MFH markets in the Southeast

12 Replies

My job allows me to live anywhere within the Southeast (Florida, Georgia, Alabama, Tennessee, Kentucky, West Virginia, Virginia, and the Carolinas). I am looking to buy my first property in one of these states, but don't hold any preference towards these areas, mostly since I know I will be in that area at a minimum of 2 times a year for work and my family lives outside of these states.

I've already been pre-approved for just over $350k, would want to use an FHA loan, and ideally find a MFH property. My main sticking point is that I am unsure how to find a marketplace that would be worth my time to find MFH properties effectively since I have minimal restrictions. Are there any recommendations to help me parse down areas in an analytical way?

Start with areas that have growing economies. Increasing job numbers, net positive migration, growing wages, growing rents, and modestly increasing housing supply. Covid has thrown a wrench into those works, but even still not all areas are faring the same.

It's not 100% clear to me from your post whether this property will be a house hack or an investment property that you own out of state.

If house hack - where do you actually want to live? If you're traveling a lot for work it makes sense to try to live near a major airport, or at least within reasonable driving distance. That'll drastically impact your quality of life. If you have to take a puddle jumper from a small airport and connect at CLT or ATL every time you travel, that'll get old fast. I had a national sales territory at one point many years ago, and lived an hour and a half from each of the nearest major airports. That drive easily turned into 3 hours if there was any kind of traffic. Not worth the hassle. It would have made life much easier to live within a reasonable distance to an airport.

Thanks Taylor, I appreciate your response.

I have already broken down census information to track and understand growth areas in my territory (something I wanted to do simply for my day job). Do you have any recommendations for sites that I can take a deeper dive for those other metrics?

Ideally this would be a househack option for the first one, though I want to have some flexibility just in case I can't find a MFH that's worth it in the appropriate area I find. I just know I don't want to resign my lease, and am open to finding a lower cost SFH in a quality market, and then finding another SFH within the year after to rent out.

And I definitely understand the more centralized area. I typically have driven to different areas for work vs. flying since I'm near much of the growth in my territory currently for a commercial construction standpoint, and with Covid concerns easily trickling past 1st quarter 2021 I'm more than willing to keep driving 4-8hrs (it works now since I'm single with no kids to rush back to).

FHA is for owner occupied. So focus on where you want to live and then secondarily a market that makes sense as an investment. It makes the most sense to pick a market and stick with it as you'll be able to scale easier with a team and track record for local community lenders. Even if you physically move in 2 years, I'd recommend continuing to invest in that same spot. Multifamily house hack is a fantastic way to start.

@Patrick Murphy it sounds like you have a great opportunity on your hands. I am also assuming that you will be house hacking from your post. @Taylor L. gave you some great advice. 

I would just add that you should consider purchasing in a landlord friendly state. There are quite a few things to consider when evaluating this. Landlords in every state are bound by certain rules and regulations and each state will have their own laws governing landlords and tenants. There are some factors that may make one states laws more appealing to landlords than others. These factors are all dependent on which are ultimately important to you, but they should all be evaluated. The following factors in no particular order are 1) Landlord and tenant rights, 2) Eviction process, 3) Tax and insurance rates, 4) Rent controls, and 5) Registration and licenses.

Each state will have laws that give landlords and tenants certain rights. Some states favor the landlord while others favor tenants. You want to be in a state that favors the landlord so you don’t end up jeopardizing your investment.

The eviction process is also a crucial factor. Evictions are probably one of the things you fear most as a landlord. As a result, you want to invest in a state where the eviction laws are in your favor. Make sure to select a state where it is easier to evict should the need arise.

Taxes & insurance rates are also an important thing to consider with an investment. While you are looking for a potential state to invest in, make sure to take these costs into consideration as they will ultimately affect your ROI.

Some states have rent control which prevent landlords from raising rents to account for inflation and yearly tax increases. These laws are well intentioned to prevent landlords from overcharging tenants but at the same time, they may also hurt landlords by preventing them from being as profitable as possible. I would definitely avoid states with rent control.

In some states, landlords are also required to obtain business licenses and register with the county and/or municipalities in order to rent their property to tenants. This is especially common with short term rentals, but it can also apply to long term rentals. At the end of the day, this is just an added cost that you should try to avoid.

