Multifamily market options
Hi guys,
I am currently looking to get into my first multifamily investment. I already have 1 SFH which is why my next investment I would like to go with multifamily. Preferably something smaller like 2-4 units. What are your states you guys tend to look at for this market recently that have been doing well? I leaning more towards the cashflow side with some appreciation also. I don't want to fully lean towards the straight cash flow side as I there can be some troubles to that later on down the road. I would preferably like the B/C class ranges. The west coast where I am from seems to be to high in price range for me to go the multifamily route. Oregon is where I am currently living and it is really expensive and not landlord friendly at all so I would like to get one out of state. Based off what I gathered so far the options with reasonable pricings where it hasn't hiked a lot has been:
Ohio
Tennessee
North Carolina
Kentucky
Wisconsin
Indiana
Florida (if so which cities? most seem kind of high from what I have seen)
I know some people may argue that these states wont appreciate as much or as quick as other states but it seems to be stable. Would anyone have any other suggestions I should look into?
Thank you!
Since you are looking at the south, check out Greenville SC. I am from there and it is growing rapidly. Check out some pics online. If you can get a duplex just outside the city, I assure you it will appreciate.
Quote from @Irvin Nguyen:
Quote from @Remington Lyman:
Quote from @Irvin Nguyen:
Quote from @Patrick Drury:
@Irvin Nguyen
In Ohio, I would recommend looking at Columbus OH. You can get good cash flow and solid appreciation at the same time. Columbus has a lot of job opportunities and population growth. Especially with Intel coming to Columbus as well as Hyperion, which is a company that makes hydrogen fuel cells. Columbus is home to the HQ of Chipotle, Wendys, White castle, L-Brands, and Hunnington. Columbus is also home to OSU, which constantly develops real estate, employs lots of jobs, and attracts students from the US and internationally to attend. On top of all of that, it boasts one of the best college football teams Ohio state buckeyes, which is very well known and has a cult following, and attracts a lot of people to the games.Thanks @Patrick Drury ! is there any bad parts of Columbus you would say to stray away from?
Imo there are no bad parts of Columbus. What are you looking for? What is your definition of bad? Some people think that bad parts mean no cash flow. Some people think bad parts are high crime areas.
When I mentioned bad, I was talking about like high crime areas or places that it was hard to find tenants to fill vacancies.
I have a map that outlines the C areas. It is pretty easy to find tenants anywhere in Columbus though due to the demand outweighing the supply
You can get both cash flow and appreciation in Columbus, OH. More cash flow in Cleveland but less appreciation. Ohio is also very landlord friendly.
-
Real Estate Agent OH (#2020004900)
- 614-698-1227
- https://www.reafcorealestate.com/
Quote from @Irvin Nguyen:
Hi guys,
I am currently looking to get into my first multifamily investment. I already have 1 SFH which is why my next investment I would like to go with multifamily. Preferably something smaller like 2-4 units. What are your states you guys tend to look at for this market recently that have been doing well? I leaning more towards the cashflow side with some appreciation also. I don't want to fully lean towards the straight cash flow side as I there can be some troubles to that later on down the road. I would preferably like the B/C class ranges. The west coast where I am from seems to be to high in price range for me to go the multifamily route. Oregon is where I am currently living and it is really expensive and not landlord friendly at all so I would like to get one out of state. Based off what I gathered so far the options with reasonable pricings where it hasn't hiked a lot has been:
Ohio
Tennessee
North Carolina
Kentucky
Wisconsin
Indiana
Florida (if so which cities? most seem kind of high from what I have seen)
I know some people may argue that these states wont appreciate as much or as quick as other states but it seems to be stable. Would anyone have any other suggestions I should look into?
Thank you!
Of the states on your list, I'd say Indiana & Wisconsin for small multifamilies.
-
Real Estate Agent Illinois (#475. 112189)
- 3126817487
- https://www.chicagodiscountproperties.com/
Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. The appreciation rate in Columbus has been 8% higher than the national average over the last year. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.
