First Investment, Going Out of State

11 Replies

Hello BP! A college friend of mine recently turned me on to the world of real estate investing, and the thought has taken me by storm. I currently live in the MA Cape Cod area and prices are too high for me to invest local so I plan on going out of state. I have been reading books as frequently as I can to get a foundation of how this whole real estate thing works, and am starting to feel confident enough to begin contacting agents and property managers sometime soon. However I’m hitting the wall that every OOS investors hits: deciding which market to in which to invest. Currently I have 3 places in mind: 1) Upstate NY (Syracuse, Rochester, Buffalo) Housing prices are relatively cheap and rents are high, which would produce decent cashflow. Cheaper housing also means a smaller deal, which eases my mind since it is my first deal. The markets are generally stable due to large universities in each area, however certain areas have very high crime rates to be wary of. I went to Syracuse University and have a decent idea of which areas to avoid in that city. Investment strategy: Small multifamily buy and hold rentals 2) Metro Minneapolis/St. Paul, MN SO is from the area and has family there, including her father who is a contractor. Utilizing him as a team member would already be one less challenge down with investing OOS. The Twin Cities area has seen significant population growth in the last decade, and certain areas of either city are not inflated yet to the point positive cashflow is unrealistic. Investment strategy: BRRRRing and renting SFH 3) Metro Philadelphia, PA Philly is seeing decent growth and the potential for cashflow is definitely there with a good enough deal. I have a potential partner, who is also a first timer, that has family and friends with real estate experience the city and would be good first “boots on the ground” when establishing a team. The benefits of having a 50/50 partner would also ease the mind when getting a first time deal and would hedge my own losses financially if the deal went sour, at the risk of losing a friendship. Investing strategy: BRRRRing SFH or buy and hold small MFH, whichever method has more/better deals and can be agreed upon with partner. Now truthfully so, I’m not really sure what to ask here. Perhaps I’m making my first post to hold myself somewhat accountable and to move myself forward mentally. I’ve been listening to the podcast and always hear how great of a tool the BP forums can be to meet other like minded investors, so perhaps I’m using this post as my first foot in the door to being involved on the site. I guess if I had to ask one question, it would be “is my thought process on the right track?” I laid out areas I am looking at investing in and the reasoning for those areas. Using what I have learned so far I choose them because of familiarity as well as the potential for cashflow. Although not easy, my research is telling me getting that first property is a straightforward process. I want to dive in and learn through experience, and I feel like my knowledge and mindset are on the right track but I won’t know without feedback on that mindset from those that have already been where I plan on going. So anyone with feedback/thoughts for me, knowledge of the 3 areas I listed, or new investors with questions of their own please feel free to post and let’s have a few discussions! Thanks for taking the time to read. Best, Andrew

Hi @Andrew Bateman , I disagree with Account Closed, properties in Philadelphia can still cash flow in desirable areas. I own a portfolio with properties in Manayunk & Roxborough which all cash flow nicely. My tenants there are all young professionals and college students. You might have to add some sweat equity, but there are deals to be had in Philly. 

@Andrew Bateman sounds like you have a strategic advantage in MSP with a contractor in the family.

You  won't find much turnkey around here so having someone like that could help quite a lot. In my experience those who are making money aren't afraid to do a little work and build value by adding bedrooms or fixing up the place.

Originally posted by @Jeremy Chaudet :

Hi @Andrew Bateman , I disagree with Account Closed, properties in Philadelphia can still cash flow in desirable areas. I own a portfolio with properties in Manayunk & Roxborough which all cash flow nicely. My tenants there are all young professionals and college students. You might have to add some sweat equity, but there are deals to be had in Philly. 

 But certainly the prices are going up like crazy. For example we bought the duplex in 2016 for K200 and now the duplexes on the same street are for sale for 275 280. Hard to make it cash flow. Should I point out that the rents are not going up.

Originally posted by @Andrew Bateman :
@Lana Lee Lana, that is a main reason my potential partner and I were interested in PA because of the rapid appreciation going on there. It appears we are late to the party though when it comes to buy and hold.

I see the prices are now higher then even before the crash. I wish I had a magic cristal ball to see if the bubble is going to burst any time soon. In a meantime cash investors and FHA househackers are winning the offer battles.

@Andrew Bateman@Jeremy Chaudet definitely knows more about the Philly market than I do.

Right now I’m trying to find a multi family in one of the areas of Philly that attracts young professionals to house hack and I’m finding it difficult. It seems to me like it’s hard to compete in this market if you’re not making cash offers as a lot of wealthy investors from nyc and abroad are buying up property in philly right now.

I looked at a market report for philly last week and if I recall correctly multi-family properties were up 25% in price from last year. 

@Andrew Bateman

About North Philly:

  • When I lived in Philly about eight years ago, I would say more than half of my friends from Temple that lived neared the main campus was a victim of a crime or witnessed a crime. That said, the area right around Temple got much "nicer" over the years.
  • Probably the most important thing to note about North Philly is that you have to be HYPER-specific about what part you want to invest in. I can't put enough emphasis on that. For example, many parts of Fishtown and Kensington are now filled with young hipsters. I was just there a few weeks ago and it was pretty nice! I saw new construction, busy restaurants, nice coffee shops, and a fun beer garden. All those are signs of gentrification --- a complicated issue from a social perspective but almost always a good sign for real-estate investors.  
  • Now walk a few blocks from that area, you get into areas where you wouldn't want to be at unless you are looking for drugs or prostitutes. Well, there are a few good "hole in the wall" type restaurants there so maybe that. But most people wouldn't want to live there if they had a choice.
  • So if you want to get into North Philly, I would work with a knowledgeable realtor and go from there. I know we have multiple folks on BP that invest and also work as realtors/brokers in Philly (e.g. @Joe White ).

Other places you listed: 

  • I went to Minneapolis for a law firm interview. Nice place but I have no idea if it is better than Philly in an objective way.
  • I like Syracuse since I visit there a lot. Good people and good businesses. I'm not sure if I would invest there but that's just because I don't see the point of going there to invest compared to my area in Wilkes-Barre/Scranton. If you compare the metro data, Syracuse is slightly "better" but not enough to do out-of-town investing.
  • One other note about Syracuse: I would argue that it a totally different class of market than Philly and Minneapolis. I would say it's also is in a different class than Buffalo and Rochester as well. All that matters since what's works in one class of market may not work in another type of market. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information

Welcome @Andrew Bateman , MSP seems to be a growing market. I recently read a report and I believe it said that the number 1 zip code to flip in the nation was somewhere in or around Minneapolis with a few more in the top 10 in Philadelphia. In regards to rental properties, In Philadelphia there are certainly plenty of opportunities that make sense. You do get what you pay for, If you want good tenants than you should be looking in the more popular areas. You'll pay more for the property but you'll usually attract a higher quality tenant and the higher rental income to match the purchase price. I would try to use the 1% rule as a guideline but be cautious and know the area because it may be tempting to jump on one of the many 1% properties in an area like the Temple with a lower entry price point that's a university area so in theory it should be a "safer" investment but this area is higher in crime and may not attract the type of tenant you are looking for. If you are okay with that and want to hold for the long term a property in Temple may be a good long term investment with the city growing rapidly and  it's proximity to center city with good public transportation access some say it's only a matter of time before the area turns but it's only speculation and I would never recommend investing with hopes of appreciation unless the property cash flows from day one and you are prepared to handle the tenant class that you might attract. Feel free to reach out with any questions, I'm glad to help in any way that I can!