It’s possible but a lot harder and riskier to invest in real estate out of state and succeed. Many reasons for this. Also the small percentage of people I know who have had success with it have deep connections to the markets they invest in: they used to live there or grew up there, travel there often or have close family members living there. Also they are the type of people who would have been successful anywhere. They survived despite the additional challenges of investing remotely, but arguably could have done much better just investing locally, and it would have been much easier. I wouldn’t do it unless you have plenty of capital to spend on things like capex issues and turnovers. And if you have plenty of capital, why not just invest here…. Just my .02! 

    1Reply
  • Kerlous TadresBusiness Member
    Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
    1y
    Quote from @Peter Vercellin:

    Hi,
    I'm brand spankin new!  Not even 1 deal yet. YET.  Is it crazy that I have my eyes set on an out of state market? I already have a realtor and contractor lined up.  Working on lender and property manager now.

    That's awesome! I would learn the area and pick your agent's brain as much as possible. There is a lot of opportunity out there, just have to have a strategy and plan
    [email protected]614-490-1163
    Kerlous Tadres | Reafco Real Estate540 Reviews
    WebsiteView Page
    0Reply
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