Where to invest in the US
Rental Property Investor · NYC · Member since 2020 · 29 posts · 45 votes
Where to invest in the US
Most Popular Reply
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
6yOriginally posted by @Omer Zakai:
Dear All,
My name is Omer and I a new RE investor from NYC. My strategy is to buy and hold SFHs in C+ class areas.
In the past few weeks, I have been active in Columbus, Ohio market. It is a hot and strong market, however, it is very challenging to solid buy and holds/ turnkey key deals ( amazing for flippers and BRRRR) as I am aiming for 8% COC/ROI.
I have been considering those markets and other options as well:
Clevland, Ohio
Cincinnati, Ohio
Rochester, NY
I would love to get your advice about those markets and any other markets with high rental demand & high rent to price ratio.
Best,
Omer
Welcome aboard Omer. Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.
In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
- Cincinnati, Ohio
- Dayton, Ohio
- Toledo, Ohio
- Youngstown, Ohio
- Cincinnati, Ohio
- Memphis, Tennessee
- Saint Louis, Missouri
- Indianapolis, Indiana
- Detroit, Michigan
- Erie, Pennsylvania
- Louisville, Kentucky
- Milwaukee, Wisconsin
- Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- 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.
- Google Clayton Morris fraud and/or Morris Invest fraud for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
26 Replies
- Member since 2020 · 1 post · 4 votes6y
Just wondering I'm in the same boat but would like to know if you have any leads or agent that is giving you help?
- The highest price-to-rent ratios I know of are in Baltimore. Cleveland and Cincy are functional, but not sure Rochester has cash flow? If it doesn, I can't imagine it's that high in comparison to some others. But Baltimore for sure is the highest cash flow I work with, and I'm with turnkeys and BRRRRkeys (combines the BRRRR and turnkey methods- they company still does the work but you keep the forced appreciation from the rehab, catch is you're financing the work upfront before you cash-out refi it). But the caps there with those properties are like 8-11%, most in the 9s.
- Wholesaler · Rochester, NY · Member since 2018 · 29 posts · 7 votes6y
@Ali Boone can you explain this BRRRkey method a bit more? Never heard of it before
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes6y
Originally posted by @Omer Zakai:
Dear All,
My name is Omer and I a new RE investor from NYC. My strategy is to buy and hold SFHs in C+ class areas.
In the past few weeks, I have been active in Columbus, Ohio market. It is a hot and strong market, however, it is very challenging to solid buy and holds/ turnkey key deals ( amazing for flippers and BRRRR) as I am aiming for 8% COC/ROI.
I have been considering those markets and other options as well:Clevland, Ohio
Cincinnati, Ohio
Rochester, NY
I would love to get your advice about those markets and any other markets with high rental demand & high rent to price ratio.
Best,Omer
Welcome aboard Omer. Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.
In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
- Cincinnati, Ohio
- Dayton, Ohio
- Toledo, Ohio
- Youngstown, Ohio
- Cincinnati, Ohio
- Memphis, Tennessee
- Saint Louis, Missouri
- Indianapolis, Indiana
- Detroit, Michigan
- Erie, Pennsylvania
- Louisville, Kentucky
- Milwaukee, Wisconsin
- Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- 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.
- Google Clayton Morris fraud and/or Morris Invest fraud for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
- 6yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Originally posted by @Eddie Perez:
Just wondering I'm in the same boat but would like to know if you have any leads or agent that is giving you help?
Hey Eddie. I know a great agent in Columbus, Ohio
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes6y
@Eddie Perez @Omer Zakai I can speak for KC. It is a great market for cash flow, appreciation and job force. Plus it is not dependent on any single entity. DM if you want to talk further about it.
- 6yRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Originally posted by @Omer Zakai:
Dear All,
My name is Omer and I a new RE investor from NYC. My strategy is to buy and hold SFHs in C+ class areas.
In the past few weeks, I have been active in Columbus, Ohio market. It is a hot and strong market, however, it is very challenging to solid buy and holds/ turnkey key deals ( amazing for flippers and BRRRR) as I am aiming for 8% COC/ROI.
I have been considering those markets and other options as well:Clevland, Ohio
Cincinnati, Ohio
Rochester, NY
I would love to get your advice about those markets and any other markets with high rental demand & high rent to price ratio.
Best,Omer
columbus isn't as hard as you think it is. What priceopint have you been looking in? There are great ones that come on the market every day
Section 8 Launch52 Reviews - 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Daniel Brault:
@Ali Boone can you explain this BRRRkey method a bit more? Never heard of it before
Prior to the GFC this was how 90% of turn key was sold in the US.
Generally you had a team.. One marketer Two Hardmoney lender three operator in the market ( did the buy and rehab) and 4 the take out lender.