Another example of economic growth is the upcoming Ohio State University Wexner Medical Center Inpatient Hospital which is a 1.9million square foot hospital that will bring over 800 new beds and a thousand new jobs.
https://abc6onyourside.com/news/local/new-osu-hospital-expected-to-transform-health-care
Here are a few more recent investments
https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus
Ohio is a landlord friendly state in many ways. Ohio landlords can set their own rent amounts and raise them without any government interference. They also have the right to screen potential tenants and establish their own rules and regulations, such as pet policies and late fees. Additionally, Ohio landlords have the right to evict tenants who violate the terms of their lease and can choose to pursue legal action if necessary. Furthermore, Ohio landlords are not required to provide any specific amenities or services, such as laundry facilities or parking, allowing them to keep their costs down. Finally, Ohio landlords can also take advantage of tax deductions and other benefits, such as the Landlord-Tenant Act of 1974, which outlines landlord rights and responsibilities.
Let me know how I can help!
Quote from @Irvin Nguyen:
Quote from @Drew C Grossman:
Hey @Irvin Nguyen - I operate in Florida, mostly Tampa, Orlando, Jacksonville, lakeland and Central Florida (everything in between).
As you noted, many markets in Florida are already saturated and have higher prices leading to lower yield in many cases. Not to say you can’t find a deal but it typically requires alot of money and returns are low IMO (4-6%). A lot of the resales under 600k you will find around the “good areas”, #1 - won’t even be in a nice area, are going to be old and built in early to mid 1900’s, require a lot of maintenance/renovations/ a mobile home, be in a location you wouldn’t want to invest in. A new construction basic duplex in a GOOD part Jacksonville, Orlando or Tampa is going to cost a minimum $600k, I am not as confident that you will be able to get at-least $6k in monthly revenues (location specific) compared to the alternative. This seems a little riskier being that prices are higher and yield is lower for the product you are getting.
Migration to Florida has seen population growth almost everywhere, and in that people had to start moving inland. Ocala is the main city in the Central Florida portion of the state, that is north of Orlando and has the infrastructure to support growth. You have seen a lot of companies such as Amazon, Lockheed Martin, dollar general and Orlando health expand major operations out here. Cost of land and build isn’t bad out here and you don’t sacrifice growth / yield. The goal would be to find a 1% deal as I have done multiple times and am doing now.
I would look into duplexes out here in Ocala. Yield and appreciation much higher. You can expect 10%+ unleveled cash flow. Although we never bank in appreciation, we feel well positioned in this market for the long run and any appreciation will be icing on the cake.Thanks @Drew C Grossman. will definitely look into that area to see what is out there! I'm sure you will hear from me more with questions once I look into it.
Quote from @Matthew Powers:
Since you are looking at the south, check out Greenville SC. I am from there and it is growing rapidly. Check out some pics online. If you can get a duplex just outside the city, I assure you it will appreciate.
Awesome! Will definitely add that area to the list of places to look into. Thank you!
Quote from @Harrison Chow:
Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. The appreciation rate in Columbus has been 8% higher than the national average over the last year. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.
Another example of economic growth is the upcoming Ohio State University Wexner Medical Center Inpatient Hospital which is a 1.9million square foot hospital that will bring over 800 new beds and a thousand new jobs.
https://abc6onyourside.com/news/local/new-osu-hospital-expected-to-transform-health-care
Here are a few more recent investments
https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus
Thank you for all the helpful info. Looks like I got a lot more reading up on for Ohio than I thought. Im sure I will definitely have questions after. But appreciate all the help!
You could also look into Madison, WI. Madison and Dane County continue to see population and job growth (home to UW Madison, lots of biotech, state government). In general, a stable appreciation market with decent cash flow (obviously more cash flow on paper in c class areas). There are a decent amount of property management companies in the area to consider as well. Happy to talk more if you decide this market area becomes a higher priority for you. I will say though that in general, prices are higher here than other parts of the state (Milwaukee, Beloit/Janesville) but also likely higher rents to go with that, and not sure what your real estate taxes are like, but I know WI is a lot higher than some areas like Kentucky (in Madison/Dane Co., we pay around 2% of purchase price/market value annually in real estate taxes) and also will have snow removal costs to budget for in the winter. Lots to think about for sure.
