Looking for the Max Bang for My Buck with my Inheritance

9 Replies

I was a real estate agent for about 3 years until I was offered a job that I couldn't resist working from 8:30-2pm everyday with two little boys at home and very well paid so I let my REL expire.  I am now about to inebriate some money (low six figures) and want to invest in real estate.  I live in central Iowa by my parents live outside of Bastrop Texas and have started investing in rental properties around them. 

Long story short I am trying to decide if I want to invest in Iowa or Texas.  The rental property and even the fix and flip market seems a lot better in Texas.  I am only 32 yrs old and want to keep growing and building my portfolio.  I love the idea of rental properties but I also am excited about the idea of Fix and Flip. 

Do you start out buying rental properties or Fix and Flip properties? I want to keep my ROI between 20 & 25% and get the max bang for my buck starting out so I can grow.

 Any suggestion or help would be greatly appreciated.  I know LOCATION LOCATION LOCATION but everything else involved and me being 1000 miles away would it work?

Hi Heather - I'm also 32 and invest in the DFW and Houston  markets. I will connect with you via private message but I'm a huge fan of Texas markets. There's a lot going on here; lots of companies bringing jobs, strong housing market even during rough times...I can go on and on. I think it would be a good idea to identify some SMART goals. The fix and flip would be great to generate even more cash. The buy and hold would be great as it would generate cash flow plus additional tax deductions. Lucky for you the kids are great deductions...I don't have any kids so my rental properties are a huge help when it comes to reducing my tax liability. I think once you have some very specific and measurable short and long term goals your answer will come! I hope this helps!

I love Texas but most people who invest there from OOS do do because their local markets suck for cash flow. 

However I’d imagine that Iowa has some good options? I’d at least start near home to learn the ropes. Then venture out. 

Best of luck!

@Heather Lawler I agree with @Cody L. . I would check your local rental market. When investing remotely you are taking on a little extra risk but you are also paying extra in fees for someone to do the extra small things that you would be able to do if you were local, i.e. walk through a property and analyze the area, review construction to make sure it is being done and to your standards. Specifically in Texas, you will also be paying more in taxes. In Texas we have no state income tax. Our state makes up for that deficit by charging the 4th highest property tax on average in the US. This isn't a big deal if you also live in a state without income tax but I don't think that is true of Iowa. So you will also be paying your state income tax after you have paid the high property tax. I would look at the rental properties around you first and then if you find it is not a good market, consider out of state (OOS) investing.

Starting an investing venture out of state is asking for trouble and it's one of the fastest ways to lose your money. Unfortunately, investing is still the wild west in that anyone can claim anything with few consequences, so it's advisable to believe none of what you hear and only half of what you see. Consider investing locally either actively or passively before venturing out of state and having to trust someone who may not be what they claim or who is simply looking for a new investor they can take advantage of. Trust me, investing profitably ain't as easy as it seems on the HGTV shows. 

Originally posted by @Ryan Blake :

@Heather Lawler I agree with @Cody L. . I would check your local rental market. When investing remotely you are taking on a little extra risk but you are also paying extra in fees for someone to do the extra small things that you would be able to do if you were local, i.e. walk through a property and analyze the area, review construction to make sure it is being done and to your standards. Specifically in Texas, you will also be paying more in taxes. In Texas we have no state income tax. Our state makes up for that deficit by charging the 4th highest property tax on average in the US. This isn't a big deal if you also live in a state without income tax but I don't think that is true of Iowa. So you will also be paying your state income tax after you have paid the high property tax. I would look at the rental properties around you first and then if you find it is not a good market, consider out of state (OOS) investing.

YUP  unless your doing big TEXAS MF type deals... of a commercial nature like Cody above.. I cant see being from a state you have to pay income tax in.. ( especially Californians ) then buying onezee twozee rentals in TExas and be subject to the uber high property tax and CA income tax which is also one of the highest in the country.. so you take on max tax's at both ends of the investment spectrum..  I have talked to many a CA who figures this out when they get their new and improved tax assessment and just figured out they have no real cash flow or very little.  BUT if you can get value add or area you think is going to appreciate well and there is a real chance of retail exit that could mitigate it some..  But if your in flat to semi flat appreciation markets which could describe most of the US as the prices seemed to have topped in most areas.. then you really need to look at your fixed expenses and see where it all falls out.

@Heather Lawler

As others have suggested - I would look into seeing if there are investment opportunities in Iowa where you live.
Usually, states within the midwest offer attractable rate of return/cash flow. Plus - its a benefit that you are from the area and know it better than Texas.

You mentioned wanted to do buy and hold or fix and flip. Your job offers you great flexibility being able to leave at 2PM everyday which can allow you to do either. I would just add that you should focus on one and focus on it well. You don't want to learn too many different things at once.

I would go Iowa all the way.  I'm not sure what market you are in, but assuming it is a smaller one (i.e. not Des Moines) you have an opportunity to be a big fish in a small pond.

My grandmother did that in a smaller Midwest town (began 70 years ago) and it worked out very well for her financially and in terms of lifestyle.  

Flips ae highest reward potential with the highest risk in todays markets. House flipping is very quickly reaching it's peak. When  every tom, dick and harry thinks they can do it and jump on board it is usually a sign home prices are about to peak.

Best buck return wise is probably MHCs....Mobile home communities. You rent the land and never have any home maintenance issues. Provided you stay the hell away from POHs. You want all tenant owned homes and invest in as large of a community you can afford to maximise your returns. Smaller communities share the same expenses as a larger community and therefor do not cash flow as well.

@Heather Lawler I invest in Council Bluffs, IA and Omaha, NE. Great market from my perspective. Let me know if you would like to talk about the market there. 

Good luck on your journey