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?
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.
@Andrew McElroy I LOVE cash flow, but there's more to the equation than that. 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.
Cash-flow pays the lunch money but appreciation and equity pay for college. Love it!
Need equity capture at the buy and efficient value-adds. That removes TK.
With your largest resources being time and energy, that removes OOS / out of area.
Now you can concentrate on finding good value in good areas of Philly for off-market, value-add deals.
When every market and every niche is your goal, we get nowhere. Focus and achieve!
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?
I would also suggest Columbus, OH. It's a great market for both cashflow and apprecation.
Rental Property Investor · Los Angeles · Member since 2019 · 26 posts · 24 votes
5y
A response to those who are advocating buying within driving distance. I get what you're saying. However, this assumes that you can find a cash flowing property near 1% rule within driving distance. Some of us unfortunately are not in that position. If I lived in the midwest, I'd be buying next door all day long so I can cut my rehab costs.
Having said that, if you plan to scale at some point, you're going to need to have a team in place. At that point, it doesn't really matter if your team is within driving distance or OOS. What matters is that you learn to build a solid team.
Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
5y
It depends on your goals. As others have mentioned, I like investing in my own backyard (figuratively and literally by adding a second unit). I live in Los Angeles. I already know the area, so the learning curve shortens considerably. Plus you can house hack it since you need a roof over your head anyways, so you might as well own it!
Rental Property Investor · Lexington, KY · Member since 2018 · 52 posts · 55 votes
5y
Hi Andrew, There are a lot of considerations when selecting a new market to invest in (population trends, local economy & job market, cash flow, appreciation, etc). I have found the Montgomery Alabama market to be great if you are looking for cash flow. I can connect you with the core 4 (agent/deal finder, property manager, lender, & contractor) if you are interested in learning more.
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?
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
Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible no matter what market you're buying in.
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 and/or Morris Invest 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.
Hi Andrew, There are a lot of considerations when selecting a new market to invest in (population trends, local economy & job market, cash flow, appreciation, etc). I have found the Montgomery Alabama market to be great if you are looking for cash flow. I can connect you with the core 4 (agent/deal finder, property manager, lender, & contractor) if you are interested in learning more.
Best of luck!
Hi Eric. I am interested in the Montgomery market. Do you have some time to discuss?