Good markets for first time investors?

Starting Out
5yFollow

Good markets for first time investors?

Andrew McElroy
New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes

Hi BP Community,

I am in the process of researching markets to purchase my first rental property and I thought I would ask if anyone had any suggestions, recommendations or tips.  I currently reside in Northern NJ, right outside of NYC, so I feel that my best course of action is to look into my opportunities out of state.  What are some good markets for a first time rental property investor?   

14Reply
135 views

Most Popular Reply

Natalie Schanne
Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
5y

@Andrew McElroy - I find that within 30 mins of my home is usually the best place to invest. My favorite place to invest is my own home when I can get an in law suite or multifamily and rent out part of my own home to nice people. I get 2.5-3% 30 year interest rates. I get free capital gains appreciation. I get tax deductions against the income. I have control. I learn. I usually don’t get screwed too badly by people lying to me about doing work they didn’t do because I can go look at it with my own eyes.

If you’re an accredited investor, you may look into syndications with people you decide to trust. Many 15-20% yielding syndications have been in texas, Atlanta/Georgia, Carolinas, Arizona, Nevada, etc. Remember most syndications essentially have you sign away that you can lose everything and they can’t be sued (unless outright fraud) because you understood the investment is risky.

We know that big REITs with lots of smart people and research have mainly been selling properties in C areas and building or buying in 24/7 cities and high growth suburbs with lots of high paying jobs. Avalon Bay and others BestRentNJ have been building new apartment communities all over New Jersey. Edison. Piscataway. If the trends were negative, why would smart people do this? I’ve found the rental market here in New Jersey is incredibly strong and most people with good jobs pay their rent on time every time.

10Reply
See this reply in the discussion

61 Replies

Jump to latestLatest
  • Eduardo Reyes
    Member since 2020 · 27 posts · 17 votes
    5y

    Hello Andrew, In my opinion, the midwest is a great spot to look at for your investing. Kansas City and NW Indiana and Chicago are all great places to invest in. Best of luck

    6Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y
     @Eduardo Reyes: Thanks for your advice.  I will definitely start to research those markets more heavily.  Is there any specific zip codes in these areas that would be the best to start to look into? 
    0Reply
  • Joseph Schweizer
    Investor · Member since 2020 · 291 posts · 592 votes
    5y

    Hi @Andrew McElroy!

    I found these posts on BP to be helpful. There may be more available that I have not found yet, but these match some of the areas mentioned above.

    https://www.biggerpockets.com/...

    https://www.biggerpockets.com/...

    Best Wishes!

    3Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y

    Hi @Joseph Schweizer

    Thanks for your help. I will definitely check out those posts, they will come in handy.

    0Reply
  • Natalie Schanne
    Real Estate Agent · Princeton, NJ · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Andrew McElroy - I find that within 30 mins of my home is usually the best place to invest. My favorite place to invest is my own home when I can get an in law suite or multifamily and rent out part of my own home to nice people. I get 2.5-3% 30 year interest rates. I get free capital gains appreciation. I get tax deductions against the income. I have control. I learn. I usually don’t get screwed too badly by people lying to me about doing work they didn’t do because I can go look at it with my own eyes.

    If you’re an accredited investor, you may look into syndications with people you decide to trust. Many 15-20% yielding syndications have been in texas, Atlanta/Georgia, Carolinas, Arizona, Nevada, etc. Remember most syndications essentially have you sign away that you can lose everything and they can’t be sued (unless outright fraud) because you understood the investment is risky.

    We know that big REITs with lots of smart people and research have mainly been selling properties in C areas and building or buying in 24/7 cities and high growth suburbs with lots of high paying jobs. Avalon Bay and others BestRentNJ have been building new apartment communities all over New Jersey. Edison. Piscataway. If the trends were negative, why would smart people do this? I’ve found the rental market here in New Jersey is incredibly strong and most people with good jobs pay their rent on time every time.

    10Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    5y

    Returns are very market specific- what is your end goal? How much time, energy and resources do you have to put towards that goal?

    1Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    5y
    • Orlando, Florida.
    • Huntsville, Alabama.
    • DFW, Texas.
    • Austin, Texas.
    • Raleigh-Durham, North Carolina.
    • Jacksonville, Florida.
    • Tampa Bay, Florida.
    • Houston, Texas.
    6Reply
  • Noah Chappell
    Investor · Minneapolis, MN · Member since 2016 · 254 posts · 228 votes
    5y

    @Natalie Schanne I second this 100%. When you're still starting out, it's invaluable to have something you can see and touch while you're still getting your head around the game. Once you develop an intuition for systems and can tell when someone's lying to you, etc, then maybe move out of state. 

    Why don't you try Philadelphia first? If you cut your teeth in that market, I think you'd be ready for pretty much anything. 

    3Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y

    @Natalie Schanne thanks for all the advice. I do feel like my best course of action would be to find a market that is closer to me so I can get some hands on experience. As you said, you can get your eyes on the property and the work that is being completed.

    0Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y

    Thanks @Bruce Lynn, I will take a look at all of these markets.

    0Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y

    @Noah Chappell I think that would be a really good start for me. Philly is close enough where the market is not as expensive, but I can still be hands on and have my eyes on the property. Thanks for the advice.

    0Reply
  • Andrew McElroy
    OP
    New to Real Estate · Bergen County, NJ · Member since 2020 · 33 posts · 37 votes
    5y

    @Corby Goade Very good questions that I probably need to do more reflecting on. As of right now, my end goal is to have enough cash flow in the future to be financially free so I do not have to work a 9-5 for the rest of my life. I know it starts with one property and takes a tremendous amount of work but I am up to the challenge and journey. In regards to time and energy, I would say I have a decent amount of both and right now have more of those two than resources as I am truthfully just starting.

