How to Determine a Good Area to Invest In for a First Timer

29 Replies

Hi BP Community,

I live in Los Angeles, California, which seems to be completely out of my price range for a first time buyer. I am looking to invest in an owner duplex/triplex/quadplex that can generate income, gain me experience, and build profit for future investments. 

How do I determine what cities and states are good places to invest in? 

If you're looking out of state, I'd suggest you try the Midwest and the South. Houses routinely sell for under 100k and will cash flow decently as the rents usually go for $600-$1000 or so depending on the state/city/neighborhood. You want to keep an eye on data such as employment, population trends, and local housing supply.

@Bob Okenwa thanks for the reply. What Midwest and Southern towns/states do you suggest to research? 

I would look to any areas that you have a connection to first. If you have family that lives in Texas, consider investing there. A simple way to screen markets to determine if there is reasonable cash flow is to google the cap rates for cities and different markets. Average cap rates above 6% would be a market worth looking into. 

Originally posted by @David Ruiz :

Hi BP Community,

I live in Los Angeles, California, which seems to be completely out of my price range for a first time buyer. I am looking to invest in an owner duplex/triplex/quadplex that can generate income, gain me experience, and build profit for future investments. 

How do I determine what cities and states are good places to invest in? 

Look for one that isn't the new "hot spot" for investors. Some markets are seeing an influx of too many investors. Look someplace in the Midwest where prices are still very low but rent is climbing. Just my thoughts.

Good luck to you!

Just to clarify...you said invest in an "owner" duplex/triplex/quad. Do you mean owner, as in you? Like you live there?

@Ali Boone Yes, I am looking for a multi-family that I will live in. It will be my first home purchase, so I am looking at an FHA.

So you'd be moving out-of-state to live in the property? If that's the case, I'd say more than anything, look at areas you would actually enjoy living in. The worst would be to move somewhere you hate just to owner-occupy a good property. A lot of CA investors, including myself, invest out-of-state but still live in LA/CA. I say that to say, you don't have to move somewhere just to invest (but you do if you want FHA).

@Tom Ott

Hi Tom! I am almost in the same position as David, also a newbie in this field. Might be a silly question, but how do  I know if rent is climbing up in an area? Thanks!

@Ali Boone how has it been for you managing your out-of-state properties remotely from California? 

@Kevin Dehesa Yes, this weekend I'm meeting a realtor in Indio/La Quinta to check out some multi-family and single family properties. I'll let you know how it goes. 

I did check out the Antelope Valley on Redfin, but haven't made the trip out in person. 

@Rob Beardsley @Tom Ott What are some good sources you use to find market data when you narrow down from say a state search to your your chosen market or sub market?

@David Ruiz good luck let me know how it goes.. PM me about indio..  let me know when you make a trip out to antelope valley I work out there and also trying to find my first multi family property

@Josh Oaten Hey, I use Marcus & Millichap reports and other data similar to this. You can reach out to brokers for market information. 

Neighborhoodscout.com is one of my favorite websites for local market data. I am from the Inland Empire and looking for my first deal in the high desert area (Victorville, Hesperia, Barstow). 

@Joel Espinoza thanks for the local market data resource. The high desert area is on my research list. 

It's been fine. Essentially my only job, from out here, is to manage the manager. It still requires a little bit of effort, but completely different types of effort than managing the property directly. When all is running fine, I easily spend less than an hour a year doing much of anything. If I'm having manager drama, it depends on what the drama is but so far I've been able to hire and fire managers just via the phone. The only time I've had to fly to my properties was when I had a tenant set one of the properties on fire (not fire but extensive smoke damage throughout the entire house) and it required the house getting fully rehabbed. That level of work I found I couldn't trust people to get it completed up to my standards and on any timely schedule without me being there. So I spent about 2 weeks essentially being a project manager on the rehab following the contractors around making sure they were getting everything done. But two weeks in six years still doesn't feel bad at all. 

So it's really just a different mindset...like learning how to manage employees (the property manager in this case) versus doing the job yourself. Not too intensive at all, and especially easy-flowing when you have a good manager.

@Ali Boone that is inspiring to hear you have been successful managing your PM and property from LA. I will keep your story in mind when researching out-of-state investments. 

You don't need to go too far from home. Some of the most affordable investment property in California is in the 

Central San Joaquin Valley. Specifically Madera and Merced. Merced is especially attractive because of the growing university population.

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@Joel Espinoza How’s I️t going Joel! I️ live in Victorville and I️ have been looking for a REI up here. I’ve been looking to get into my first deal as well. I️’m in the learning stage and you’re quite a bit ahead of me and I’d like to learn anything I️ could if you’d be interested.

Sounds good. Reach out anytime- either on here or at my email address below. Happy to offer resources or helpful hints. And we're neighbors! I'm in Venice.

@Rob Beardsley What is the deal with becoming a member of Marcus & Millichap to gain access to their reports? Do you have to be in real estate or pay for membership?

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