Tampa, I-4 corridor up to Orlando and Ocala Florida. I love Tampa because it is one of the fastest growing cities in Florida and has a large growing STEM community bringing in high income earners, Major developments in Tampa, Sports teams, highly rated Universities etc. All this creates a strong housing market. I like to get my investors into areas where new districts are being built so they get the fastest force appreciation other than repositioning the property. Ocala is growing really fast and you can get a great ROI on multifamily properties.
I'm seeing lots of people here recommending Ohio as the next place to go. For once, I agree with the majority LOL.
Ohio is the home to my personal real estate business and I can assure you with 100% confidence that I can provide you with QUALITY properties in A/B/C neighborhoods whether they're SF or MF. My team and I buy 20-25 properties per month... there's nobody in southwest or central Ohio that knows the area better than me.
Shoot me over a DM if you are serious about investing in my market.
Don't underestimate how the OOS PM can make or break your property.
INDY! Indianapolis has had more capital investment come in in the past 4 years than in the past 25 years combined. Huge wave! Cash flows still possible.. for now! It's a great opportunity to get in on the rapid development as we transition as a tier 2 city (as Charlotte, Charleston, Nashville, and others have done).
Hello @Irvin Nguyen,
Assuming your goal is to get off and stay off the daily worker treadmill, I recommend selecting an investment location before selecting a property type. All long-term income characteristics are determined by the location. Also, select a location based on metrics, not other people’s opinions. I recommend the following:
- Metro area population size greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
- Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
- Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts' list of the 100 most dangerous US cities.
- Low operating cost - High operating costs can turn what appears to be a profitable property into a money pit. The three most apparent are income taxes, property taxes, and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree
- Inflation compensating - To have the additional dollars you need to pay for inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents lag prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research
- Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control. Rental restriction information comes from interviewing local property managers.
After location, the next most important decision is the tenant pool segment. The only way you will have a reliable income is if your property is continuously occupied by a reliable tenant. A reliable tenant is someone who
- Has stable employment in a market segment that is very likely to be stable or improve over time
- Pays all the rent on schedule
- Takes care of the property
- Does not cause problems with neighbors
- Does not engage in illegal activities while on the property
- Stays for many years
How do you find a segment with the highest percentage of reliable tenants? Interview multiple local property managers. If you would like a list of sample questions, let me know.
Once you select a segment, determine where and what they rent today (from property manager interviews) and buy similar properties. Important: the tenant pool segment determines all property characteristics (type, configuration, rent range, and location.) If you buy anything else, you exclude this segment.
What if you choose a property based on others' opinions and not the tenant segment you want to target? See the image below. You get whatever the property comes with, which may not meet your long-term goals.
Ivan, I hope this helped.
Quote from @Eric Fernwood:
Hello @Irvin Nguyen,
Assuming your goal is to get off and stay off the daily worker treadmill, I recommend selecting an investment location before selecting a property type. All long-term income characteristics are determined by the location. Also, select a location based on metrics, not other people’s opinions. I recommend the following:
- Metro area population size greater than 1M. Small towns may rely too much on a single business or market segment. Wikipedia
- Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
- Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts' list of the 100 most dangerous US cities.
- Low operating cost - High operating costs can turn what appears to be a profitable property into a money pit. The three most apparent are income taxes, property taxes, and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree
- Inflation compensating - To have the additional dollars you need to pay for inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents lag prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research
- Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control. Rental restriction information comes from interviewing local property managers.
After location, the next most important decision is the tenant pool segment. The only way you will have a reliable income is if your property is continuously occupied by a reliable tenant. A reliable tenant is someone who
- Has stable employment in a market segment that is very likely to be stable or improve over time
- Pays all the rent on schedule
- Takes care of the property
- Does not cause problems with neighbors
- Does not engage in illegal activities while on the property
- Stays for many years
How do you find a segment with the highest percentage of reliable tenants? Interview multiple local property managers. If you would like a list of sample questions, let me know.
Once you select a segment, determine where and what they rent today (from property manager interviews) and buy similar properties. Important: the tenant pool segment determines all property characteristics (type, configuration, rent range, and location.) If you buy anything else, you exclude this segment.
What if you choose a property based on others' opinions and not the tenant segment you want to target? See the image below. You get whatever the property comes with, which may not meet your long-term goals.