Of the states you mentioned on the east coast, Florida and Alabama are very landlord friendly. While not on your list, some other landlord friendly states include Texas, Arizona, Illinois, Ohio, Pennsylvania, Colorado, and Indiana.

While not ruling out the other states available to you, I would suggest doing a little more research on markets in Florida and Alabama. Aside from picking a market where you have good cash flow and appreciation, ultimately you want to invest where it pays to do so. Picking a landlord friendly state will definitely help in that regard. Best of luck in your search and please let us know where you end up investing.

I'd house hack! Getting one for my girlfriend here in louisville shortly. 

@Patrick Murphy I started with an FHA loan in Columbus OH. Bought a duplex, renovated it, rented it to friends, later refinanced and got enough money to buy my next place!

I wanted to thank everyone (@Taylor L. , @Andrew Kougl , @Bradley Sriro , @Rob Bergeron , and @Steven Wilson ) for your help with spring boarding me with this.

I found three blog posts on BiggerPockets that helped me understand where to find a lot of the pertinent information, and additional metrics to weed out the noise of having 9 states to examine (true first world problems):

https://www.biggerpockets.com/blog/determining-market-invest-remotely-dream-investment

https://www.biggerpockets.com/blog/2015-05-10-invest-out-of-state-how-to-analyze-a-city

https://www.biggerpockets.com/insights/articles/rent-to-income-ratio

My metrics are almost a hybrid out-of State investor mentality in my opinion. I used the third Blog Post’s spreadsheet and got rid of anything outside of my territory, as well as cities that exceed 30% RTI, or are under the 50% RTP. Once I had my “Top 33” I pulled each of their CAFRs to get a better sense of their stability.

I then pulled in other metrics like Population Growth to LY, Unemployment, Median Age (matters to me since I'll be moving there and am single), Cost per Student, Violent Crime above US avg., Property Crime above US avg., Real Estate Appreciation in past 10yrs, Real Estate Appreciation from last year, Cost of Living, Distance to my best friend in Jacksonville, FL, Distance to my family in Indianapolis, IN, Distance to Atlanta, GA (trying to mitigate against being pulled too far out of the center of my region). Then I ranked each metric 1-33, and then summed the ranks together. That allowed me to be able to find a rough top 10.

Now I’ll start spending time breaking down each city’s neighborhoods into classes. If anyone knows of a quality blog post that shows you how to break down a neighborhood and do this efficiently, please let me know!

Best,

Patrick

Originally posted by @Patrick Murphy :

I wanted to thank everyone (@Taylor L. , @Andrew Kougl , @Bradley Sriro , @Rob Bergeron , and @Steven Wilson) for your help with spring boarding me with this.

I found three blog posts on BiggerPockets that helped me understand where to find a lot of the pertinent information, and additional metrics to weed out the noise of having 9 states to examine (true first world problems):

https://www.biggerpockets.com/blog/determining-market-invest-remotely-dream-investment

https://www.biggerpockets.com/blog/2015-05-10-invest-out-of-state-how-to-analyze-a-city

https://www.biggerpockets.com/insights/articles/rent-to-income-ratio

My metrics are almost a hybrid out-of State investor mentality in my opinion. I used the third Blog Post’s spreadsheet and got rid of anything outside of my territory, as well as cities that exceed 30% RTI, or are under the 50% RTP. Once I had my “Top 33” I pulled each of their CAFRs to get a better sense of their stability.

I then pulled in other metrics like Population Growth to LY, Unemployment, Median Age (matters to me since I’ll be moving there and am single), Cost per Student, Violent Crime above US avg., Property Crime above US avg., Real Estate Appreciation in past 10yrs, Real Estate Appreciation from last year, Cost of Living, Distance to my best friend in Jacksonville, FL, Distance to my family in Indianapolis, IN, Distance to Atlanta, GA (trying to mitigate against being pulled too far out of the center of my region). Then I ranked each metric 1-33, and then summed the ranks together. That allowed me to be able to find a rough top 10.

Now I’ll start spending time breaking down each city’s neighborhoods into classes. If anyone knows of a quality blog post that shows you how to break down a neighborhood and do this efficiently, please let me know!

Best,

Patrick

Thats awesome patrick, good research! As for finding out neighborhoods street by street I suggest connecting with a local boots on the ground expert. Here in Columbus it is street by street in alot of neighborhoods. 

