Accountant · Santa Clara, CA · Member since 2018 · 8 posts · 2 votes
Hi. I'm a newbee, living in the Silicon Valley and there is no way I can afford to buy/ invest in this area. So I'm planning to invest long distance and thinking about the West coast and Midwest areas. Any recommendations on good areas to start with, or advice on what I should look for in finding a good area? Thanks!
@Shevon Coorey and @Alex D. the area is important, however the investment team, property management and contacts in that area are more important. You have to find boots on the ground that you can really trust. I moved to Indianapolis to be on the ground from Portland, Oregon for this reason alone. I don't know all the areas in the Midwest, but I'd be happy to discuss some potential pitfalls and areas to be aware of.
@Shevon Coorey and @Alex D. the area is important, however the investment team, property management and contacts in that area are more important. You have to find boots on the ground that you can really trust. I moved to Indianapolis to be on the ground from Portland, Oregon for this reason alone. I don't know all the areas in the Midwest, but I'd be happy to discuss some potential pitfalls and areas to be aware of.
It's not just the market, but all about the team as Jeff says. What kind of REI are you planning to do - buy and hold - turnkey or value add such as BRRRR? flips?
Well it depends on what you are looking for and what your budget is. For the most part, the west coast in general isn't going to offer much in terms of cash flow. But if you are hoping just for appreciation, maybe it's better. Then SFR or MFR, and what price ranges? And do you want to fix something up or buy it rent-ready?
@Jeff Wallenius thanks a lot for the insight. Yes, I'm still researching on the area that I should start with. Therefore your experience on pitfalls and places to be aware of will be very helpful to me. How can I reach out to you, so we can discuss further?
@Larry F. Hi Larry, my first istict is to do a buy and hold as I still haven't found the right teams for rehabs. But definitely in the future my plan is to get in to BRRRR.
@Ayne C. Hi Ayne, unfortunately, I don't have much friends out of California and I haven't been to the mid-west states. Actually, that was my purpose to joining BP so I could make some connections out of CA to build up my network. I'd like to connect with you so we could discuss more. Thanks!
@Shevon Coorey. Actually I'm in Florida. But I think you are doing the right thing here. Good luck
Btw I used to live in San Jose. Looooooove Northern California.
@Shevon Coorey I agree with the others. I would also add that areas with higher volatility tend to yield bigger gains and losses as the market moves. For example, my wife is from Fargo ND. Had I bought a house in 2006 for 100k and lost 30% of the value when the market crashed I would have lost 30k in equity. If you bought a house in Santa Clara for a cool 1mil in 2006 and lost 30% than you are looking at a 300k loss in equity. The converse is true on the gains.
Obviously theres markets and neighborhoods that are in decline and ones that are on the rise. Talking to locals you can figure that out very quickly. Find what you are comfortable with, build your team, do your homework and you will be fine.
@Shevon Coorey
I was like you just a few years ago. I started by invest in UT, St George with 2 LTR that I self managed. Then the market went up nicely so I 1031 those into 4 STR here in The Great Smoky Mountains. Pigeon Forge\ Gatlinburg\ Sevierville TN is a hidden jem.
Now I have relocated here from Orange County, CA and help other investors get set up down here even offering PM services or airbnb cohosting.
Message me if you wanna chat.
Hi @Shevon Coorey! I live in CA and invest out of state in the Midwest and Southwest. My partner and I were able to get a 40-unit off market apartment under contract and are about to add another 98-units to our portfolio after this month.
I chose different cities to invest in based on population growth, job growth, fortune 500 companies in the city, affordability, and several other factors.
I'd be happy to chat and share my experiences and the books we read when selecting our markets.
@Shevon Coorey my partners and I have closed on several MF complexes in NorCal tertiary markets, and we have our eye on some OOS markets/properties moving into 2019. LMK/connect with me if you'd like me to share my story!
@Shevon Coorey others here have said it, but it always bears repeating: the people you work with on an out of state investment should be your top priority, even before market. Yes, numbers need to add up, but there are several markets around the country that provide solid cash flow and decent appreciation potential, without the wild highs and lows of primary markets. However, a bad PM can still take an amazing investment and turn it into a money pit. Everybody has bad days, bad tenants, bad deals on one occasion or another, but working with a team that has a track record of happy clients and good returns is going to be worth its weight in gold.
Whether you go turnkey (where one company handles everything, including property management) or you build your own team and select your own PM, the people you choose to take care of your investment long-term are the single most important factor in any rental investment. A good investment in a stable secondary market with a great PM is always going to be a better performer than an amazing deal in a primary market with a PM who drops the ball.
Focus on people first, market second. Use BP for all its worth to learn about the good, the bad, and the ugly, and come up with a concrete list of questions you need answers to (and there should be plenty of them) for a turnkey provider or independent PM to be on your shortlist. Of course, if you go turnkey, you have one list of many many questions, since they handle it all, top to bottom. If you decide to go the DIY team route, you'll need to vet each partner individually, but your PM is still going to be the piece of the puzzle that is most incentivized to keep you happy long-term, so finding a team you can trust is paramount.
Hi. I'm a newbee, living in the Silicon Valley and there is no way I can afford to buy/ invest in this area. So I'm planning to invest long distance and thinking about the West coast and Midwest areas. Any recommendations on good areas to start with, or advice on what I should look for in finding a good area? Thanks!
Welcome to the site Shevon. Most people in your situation invest in the Midwest. Everyone has their preference on the best market in the Midwest. This site has a ton of operators selling properties in the Midwest (myself included). Most will give reasons for why their particular market is better than the others. The most popular markets seem to be Cleveland (my market) Toledo, Dayton, KC, & Indy....Oh & Memphis. Memphis is very popular here on bigger pockets although I am not sure if that is technically considered in the "Midwest" At any rate that is another popular market for out of state investors to buy in.
Me, I don't think there is much of a difference between any of them. You'll be splitting hairs when it comes to your profitability investing in one market or the other. What is important is where & how you invest in a particular market. Below are some best practices for out of state investors like yourself. Follow these simple rules and you should do well no matter which market you choose.
Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
Make sure your property manager is a licensed real estate brokerage.
Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
@Shevon Coorey As a fellow Detroit investor, I agree with Jabari in the post above. Detroit has great history, the economy is starting to pick up because of the influx of employers coming to the city and surrounding areas. A lot of development in the downtown area which is spreading to the metro area.