Ivan, I hope this helped.
Amazing and helpful post! Thank you for all these useful links to look into. Looks like I have a lot more to add to my list of research before picking a location. I will also start calling some property managers to get some data as well.
#5 All Forums Contributor
- Real Estate Broker
- Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
- 17,939
- Votes |
- 26,624
- Posts
#5 All Forums Contributor
- Real Estate Broker
- Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH
Quote from @Irvin Nguyen:
Hi guys,
I am currently looking to get into my first multifamily investment. I already have 1 SFH which is why my next investment I would like to go with multifamily. Preferably something smaller like 2-4 units. What are your states you guys tend to look at for this market recently that have been doing well? I leaning more towards the cashflow side with some appreciation also. I don't want to fully lean towards the straight cash flow side as I there can be some troubles to that later on down the road. I would preferably like the B/C class ranges. The west coast where I am from seems to be to high in price range for me to go the multifamily route. Oregon is where I am currently living and it is really expensive and not landlord friendly at all so I would like to get one out of state. Based off what I gathered so far the options with reasonable pricings where it hasn't hiked a lot has been:
Ohio
Tennessee
North Carolina
Kentucky
Wisconsin
Indiana
Florida (if so which cities? most seem kind of high from what I have seen)
I know some people may argue that these states wont appreciate as much or as quick as other states but it seems to be stable. Would anyone have any other suggestions I should look into?
Thank you!
I got like 30 Cleveland keyword alerts from this thread lol.
Having sold over $200 million in Cleveland rentals over the years, I can say that Cleveland is a very tricky market. You can make money, but you can also lose money. I have seen a lot of people make a lot of money (myself included) but I have also seen a lot of people lose a decent chunk of money here as well.
Biggest thing I say that gets people in trouble is they don't understand what the Cleveland ghetto is like. The ghetto chews up and spits out coastal investors who've got no realization to what like in the Cleveland ghetto is like.
I suggest all out of state investors look over The Ultimate Guide to Grading Cleveland Neighborhoods before spending any money here. It's a good resource as you cruise Zillow and see varying prices. Gives you an indication of why the prices range the way they do.
Hey @Irvin Nguyen,
I am just south of you in the Willamette Valley. I've done "cashflow" in Louisiana and it's definitely different than Oregon.
A few things I highly consider you look into (which I'm sure you have) when you try to find a market with respectful cashflow and has the ability to appreciate well:
1. These types of markets take research to find and typically when you hear about them on Biggerpockets or from others, it's almost too late. It takes a lot of research to identify these rare opportunities (large corporations moving to the area, spikes in population growth, etc.).
2. You should define exactly what your 2-5 year plan is with the property. It sounds like you want cashflow and appreciation and being a landlord not on the west coast is important. But you're going to find yourself in a mental dilemma with every property you look at because it's not going to cashflow enough (compared to midwest properties that tend to not appreciate) and it won't appreciate at the rate you want it to to get your capital back (like what we typically see here on the west coast). So having a real honest and clear goal defined on what you plan on doing before investing will help you temper expectations and manage emotions. If it doesn't appreciate as much as you had planned, will you be okay with having that capital tied up in a property for longer than expected? If it only cashflows $150/month, does that slow down your financial journey? Does a tree needing to be removed or a water leak in the roof set back your cashflow a whole year?
I think what you described is a really good idea that a lot of people spend a lot of time and money trying to find. If you have networks and boots on the ground that can help you find those areas, that's perfect. But if not, you have a lot of upfront work that you should consider to get what I am thinking you are wanting. Either way, getting out of Oregon for your investing is always a good idea.
I hope that made sense. I don't want to discourage you, but just know that everyone is trying to find that unicorn of a city. You'll get a lot of people in cashflow areas pitching how great of a return you'll get from your cashflow on properties and sometimes you'll find yourself in "cashflow purgatory" where you have to wait to sell or 1031 or refinance because it doesn't appreciate. And you'll get the other side trying to pitch on speculatively too. Just be careful who you go through and always do your own research. Look into population growth, schools, hospitals, what type of jobs, what jobs are moving to where, etc. You got this.