Market recommendations?

30 Replies

Hello all,

I am looking to finally take the plunge into purchasing my first rental property (looking for cash flow). Given the insane prices in the Bay Area I am looking out of state. I see that places like Memphis and St. Louis are pretty attractive at the moment however I am really looking for markets a little closer to home so that travel won't be as daunting. I'm definitely doing and willing to do the research and legwork but am a little overwhelmed by all the possible locations to look at and am looking to focus the search. Any suggestions would be most welcome!

Afternoon Patrick,

I'm in Sacramento and recently started investing in Memphis. There are a lot of good deals there, and a lot of bad. That's everywhere though. Hang out in here and set keyword alerts for cities that are closer that you would be interested in and then watch those discusssions. I would say look at a few cities in Texas or Arizona but flights to those cities are about the same price and the cash flow won't be much different, depending on the deal.

Hi David,

Totally understood. I have a friend that has a couple of turnkey properties in Memphis that are working out pretty well for him, however the travel would be a killer as I am pretty insistent on doing my own due diligence in seeing any properties/neighborhoods I'd be buying in so I will definitely try out the keyword alert suggestion, thanks!

@Patrick G. , you should come check out my 4plex in Oakland I'm closing on next week. Search 4plex meetup on BP. Should be lots of CF, and a fun networking event on-site at an investment! Some people go inland to invest. Central Valley. Inland Empire. Some from the Bay go out to Stockton, Sacramento, etc.. @Erin A. is out in Stockton. @Al Williamson is a knowledgeable resource - and in the Sacramento market.

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

@J. Martin Thanks for reaching out. It would be great to connect with others so I will definitely try to make it out.

Originally posted by @Patrick G. :
Hello all,

I am looking to finally take the plunge into purchasing my first rental property (looking for cash flow). Given the insane prices in the Bay Area I am looking out of state. I see that places like Memphis and St. Louis are pretty attractive at the moment however I am really looking for markets a little closer to home so that travel won't be as daunting. I'm definitely doing and willing to do the research and legwork but am a little overwhelmed by all the possible locations to look at and am looking to focus the search. Any suggestions would be most welcome!

Hi Patrick and welcome to BP.

I always like to say that good deals can be found anywhere in the US.

Its harder to find the right people to do the deals with lollol

We are based in Ohio and are finding some amazing undervalued properties.

Ohio and Michigan possess stigma's due to higher than average unemployment and "declining population".

I do believe that these 2 states have lots of potential as soon as manufacturing jobs return to the rust belt.

Indiana, Kansas, Missouri are some other sports with great numbers.

Thanks for reading and have a great day.

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

If I have to make a bet, I put it on Texas. Texas has been experiencing massive population growth in the last decade. They're growing even faster than California. But then again, I don't preach on what I bet. I'm still investing in the Bay Area because that's the market I know best.

Just heard the head of CA's High Speed Rail Authority on podcast. That got me thinking whether there is any investment angle in this. The initial phase between Merced and Bakersfield will open in 2022, followed by the link from San Jose to Merced in 2026 or something.

I am already interested in Merced. The UC campus there will no doubt expand. And look like it will become a rail hub of sort? Any thoughts on this?

@Patrick G.

Welcome to BP. I'm from CA too so I know the challenges (i.e. impossibility) to get cash flow. My advice is to focus on whatever market will give you the best chance of achieving your objectives and being successful and less on where that is. I think people often sub optimize their investment because they want to be close to home. There are some really good cash flow markets but you have to be willing to invest further away. I agree with @Engelo Rumora that Indianapolis and Kansas City are very good. I'm working in both of those markets and know them well. I have to disagree [email protected] L. about Texas. Yes, the economy is great but the cash flow and ROI is mediocre. The rent ratios are barely 1% to begin with and on top of that, they have some of the highest property taxes and homeowners insurance in the country. I'll be happy to send you a couple of reports on how to choose a market and how to invest out of state if you'd like.

Best wishes,

Mike

Mike D'Arrigo, Pinnacle Investment Properties, LLC | [email protected] | 800 348‑0956 | http://www.investwithpinnacle.com

Originally posted by @Mike D'Arrigo :
@Patrick G.

Welcome to BP. I'm from CA too so I know the challenges (i.e. impossibility) to get cash flow. My advice is to focus on whatever market will give you the best chance of achieving your objectives and being successful and less on where that is. I think people often sub optimize their investment because they want to be close to home. There are some really good cash flow markets but you have to be willing to invest further away. I agree with @Engelo Rumora that Indianapolis and Kansas City are very good. I'm working in both of those markets and know them well. I have to disagree [email protected] L. about Texas. Yes, the economy is great but the cash flow and ROI is mediocre. The rent ratios are barely 1% to begin with and on top of that, they have some of the highest property taxes and homeowners insurance in the country. I'll be happy to send you a couple of reports on how to choose a market and how to invest out of state if you'd like.

Best wishes,

Mike

Thanks Mike,

Cashflow is KING.

Have a great day.

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

@Engelo Rumora @Mike D'Arrigo Thanks for the suggestions. After spending most of yesterday doing the virtual equivalent of throwing darts at a wall (looking at a map then checking prices in random areas within a three state or so radius) I ran across this: http://www.realtytrac.com/content/news-and-opinion/best-and-worst-markets-for-rental-returns-heat-map-8023 . Spot-checking it revealed that it seemed to be pretty darn accurate so I decided to go where the market is rather than where I wished it was. :-) I am looking into Kansas City now which seems to have a lot of potentially good deals.

