My wife and I are newbies and want to make our first purchase. We have been doing our readings from Brandon Turner, reading BP blog posts/forums (so much invaluable info), and looking at properties on realtor.com. We just got approved for a heloc for our primary mortgage that we have only been in for 2 years. Our goal is to buy and hold multi family units.
We live in northern, NJ where property taxes are really high so we are looking out of state to get more bang for our buck. As we research we see that Fayetteville NC, Dayton and Cincinnati, and Detroit are good markets.
We are wondering from those who have experience in these markets, would we be able to get 2 properties and do the BRRR method? Which zip codes are ideal?
How much cash reserve should we have?
Any connections to contractors/realtors?
We would want to plan a three day trip in the area of choice to field the area and make a deal.
Any advice/ thoughts are appreciated.
What would keep you from moving to one of these markets? Could you do your current job in those areas? There are multiple advantages to living in your real estate investing market. I know some people invest out of state, but I hope they are doing turn-key investments. Knowing your market intimately is very important when investing, especially with borrowed money. If the investment turns bad, you still owe the money. I have trust issues and I don't take big risks, so I only buy what I know and what I know that can't lose money. I recommend moving, but that is free advice from a total stranger.
I invest in Dayton and Cincinnati areas and know that both are great fits but u need to educate yourself a bit and make a decision that’s right for u. I would say that it’s fairly easy to find a property for $50K that rents for $800/mo.
The numbers must make sense
@Anthony Dooley thanks for responding. I’m not looking to move in any of the markets. I appreciate your insight.
@Bryan C. Good to know and I will continue to educate myself on the area. Would you mind sharing any of you contacts there in a PM? The realtors you used and any contractors. Thanks again for the response.
Do you feel you have a good understanding of the BRRRR method? You will have a pretty difficult time finding properties that are listed (in the MLS) that will fit the BRRRR model. You are looking for crappy properties that need a lot of work. Perhaps even from distressed sellers. The common ways for finding these properties include wholesalers and direct mail marketing. I would start by networking with wholesalers in the area.
Also, the rehabs on these properties must be managed fairly closely. Especially if you are thinking you will save money on the rehab by playing the GC role. That's not easy to do out of state. You will have to have a solid team you trust in the target market. The turn key model is more common for out of state investors, but that's a very different strategy than what you have described. It requires much more capital.
I don't mean to discourage you, but you should really get these points nailed down before proceeding. As far as cash reserves go, the lender you use on your refinance will likely require that you are able to show 6 to 12 months of reserves to approve the loan.
@Kris Wong thanks for your reply! It makes sense and I will factor that in.
@Bryan C. thanks man!
@Elliot Obeng doing a BRRRR out of state is very risky and challenging. The key to success is buying at the right price. In order to do that, you have to be intimately familiar with values and you have to get your construction cost estimate right. Neither is easy to do when you're not local. Do you have good boots on the ground that can help you?
@Mike D'Arrigo thank you for the feedback and the information. No, we do not have boots on the ground as of yet. We are continuing our education and will reach out to some members on here that are in the area.
NJ isn't tenant-friendly- stay in landlord friendly states. PA lehigh Valley is a tenant-friendly state.