Locations to focus on for newbie BRRRR with cash.

17 Replies

Hi, my education is picking up momentum. I want to start looking at potential deals and practicing analysis. I want to test my abilities to seek out my rockstar team and get some leads. BUT what areas should I start in? 

I'm living in Chicago but realize there are cities/ counties / states that might set me up better for cashflow and ROI. Part of me likes the thought of needing to visit warmer parts in the future, but torn with being close to meet people in person, observe, check in. Thoughts? Advice?

If being within driving distance isn't worth sacrificing the better returns, then where would you be looking now for first investment with 100-150k cash seed money? I hear FL, IN, AZ, TX, OH, MO...as hot areas but need to focus even tighter i think, esp. when it comes to seeking out my potential support team.

@David C. . I’ve currently been watching the Pilsen area. Prices are high. I have seen a couple that need a tear down, which could be profitable if I could figure out that much funding.

I’m always watching surrounding my house in mount greenwood as well because I like the area, it’s close, and there’s a lot of cops, firemen, and city workers in the area making it fairly easy to find great tenants.

@Lucas Hammer no to house hacking. Moved into a house last year, big mortgage, wife won't downsize now (11 month kid with another in future perhaps. Playing with the cash and assets i have outside my regular home. If i was single then definitely would. Not started looking at any particular neighborhoods anywhere until i know that i see the benefits of focusing locally over other parts of country. I'm not much more connected and knowledgeable about Chicago as I am elsewhere, alart from knowing that taxes are high, winters are brutal and population is decling every year. And suitable BRRRR bargains outside of war zones might be rare. Open to anything at this point. Multi-family definitely appeals, just not for house hacking. Tnx

@David C. I personally am in MO and IN.  LOVE it as I live in CO where pricing is insane.  We have family N Chicagoland and have looked at Milwaulkee, Hammond, Merriville, and South Bend.  Some good finds there :)

@David C.  Kansas City is a hot market but there are deals out there. Prices have been rising steadily but you can find BRRRs below 80K. I work with a California investor, it's about finding the deals and making offers. Would be happy to discuss.

@David C. great opportunities in Chicagoland IMO. I like pullman, woodlawn, and canaryville. Tons of multiple family value add properties and the area no war zones. Urban! But not a warzone!! Southside is next! follow the commercial development and closer to the lake/expressways the better!

good Luck!

@Ibn Abney I also keep an eye on the Pullman area, specifically the historic part of it. It’s super hipster, on its way up imo. The crime is still just too high for my comfort. 

@David C. , here's my 2 cents on the question.  This is my experience at least, so take it for what it's worth.  Anywho, in my almost 19 years of being in the industry, I've invested in various states: CA, AZ, all over the Midwest, PA, and NY.  One thing I learned - I will be slow/hesitant to buy rental property out of state - really, if I can't drive there within a couple hours, probably not interested (generally speaking).  

I am a born and raised Chicagoan, live here now, know it well, have lots of relationships.  I didn't have that in these other states.  Any relationships I had in those states were solely based on tapping into my wallet.  I didn't know those markets nearly as well, no strong connections with people to help on the buy-side, renovation, management, or when the S hit the fan.  Learned some hard and costly lessons where I was limited with what I could control/affect.  I'm a hands-on guy.  Not saying I do much of the handy-work....I have my crews for that who are much more efficient and effective....but I don't simply "call it in" (unless it's something small & simple).  I've since sold all of my properties out of state except for one.  Everything else I own, am building/rehabbing, or looking to invest in is in Chicago at this point.  It will take a lot for me to invest elsewhere, because it's simply not my sphere.  Attractive numbers need to be substantiated with some of those "intangibles", because we all know how numbers can change easily....and much more so when it's outside your home turf.  That's my opinion anyhow.  

Originally posted by @Patrick Moore :

@David Chriswick. I’ve currently been watching the Pilsen area. Prices are high. I have seen a couple that need a tear down, which could be profitable if I could figure out that much funding.

I’m always watching surrounding my house in mount greenwood as well because I like the area, it’s close, and there’s a lot of cops, firemen, and city workers in the area making it fairly easy to find great tenants.

yeh, very hot area with the cool crowd. Expensive. Not sure i can start there. 

 

Originally posted by @Michael Facchini :

@David Chriswick, here's my 2 cents on the question.  This is my experience at least, so take it for what it's worth.  Anywho, in my almost 19 years of being in the industry, I've invested in various states: CA, AZ, all over the Midwest, PA, and NY.  One thing I learned - I will be slow/hesitant to buy rental property out of state - really, if I can't drive there within a couple hours, probably not interested (generally speaking).  

I am a born and raised Chicagoan, live here now, know it well, have lots of relationships.  I didn't have that in these other states.  Any relationships I had in those states were solely based on tapping into my wallet.  I didn't know those markets nearly as well, no strong connections with people to help on the buy-side, renovation, management, or when the S hit the fan.  Learned some hard and costly lessons where I was limited with what I could control/affect.  I'm a hands-on guy.  Not saying I do much of the handy-work....I have my crews for that who are much more efficient and effective....but I don't simply "call it in" (unless it's something small & simple).  I've since sold all of my properties out of state except for one.  Everything else I own, am building/rehabbing, or looking to invest in is in Chicago at this point.  It will take a lot for me to invest elsewhere, because it's simply not my sphere.  Attractive numbers need to be substantiated with some of those "intangibles", because we all know how numbers can change easily....and much more so when it's outside your home turf.  That's my opinion anyhow.  