So what happened is leads would come in to the marketing companies.. these leads would be shown markets in the mid west rust belt. where there was inventory that could be bought that would cash flow. Marketer would align them with the outfit in said city then they would pre qualify them for a take out loan. and then they would refer them to us the Hard Money lender.. We would make sure of the product and that the pre approval was real.. then we required 1k down and would fund 100% of the rehab and buy of the property.. Out of that loan when we closed everyone got paid up front.. the teams on the ground got their profit the marketing company got their spiff / commish and we now had a loan in place.. once rehab was done the take out lender sent in the same appraiser who did the apprasial for the PRe qual.. and they did what was called a 442.. which verified all the work was done and then the loan would close shortly there after.
In those days we could all make money at 65% of ARV.. that was enough to pay profits to the operator on the ground and pay the marketing company their fee's.. when the take out loan closed we got our return on our HML .. and the investor ended up with the home and a new loan.. now generally they did a 75% ARV loan so they actually walked out of the transaction with between 5 and 10k of refi proceeds. many times we would do 4 at once for the buyer.. all they need was the fico score.. and 4k up front.. they would get 20 to 40k back at closing tax differed and the property should generate 100.00 to 150.00 per month positive cash flow all expenses accounted for. My company did over a thousand of these transactions in markets such as Detroit Indy Memphis Jackson Chicago etc. We just did not call it BRRR it was simply a rate and term cash out refi.. now you can pay cash and do the same thing.. but allowing investors to get into properties with 1k out of pocket and a 700 plus fico and get cash back.. you can imagine how the West coast marketing companies sold the heck out of that.
Fast forward to today and most are paying cash either with a HELOC on their primary or they have the cash.. some HML still do this I do it occasionally for clients. Turnkey morphed after the GFC into buying houses already done and you have less equity becasue your not on the front end and the people doing all the work have to add in their holding costs etc.
hope that gives you a little color on how these transactions work and or did work..
- Wholesaler · Rochester, NY · Member since 2018 · 29 posts · 7 votes6y
@Jay Hinrichs very thorough explanation. Thank you!
- Rental Property Investor · St. Louis, MO · Member since 2016 · 32 posts · 12 votes6y
I am in the Rochester Ny area and My cap has been 30% on average. However the market has changed in the last year and due to the increase in value I will be selling off my single Family homes. Even with the values up the price to rent ration as mentioned earlier is the best you can find. Homes are cheap on average 30-90,000 and the rents can range from 750-1100 in c class neighborhoods. It is still a unique market because every street can vary in tenant and rent types. My rentals are always on the higher rent side because we care for our properties.
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes6y
Originally posted by @Omer Zakai:
Dear All,
My name is Omer and I a new RE investor from NYC. My strategy is to buy and hold SFHs in C+ class areas.
In the past few weeks, I have been active in Columbus, Ohio market. It is a hot and strong market, however, it is very challenging to solid buy and holds/ turnkey key deals ( amazing for flippers and BRRRR) as I am aiming for 8% COC/ROI.
I have been considering those markets and other options as well:Clevland, Ohio
Cincinnati, Ohio
Rochester, NY
I would love to get your advice about those markets and any other markets with high rental demand & high rent to price ratio.
Best,Omer
I would keep your eyes on Cleveland or other Midwestern markets where prices are so low, but the rent is good. Make sure to work with a professional in the local market.
- 6yJoe HammelBusiness MemberReal Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
@Omer Zakai Welcome,
Two, Great Turn Key Rental Locations here in Metro Detroit. My BP Profile, has PDF Investor reports and I can send example properties and "tweaked" reports.
Redford, MI (B-,C, Neighborhoods)
Warren, MI (C, Neighborhoods)
Buy: $60k-$80k
Rent: $900-$1200
Cash on Cash ROI: 12%-15% (Financed, Property Management, conservative savings)
Cash Flow: $200-$350 a door (Financed, Property Management, conservative savings)
Plenty more opportunities, more aggressive or more conservative, but these seem to fit your taste the best.
FIRE Realty Team - Keller Williams5379 Reviews - Rental Property Investor · NYC · Member since 2020 · 29 posts · 45 votes6y
@Robert Ellis I am looking for SFH/Double in $50K-$100K all in. Looking for a min of 8% ROI.
I appreciate are you sending me a few zip codes to check, which 2-3 should I further explore in order to get the highest price to rent ratio?
Omer
Originally posted by @Daniel Brault:
@Ali Boone can you explain this BRRRkey method a bit more? Never heard of it before
Yeah. Some people refer to it as "turnkey light". The same process happens- turnkey provider rehabs the property, places tenants, has property management ready. But instead of waiting to put money into it until everything is verified and ready to close, you are funding the initial distressed property purchase and the rehab. But they do all the work. The (major) upside is- you get to keep the forced appreciation once it's all done, whereas with regular turnkeys there is no forcing appreciation and you're paying market value. The downside is- it's your money at risk. There's not much to stop the turnkey provider from moving to the Caribbean with your cash (so you need to seriously know who you're working with). All this in contrast to regular turnkeys. The upside being it's not your money at risk and you don't put any money in until everything is verified, but the downside is you're paying market value with no chance for value-add. So you get the benefits of the BRRRR method- a value-add deal to help you capture immediate equity- and the turnkey method- someone else is doing all the work for you.
