@Ben Callahan I am going to be using some real world examples to help convey the points I am expressing, adding onto what @Nicholas L. said, which I agree with much of.
I can understand why one would think of starting with looking at markets, but it's wrong, it's backwards.
To put it in terms that maybe more-so connect for you, looking at markets first is like someone walking in to see you saying they were wronged and want to sue some business, so first they want to sort out how much they can get from them. That's not where you start right, you can understand why someone would think they start there but it's wrong, they start with themself, asking strength of there case and if they have the budget to fund-the-fight, and what kind of fight can they fund.
Where you want to start, similarly, is with yourself.
What kind of tenant are you ok dealing with? Are you comfy dealing with a daisy-chain of evictions? Is perpetual maintenance and tenant damage a-ok?
Or do you want to start by renting to people similar to yourself? People who make good $, care about there credit and just so happen to have some life situation necessitating a rental for a time, like divorce or relocation? In other words A class tenants and an all but complete void of those tenant headaches and hassles?
And keep in mind this is just about the here n now, where we start, a person can always change things as they go forward, your not making a locked in 4 life decision, but yes you MUST look into self and get honest about what tenant demographic your willing and most ideal to work with at this juncture.
Ok, that now decided, we simply look at budget.
Lastly, is looking at LT realistic expectations. You already detailed some of these that equity growth and appreciation are primary with a desire of best cash-flow available getting the primary meet, with net-0 to start being acceptable. Ok.
Now here is my counter to all the "ohio, Ohio, OHIO" moths to this flame......
Saint Michael MN.
And to be more specific, I am RIGHT NOW actively doing acquisitions in new home developments in this area, yes that does technically make them build 4 rent.
3bd, 2/3 bath homes or detached townhomes (homes without a basement) with unfinished basements/ lower levels all plumbed in and set for adding another bathroom, bedroom and family room (value add).
We are snagging these in the $335k - $365k range, depending on specific layouts etc etc..
Some key aspects of why we are on these:
- 0 cap-x and maintenance day 1, yr1, and really expected for yr 1-3 and very limited up to yr 5/7. Maintenance and cap-x is a HUGE factor far too many pay far too little attention to.
- Seller paid closing. And yes, if done right it includes loan origination fee's. That's up to $10k paid by someone else. No, it's not a discount on purchase price but it is a discount to purchase.
- Class A tenants, in a Class A market, with class A asset. That spells limited headaches, faster leasing times, better rents, in a location that get's accelerated appreciation via forced appreciation.
When starting out that's NOT when a person get's jazzy with it, no. You want BORING, simple, straight forward, consistency7 and factors you can readily see and understand via factual data.
When you invest in path-of-progress, when it's a planned city development, we get to see exactly where things are going in the next 6 months, year, 3 years, heck even 5, 10, 20 years. Because it's all been planned. So we get to use MATH vs hope.
We know what will be where, what demand will be, what it's doing now etc etc.
That's how successful starts are made, by boring acquisitions done based on math and metrics.
Most recent one I did, we had it leased in 19 days listing over $2,700mnth. The tenant is an underwriter at a regional bank, recently divorcing. What do you think the odd's are of a person like that presenting issues that lead to eviction? Exactly.
And best part is, with all these type tenants i pave a path at start that if things so happen that they become interested in buying the place because they love it so much when end of lease is coming up (I do 3yr leases on these with automatic annual rent increases) to just let me know because yes it's always a potential.
And yes, it does happen and it's awesome when it does because then we can reap the forced appreciation, rinse & repeat via 1031 and pyramiding.
And that my friend is how a person can brag they have many rentals and have done next to 0 maintenance in years.
Do you know how much stress, time, energy and money savings no maintenance is? The silence is bliss.
Last word of advice; I would NEVER chase cash-flow in this market cycle, not in MN, IL, WI, TX, TN, IA, ND, GA, not ANY of the market's anywhere. I would chase QUALITY, Equity, Appreciation, and stability.
Cash-flow will make you money, appreciation will make one RICH.