    0Reply
  • Ivy SanmiguelPro Member
    Real Estate Agent · Miami, FL · Member since 2017 · 52 posts · 18 votes
    5y

    @Andrew McElroy Hello Andrew, it depends on your investment goals; if you’re looking for cash flow, appreciation, flipping, etc.

    With that being said, Baltimore, MD is a good place to look for renovated properties with good cash flow (+10% Cap Rate). Are you interested in turnkey solutions? We can connect.

    Best of lucks in this journey!

    0Reply
  • Corby GoadeBusiness Member
    Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
    5y

    @Andrew McElroy Glad to hear I've got you thinking! If I may...there is so much chatter here on BP about cash flow- and don't get me wrong, I LOVE cash flow, but there's more to the equation than that. I'd be looking for growing markets that have high quality of life and relatively low cost of living. You should be able to find something affordable that will provide you with some cash flow at first and something that will appreciate reliably and indefinitely. That appreciation is what help you scale your portfolio. I have a cheesy saying that cash flow pays for your kids lunch, but equity pays for their college. You only get real equity growth in appreciating markets, and that's how the "average" guy can truly make it in the long run. 

    Best of luck!

    5Reply
  • John Jones
    Realtor · Memphis, TN · Member since 2020 · 33 posts · 22 votes
    5y

    @Andrew McElroy I’m biased but I think the Memphis market is a great one to look into! It’s great for cash flow and has some appreciation as well.

    0Reply
  • Timothy Lewis
    Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes
    5y

    Before you get started, I highly recommend checking out David Greene's book on long distance RE Investing.

    https://store.biggerpockets.co...

    Gold Mine!

    4Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Andrew McElroy

    Any market that you know and have a core 4 of agent, property manager, contractor, and lender. I recommend the Midwest and Columbus, Oh greatly.

    [email protected]614-363-2787
    Marc Rice | Investor Friendly Agent at Reafco Tailwind Team574 Reviews
    WebsiteView Page
    1Reply
  • Gregg CohenBusiness Member
    Rental Property Investor · Jacksonville, FL · Member since 2011 · 143 posts · 136 votes
    5y

    I've been investing in single family rentals since 2006 and I love the Jacksonville, FL market.  My perfect market is one that has low prices, high rents and above-average long-term home price appreciation.  There are a number of markets out there that have low price and high rents but typically their home price appreciation rates fall below the national median.  Jacksonville's home prices are 27% below, rents are .3% above and home price appreciation is 19% above the national average per year since 1991.  Hard to find another market out there that checks all of these boxes but if you are planning on buying and holding for at least a full market cycle (10-20 years), this is your best bet to maximize your return on investment. 

    904-677-6777
    Gregg Cohen, Not Your Avg Investor Show4.5237 Reviews
    WebsiteView Page
    5Reply
  • Brandon GoldsmithBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes
    5y

    When looking at some of these markets, another thing to keep in mind is the job diversity of the city and this usually helps to reduce risk. Here in Columbus, OH there is a well-growing population and nice diversity of jobs. @Andrew McElroy

    [email protected]614-963-3340
    2Reply
  • Blaine Alger
    Investor · Waco TX / Conroe, TX · Member since 2017 · 376 posts · 228 votes
    5y

    I would say the best market to start in would be one your are familiar with and have a connection to. Ideally, you would want to start investing locally, but I understand that is not possible for some people.

    So if prices are too expensive in your own market I would suggest look in areas where you have family/friends or maybe used to live there.

    For example, I live about 3 hours from where I grew up but I still look for deals in that area because I am very familiar with the county and know all the in's and out's.

    -BA

    2Reply
  • Mazi Obinna Ogbonna
    Norfolk, VA · Member since 2018 · 2 posts · 1 vote
    5y

    Great afternoon I hope this finds whomever is reading this well and in great spirits! I am currently in the Navy and will be moving to VA this month and I'm interested in investing in the VA area. I'm specifically looking for a quad+ (<- perfect world , but I'm open to a duplex/triplex) with a low cap rate as a new investor and while living in one of the units for a while. Since I'm in the Navy I have my VA loan to utilize but also may still use FHA with my wife. Anyone with any tips, higher understanding of the area or process, or general pointing in the right direction are all welcome, I'm a sponge! Thanks!

    1Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    5y

    @Andrew McElroy A lot of chatter about the OH markets these days. 

    Many OOS investors are really liking those markets right now. That said, it all depends on your real estate investing strategy. 

    0Reply
  • Alice Horn
    Property Manager · Kissimmee, FL · Member since 2019 · 446 posts · 266 votes
    5y

    @Andrew McElroy we know the northern NJ market well as we lived in Tenafly, NJ before relocating to Florida over 20 years ago. Never regretted the decision! If you'd like to take a look at the Orlando vacation rental market, we are happy to help. We can recommend specific communities, as well as help with revenue and occupancy data for individual homes. Just let me know!

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    5y

    If cashflow is what you seek... Birmingham, Atlanta, Indianapolis, St Louis, Kansas City, Memphis, Little Rock, Indianapolis, Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

    6Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y

    @Andrew McElroy That's going to depend on your objectives and criteria. Regardless of whether you are a first time investor or not, if you're objective is cash flow, these are the things that you want to look for:
    * Strong price/rent ratio's
    * Low property taxes and insurance rates
    * Growing populations and jobs
    * Modern, diverse economies and industries
    * Landlord friendly statutes 

    The Midwest is generally the best region for cash flow but personally, I think that Indianapolis and Kansas City have the best combination of the criteria above. There are other markets that cash flow but many of them have stagnant or declining populations and jobs which doesn't bode well for long term asset value.

    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free