Originally posted by @Steven Wilson :
Originally posted by @Patrick Murphy:

I wanted to thank everyone (@Taylor L. , @Andrew Kougl , @Bradley Sriro , @Rob Bergeron , and @Steven Wilson) for your help with spring boarding me with this.

I found three blog posts on BiggerPockets that helped me understand where to find a lot of the pertinent information, and additional metrics to weed out the noise of having 9 states to examine (true first world problems):

https://www.biggerpockets.com/blog/determining-market-invest-remotely-dream-investment

https://www.biggerpockets.com/blog/2015-05-10-invest-out-of-state-how-to-analyze-a-city

https://www.biggerpockets.com/insights/articles/rent-to-income-ratio

My metrics are almost a hybrid out-of State investor mentality in my opinion. I used the third Blog Post’s spreadsheet and got rid of anything outside of my territory, as well as cities that exceed 30% RTI, or are under the 50% RTP. Once I had my “Top 33” I pulled each of their CAFRs to get a better sense of their stability.

I then pulled in other metrics like Population Growth to LY, Unemployment, Median Age (matters to me since I'll be moving there and am single), Cost per Student, Violent Crime above US avg., Property Crime above US avg., Real Estate Appreciation in past 10yrs, Real Estate Appreciation from last year, Cost of Living, Distance to my best friend in Jacksonville, FL, Distance to my family in Indianapolis, IN, Distance to Atlanta, GA (trying to mitigate against being pulled too far out of the center of my region). Then I ranked each metric 1-33, and then summed the ranks together. That allowed me to be able to find a rough top 10.

Now I’ll start spending time breaking down each city’s neighborhoods into classes. If anyone knows of a quality blog post that shows you how to break down a neighborhood and do this efficiently, please let me know!

Best,

Patrick

Thats awesome patrick, good research! As for finding out neighborhoods street by street I suggest connecting with a local boots on the ground expert. Here in Columbus it is street by street in alot of neighborhoods. 

 Yeah but I feel like wherever you invest in Columbus, Ohio is okay. Just throw a dart.

@Patrick Murphy

10 is too many in my opinion to go down to the neighborhood level, you have already done a ton of analysis so if it helps you feel confident I believe you've proven you won't get stuck in analysis paralysis. However, if you really think about it and you've got 10 metro areas that are all viable and are just a good as each other you probably need to up your filters.

When I did all this I took it in stages, initially had approx. 25, then looking at the next data parameters whittled it to 10, then 5 then 3. If you really go down to the neighborhood level, and to do so I recommend talking to PM's, local forums here and getting agent recommendations. Then talking to people: investors, agents, PM's, lenders, contractors, it's a lot. Going to that level of research from people in the market, 3 was a good number for me. I'd recommend you do 5 max but less would be better.

All the metrics in the world unfortunately don't matter much when you can't feel confident about a team of professionals you only vet over the phone. Building personal relationships will give you a million times more confidence than a spreadsheet and I'm a spreadsheet guy. Good luck!

@Andrew Kougl

Yeah I definitely agree about whittling it down in stages. There's 10 cities, but not 10 metro areas so some reside within the same metro area, so it's not like Atlanta, Miami, Nashville, Tampa, Charlotte, etc. that all act very differently. There's really only 3 metro areas of value that I would target initially and then go to the other 10 to examine deeper if I found my initial avenues resulted in only inept individuals to work with.

@Steven Wilson

I definitely was planning on finding some key local boots, I just wasn't sure if I could take out 2/3s of the cities from the get go by doing something that way I didn't come to an individual initially by only saying, "I'd like to look in city X" and have zero base knowledge.

Originally posted by @Patrick Murphy :

@Andrew Kougl

Yeah I definitely agree about whittling it down in stages. There's 10 cities, but not 10 metro areas so some reside within the same metro area, so it's not like Atlanta, Miami, Nashville, Tampa, Charlotte, etc. that all act very differently. There's really only 3 metro areas of value that I would target initially and then go to the other 10 to examine deeper if I found my initial avenues resulted in only inept individuals to work with.

@Steven Wilson

I definitely was planning on finding some key local boots, I just wasn't sure if I could take out 2/3s of the cities from the get go by doing something that way I didn't come to an individual initially by only saying, "I'd like to look in city X" and have zero base knowledge.

 I can say that if you get started in Columbus it will be a worth while investment.