Should i invest in a out of state rental and primary with funds?

Question

hello,

i have 170k for RE, i am located in North jersey looking for a primary 2 family 100k for down payment, closing cost etc.

the 70k left over i want to use in a out of state rental single or duplex aiming for 8% cocr.

im not sure if i am being unrealistic in this market but would love advice.

the states/cities i am looking at now is

1. dallas TX

2. Philly PA

3. Tampa/orlando FL

4. Tennessee

i am not sure which one i should invest in and if i should wait till i get a primary home or do both in a year.

im living with family now so no rent.

Account Closed · Answer

@Rich O'Neill i cant think of a BRRR method until i own a primary because the BRRR might affect my numbers for a personal primary loan and much more risk/funds.

i want a turn key and happy with anything over 8% after all cost including 5% repairs 5% capex 10% pm 8% vacancy

i will keep looking at the other better markets where growth is happening but PA is def something im into seeing how it is very close by towards me.

ill hit u up if anything

Rich O'Neill · Answer

Account Closed I actually don't love the city itself. We do a lot of work there for our PM company, but I don't prefer to invest there. I like the surrounding counties, especially Delaware County. The transfer tax I think you are referring to is the Philly transfer tax, which is way higher than the rest of the state. PA in general is 2% and that is usually split between buyer and seller.

To get the best COC return, I would try to buy something that needs work, fix it up, refinance it and pull most of my money back out. Even if you don't pull it all out for a perfect BRRRR deal it will still maximize the COC to a level that I think should be way over 8%. If you are happy with 8%, then turn-key might be the best route for you. Even if you left $30k (a lot) in a property that is cash flowing $3,000 a year (not terribly hard to get), your COC is still 10%.

Drew Brown · Answer

Account Closed you can come to Michigan and hit those numbers with little to no effort. I am in the Lansing Market and would happy to chat!

Account Closed · Answer

@Rich O'Neill hey thanks for the comment, i was looking at philly since its a close market to me but its full of crime and horrible news with blocks being different from one another so close by and the PA transfer tax really sucks being costly.

its actually my very last backup market. i do not know a lot of the market there yes but when i visit i just see slow progress and slow job growth. i could be wrong, what plan would be best if i have 75k for a 8% cocr after all cost and duplex?

Sean Sloop · Answer

Hey Mario,

I would suspect you can hit your numbers here in Grand Rapids if 8% is all you are looking for. Feel free to message me your criteria and Ill let you know if any of the Michigan markets I am familiar with are good for you.

Rich O'Neill · Answer

Great good luck!

Wouldn't a turn-key investment property purchase have a similar effect on your credit as a BRRRR, or am I missing part of your strategy?

Rich O'Neill · Answer

Agreed with @Sean Sloop on order, but I don't see why you couldn't do both within a year. With that kind of cash you should be in pretty good shape in terms of buying the investment. 8% coc should be pretty easily achievable in most of Philly, especially if you are willing to take on a value add deal.

Biggest challenge is going to be putting together a team you trust, or being willing to travel to the market. This can absolutely be done and David Greene wrote an excellent book on the subject, but in practice it is really hard.

If you land on Philly as your market, let me know and I can try my best to help point you in the right direction!

Sean Sloop · Answer

Hey Mario, I am not invested in those markets but I am pretty sure 8% COC should be fairly easy to do whether those markets or other cashflow markets. As far as order of operations, I would buy your primary first, then buy the investment. Once you buy the investment, your DTI will be impacted which will in turn impact what you qualify for as your primary.