Thank you! really good to hear different viewpoints. Apart from a few residential agents and mortgage contacts, I'm no more connected in Chicago than anywhere else, so It's not a base I'm working off. I'm also very time poor - even this initial research and education is tough to fit in with my FT job and familar life. Squeezing it in by getting up earlier / going to bed later - i just don't think I could ever find the time to even build a trusted team and keep on top of them in a renovation. Every day I'm closer to focussing in on turnkeys as first toe in the water - maybe some with simple cosmetic upgrade opportunities in the future, but basically move-in ready. So looking everywhere.

I am a fan of North Iowa and Southern MN. Rural areas tend to have lower barriers to entry as well as lower asking price. IMO its more of a cash flow play over appreciation. 150k using the BRRRR strategy should produce at least 3 cash flowing rentals a year. Pay cash, hopefully light rehab, rent out 1% rule+, then find local bank/credit union to finish the refinance. The best outcome being <80% LTV on each rental and at the end have as little of your equity as possible. Of course no guarantee that any part would work perfectly. Good luck in your journey.

@David C. - I hear ya, an investment property or two on the side can almost be a full-time job.  Hard to find time, but it's worth it in the end.  Just take your time compiling intel...you'll get there eventually.

So, when I was referring to the value of being close and keeping it local, having established & trusted circles, familiarity with the areas, etc., that all helps when sourcing the property, ensuring a successful/smooth transaction, and of course for renovations...but even with turn-key properties to your point above, there is a big value to being local when owning/managing. I manage my own properties. Property managers, generally speaking (no offense to the few good ones out there, which there are), are not going to do as good of a job as I, nor protect my bottom-line as well as I will. But I do this for a living. Someone who wants more of an arm-chair investment needs a property manager. Even then though, I want to be able to get to the property once per month or so...or when bigger items pop up. No one protects my dollar better than me, no matter how good the property manager. Nor could I expect them to for 5-10%. With my businesses and my properties, I want full visibility - and that is hard to achieve when "off-site" (IE, many miles away). But again, this is take on things after many bumps and bruises.

Originally posted by @Michael Facchini :

@David Chriswick - I hear ya, an investment property or two on the side can almost be a full-time job.  Hard to find time, but it's worth it in the end.  Just take your time compiling intel...you'll get there eventually.

So, when I was referring to the value of being close and keeping it local, having established & trusted circles, familiarity with the areas, etc., that all helps when sourcing the property, ensuring a successful/smooth transaction, and of course for renovations...but even with turn-key properties to your point above, there is a big value to being local when owning/managing.  I manage my own properties.  Property managers, generally speaking (no offense to the few good ones out there, which there are), are not going to do as good of a job as I, nor protect my bottom-line as well as I will.  But I do this for a living.  Someone who wants more of an arm-chair investment needs a property manager.  Even then though, I want to be able to get to the property once per month or so...or when bigger items pop up.  No one protects my dollar better than me, no matter how good the property manager.  Nor could I expect them to for 5-10%.  With my businesses and my properties, I want full visibility - and that is hard to achieve when "off-site" (IE, many miles away).  But again, this is take on things after many bumps and bruises.    

i hear ya. I'm definitely taking time to come to terms with that reality. I'd love to manage my own properties and be hands-on through the process - all my friends successful in REI are that way too, but it's their FT job they got into early on. But my job (exec at ad agency) is intense and unpredictable. So I either find a job that i can flex more to the part time property job (which would mean reskilling myself and taking big cut in salary) or get into it the turnkey way at first and perhaps slowly transition later on as my conditions change and confidence and knowledge grows. My best cashflow over the next 5-10 years will always be my W2 job - I'm not doing REI to get rich quick, so I can sacrifice cashflow in the short term for the sake of equity and appreciation over the long term. My objective is an earlier, better retirement income than I can probably expect from my current approach consisting of 401k, funds, stocks and shares - all of which I'll still have but looking for diversity, and maybe a semi-retirement interest/income 15-20 years from now.

Hi @David C. , your list of potential markets is great, I would add in AL, too! If your FT job at the ad agency takes up most of your time and energy, turnkey is a great option for you. This way you won't have to do the rehabbing and repairs. I am a bit biased about the turnkey method, but your situation is a great example to choose this method. As you said, you can slowly transition to BRRR in the future until you get enough passive income from your turnkey properties.

Best wishes!

Originally posted by @Patrick Moore :

@Maureen McCann I just quickly looked at Birmingham... prices are cheap!

They are inexpensive, that's why a lot of investors choose Huntsville and Birmingham. Not only are the prices low, with companies like Amazon, Toyota, and Mazda planning to build in Alabama, the increase in employment opportunities is immense. The vast amount of employment opportunities in Birmingham is another indicator that Alabama’s economic state is very bright!!