Thanks again for all the thoughts and recommendations!

Best,

Patrick


Originally posted by @Patrick G. :
@Engelo Rumora @Mike D'Arrigo Thanks for the suggestions. After spending most of yesterday doing the virtual equivalent of throwing darts at a wall (looking at a map then checking prices in random areas within a three state or so radius) I ran across this: http://www.realtytrac.com/content/news-and-opinion/best-and-worst-markets-for-rental-returns-heat-map-8023 . Spot-checking it revealed that it seemed to be pretty darn accurate so I decided to go where the market is rather than where I wished it was. :-) I am looking into Kansas City now which seems to have a lot of potentially good deals.

Thanks again for all the thoughts and recommendations!

Best,

Patrick


Thanks Patrick,

All the best and have a great day.

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

Hi Patrick,

Welcome to BP!

Of course, I'm biased but I'm glad you're looking into KC. In my 15 years here I've gotten pretty involved in the community and really enjoy it. The city has a lot to offer and, right now, that includes a good real estate market.

I know what you mean about "deciding to go where the market is rather than where I wished it was." I went through that, too, even within the city. But that's business, we have to go where the deals are so we adjust.

I'd be happy to help you get acquainted with the area. Just send me a private message and let me know how I can help you.

I am investing on the south side of Indianapolis. My last deal is cash flowing pretty well. What is the ROI you are looking for? My rent isn't quite a 2% of the purchase price, But I have 1.5%.

actually both. Most of my focus is now in franklin. My Condo is Franklin is cash flowing very well right now. I live in Perry, so that is why I like the south side. I like things close to home for now, because I know the market. I am slowly branching out in Indianapolis.

@Vicki Stewart Very kind of you, thanks! Will likely head out there next month for a few days to get a feel for the area, check out some properties, etc. I would be very appreciative of some perspective on the various neighborhoods. I am looking up crime stats, etc. but they only tell part of the story. Will PM you.

Best,

Patrick

@Adam Kent Well of course I'd love to find the 2% holy grail, my initial plan is to shoot for at least 1.25%-1.5% including property management fees. I am not certain how doable that is without understanding the market, players, and offerings for PM services in KC so that is one of the many items I am in the process of researching.Once I have done that I think I will have a better feel for what is feasible.

Best,

Patrick

@Patrick G. If you want to be in a decent area, the days of 2% are long gone unless you plan to do a lot of the work yourself but ou can still get 1.2 to 1.4 ratios in Kansas City easily. We have turn keys with those kind of ratios right now.

Mike D'Arrigo, Pinnacle Investment Properties, LLC | [email protected] | 800 348‑0956 | http://www.investwithpinnacle.com

Originally posted by @Mike D'Arrigo :
@Patrick G. If you want to be in a decent area, the days of 2% are long gone unless you plan to do a lot of the work yourself but ou can still get 1.2 to 1.4 ratios in Kansas City easily. We have turn keys with those kind of ratios right now.

I get investors asking me about the 50% rule and 2% rule.

I have no clue what they are lollol

I am sure that incompetent and non trustworthy people on the ground don't follow any rules :(

Team makes the dream work.

Thsnks

Medium list n sell logo designEngelo Rumora, List'n Sell Realty | [email protected] | 419 740 6999 | https://agentscomefirst.com/ | Podcast Guest on Show #89

Here's a vote for KC from another out of state investor in California. It is a pretty scary step to take investing out of state but I am very happy with the decision. I have a great contact there making it possible for me. If you plan on going out to visit you should talk with him.

Patrick,

Indianapolis is a great market for investors. However, this is a little out of the Bay area :)

Feel free to contact me if you want to learn more about the Indianapolis market. I would be happy to discuss it with you.

Happy Investing!

Medium berkshire law logo copyJynell Berkshire, Berkshire Law LLC | [email protected] | 3177521276 | http://www.berkshirelawllc.com

Hey @Patrick G,

I too am from the Bay Area. I commend you for taking the leap and going out of state. After managing properties for in-laws for a few years and wanting to buy my own cash flowing properties locally that I could self manage I finally bit the bullet. Decided it made no sense to sacrifice the good (out of state cash flowing properties) for the perfect (local cash flowing property that did not exist). As people have already mentioned, there is no shortage of investment opportunities out of state.

Do your due diligence, get to know the area (visit if that lets you sleep at night), and vet the heck out of anybody you are going to work with. Since you have to rely on other people in a big way when leaving the state to invest you really must have good people running the shop. This is especially true of your property management company. If you have lousy property management it does not matter how great the numbers look on paper. You'll never hit them.

Investing out of state is like having kids. With your first kid you check on them every time they cry, you make sure they keep to their nap schedule, you wash the pacifier off after it falls on the floor. You don't know what matters and what doesn't. By the second or third kid the pacifier falls on the floor, you pop it back in her mouth and say, "Its good for her immune system!" After you get the first or second out of state property under your belt you'll feel much more comfortable and will know what to sweat and what not to worry about.

Happy hunting!


Cheers,

Jeff

Jeff Pollack, Trident Equity Group | [email protected] | 650‑533‑8534 | https://www.meetup.com/San-Jose-Real-Estate-Networking-Club/

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