- Wholesaler · Rochester, NY · Member since 2018 · 29 posts · 7 votes6y
@Ali Boone that’s very interesting. Have you done this before, or known people who have?
- 6yRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Originally posted by @Omer Zakai:
@Robert Ellis I am looking for SFH/Double in $50K-$100K all in. Looking for a min of 8% ROI.
I appreciate are you sending me a few zip codes to check, which 2-3 should I further explore in order to get the highest price to rent ratio?
Omer
43204, 43211, 43213.
Section 8 Launch52 Reviews - Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes6y
Kansas City is pretty good :)
- Member since 2020 · 7 posts · 2 votes6y
Originally posted by @James Wise:
James, thank you for the list/info. Would be able to go more in depth about the Louisville market? Additionally, would you be willing to recommend a turnkey company or two? I've mostly looked through Roofstock, but haven't really seen anything in the KY market. I'm considering Bowling Green, Lexington, and Louisville.
@Omer, how is your search going? Like you, I'm new to out-of-state investing. I'd love to hear about your experience thus far!
Thank you for your time,
Emily
Originally posted by @Daniel Brault:
@Ali Boone that’s very interesting. Have you done this before, or known people who have?
Yeah. I'm actually working pretty heavily with them. I was just out with the operator I work with on it a couple weeks ago... have been out now twice. I've been working with the model for several years now... the first round didn't go very well because the provider of them more or less stopped performing. But it was a lot of lessons learned in what to look for and how to operate them, and now I'm working with a completely different guy doing them... much better set up and trust overall. Most of the people I know doing them have either just closed on the distressed properties or are getting ready to close, so not as many who can speak to the longer-term success of them (can find a couple at least). But the seller has a lot of great stuff in place-- he's only doing subject-tos to help with Baltimore shoddy appraisal system, etc.
- Flipper/Rehabber · Berkeley Springs, WV · Member since 2017 · 164 posts · 103 votes6y
@Ali Boone Just so I understand this model correctly:
Your operator finds people to sell him properties subject to their existing mortgages and then finds an investor to finance the renovation (before transferring the property) and then after the renovation the operator places a tenant and then sells the property to investor at a predetermined price. Since he is buying deals subject to, the new buyer would clear the previous mortgage and I guess your operator would charge a premium on top of that and then a premium for doing the renovation, finding a tenant, and then managing it afterward.Am I basically following the model correctly?
It is innovative but like you said is a huge risk to investors. Baltimore City is a challenging city to do rehabs from a regulatory perspective and tenant placement is also a big challenge given the economics and demographics.
I have helped a few clients clear inventory that they had purchased in turn key deals that went poorly (some with the operator that you made reference to above) and those folks lost a lot of money in those deals.
I am generally skeptical of OOS investors investing Baltimore City. I have personally bought, rehabbed and rented over 20 properties in Baltimore City and also had a lot of lessons learned that I would not wish upon anyone else. I think it is possible to do it with the right team of people in place that you can trust but I would urge caution to investors out there. Originally posted by @Sebastian E.:
@Ali Boone Just so I understand this model correctly:
Your operator finds people to sell him properties subject to their existing mortgages and then finds an investor to finance the renovation (before transferring the property) and then after the renovation the operator places a tenant and then sells the property to investor at a predetermined price. Since he is buying deals subject to, the new buyer would clear the previous mortgage and I guess your operator would charge a premium on top of that and then a premium for doing the renovation, finding a tenant, and then managing it afterward.Am I basically following the model correctly?
It is innovative but like you said is a huge risk to investors. Baltimore City is a challenging city to do rehabs from a regulatory perspective and tenant placement is also a big challenge given the economics and demographics.
I have helped a few clients clear inventory that they had purchased in turn key deals that went poorly (some with the operator that you made reference to above) and those folks lost a lot of money in those deals.
I am generally skeptical of OOS investors investing Baltimore City. I have personally bought, rehabbed and rented over 20 properties in Baltimore City and also had a lot of lessons learned that I would not wish upon anyone else. I think it is possible to do it with the right team of people in place that you can trust but I would urge caution to investors out there.No, not quite the model. The operator has acquisitions folks that find the distressed properties. The investor buys the distressed property prior to rehab, but it's purchased. Then the rehab and and tenant placement and stuff happens while they own it. Once all that's done, then they can do a cash-out refi to pull their money back out.
And yes, you have to have the right teams. Not only for this model, but for Baltimore. The operator I work with knows all the ins and outs of Baltimore so he handles all that mitigation for the investors.
- Rental Property Investor · MD · Member since 2018 · 287 posts · 205 votes6y
Hearing anything/anyone touting about "subject to" deals or models makes my skin crawl. Just grimy in my opinion
- Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes6y
@James Wise Awesome list of markets to invest in in the United States. Have you invested in these cities/states personally?
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes6y
Originally posted by @Marlen Weber:
@James Wise Awesome list of markets to invest in in the United States. Have you invested in these cities/states personally?
We operate in several of them, mostly Cleveland.
- Investor · Rochester, NY · Member since 2015 · 499 posts · 169 votes6y
I invest in Rochester NY-if you have questions let me know.
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