What Real Estate Markets Should I Invest In As A First Time Investor?

Question

I am having a hard time finding anything that cash flows with a down payment from 20% - 35%. Should I be expecting to place a down payment of 40% or more? I am looking for a growing market with lots of appreciation value.  Please help. I have been struggling to find that I need. Thank you so much.

Becca F. · Answer

Ryan I would recommend house hacking or buying within a 2 hour drive of where you live. There's more risk with buying out of state since you can't check on the property and you have to find a trusted team.

I invest in the Bay Area (pre-2013) and did a renovation, was on site at least once a week. Everything went well and it's rented out. I do have to consider the pro-tenant laws here so I'm pretty cautious (renting to family members right now).

I also invest in the Indianapolis metro area.  Indy house #1 (Class A) is in great suburb, good schools, low crime and appreciating home values, owned almost 11 years. I closed on 2 Class C homes in 2023  that were supposed to be move in ready and full inspections were done.  With C#1 I'm -$300 to -$700 a month from repairs. I've received 2 full months of rent (minus property management fee.) I thought it was starting to stabilize after a year but another repair call. Still problem solving C#2. I don't know about Ohio but my property tax rates are 2.77%. My property taxes all went up 17% with 2024.

If you decide on the Midwest, I recommend not buying Class C 100 year old homes (what I did)  - there are issues with things breaking down, crime (stolen AC unit). I think Class C is better for local investors who can keep an eye on the property. I don't know what your budget is or risk tolerance but you'll have less headaches hopefully with buying Class A or B

I'm going to be the dissenter here but I'm looking to exit the Midwest in the future and come back to CA (Sacramento), Nevada or Arizona. Few people post about this but NV and AZ have some of the lowest property taxes and western states appreciate well. It's still OOS but a short plane ride away. I'm also considering doing mid-term rental (travel nurses/business people) in combination with long-term rental to improve cash flow. I'm not a fan of putting more than 20 to 25% down because you're typing up a lot of money. Good luck!

Jeremy Melloul · Answer

Ryan- I would definitely take a look into OH. Columbus and Cleveland. Cleveland has more cash flow opportunities while Columbus you can find some cashflow opportunities but it’s more of an appreciation play since the city is growing so fast. Would be happy chat it up with you.

Hope you find your market and deal!

Jake Andronico · Answer

@Ryan Holtz

*Cue every agent talking about their area* haha

In all seriousness, what you're experiencing is just the reality of the market. Not much anyone can do except:

1. Don't buy

2. Put more down

3. Get the property for less

4. Don't cash flow

In Reno, NV we've seen a steady appreciation rate of 4-7% annually over the last decade but if you are looking for strong appreciation you're likely going to give up cash flow with interest rates where they are currently.

We analyze the entire market simultaneously and rank the best cash flowing properties based on cap rate.

The very top properties essentially break even with 25-30% down.

I don't mean to discourage you, but hope you're able to find what you're looking for.

Alfath Ahmed · Answer

Hey Ryan, I would check out the Columbus market. It has been booming for the past couple of years with strong job growth and population increase. I personally invest here for both the cash flow and appreciation. I recommend looking into areas near economic bases - close to Nationwide Children’s Hospital, Ohio State Campus, New Albany, etc.

Most of my clients purchase turnkey investment properties in areas like Old North, Merion Village, Southern Orchards, Old Towne East/King-Lincoln Bronzeville, Driving Park, North Linden, North Hilltop, Franklinton, Reynoldsburgh, and Hungarian Village.

My BRRRR and Fix & Flip Investors like to buy in areas like Eastmoor, Hilltop, Whitehall, and Linden. These areas have appreciated a ton and have seen a lot of growth.

Brian Sardinskas · Answer

Hey @Ryan Holtz,

Great question! What type of properties are you looking to buy? ie. single family, small multi-family, large multifamily? Also, are you interested in buying something that is turnkey, or willing to do renovations to the property? What have you been doing to find properties so far?

It is no secret that with interest rates at 7-8% that it can be challenging to find properties that cash flow. In my market, you typically need to force appreciation and rent growth through renovations to cash flow. Without knowing more I can't answer very thoroughly, but what i'll say is that not every market is good for cash flowing. You will make your money in other ways though... usually through appreciation and debt pay down. If you are looking strictly for cash flow, you can usually find these in *cheaper* markets or "C class" markets.

If you are at all interested in investing out-of-state, I do not do this myself, but if you look into "investwithace" on Instagram, he has a lot of content talking about how to do so. I am also sure there are some other people on BP that can help with more out-of-state investing.

This is all VERY GENERAL information and will vary depending on where you live. If you can answer some of my questions above, I may be able to help further.

Ben Howard · Answer

Hello @Becca F., you mention mid-term and the Sacramento area. I posted on BP about the opportunity for mid-term rental growth in the Folsom market:

https://www.biggerpockets.com/forums/925/topics/1164202-folsom-could-see-over-500-000-square-feet-of-new-doctor-s-offices-and-medical-clinics

Michael Smythe · Answer

@Ryan Holtz guessing you are looking at Class A properties.

Historically, these have NOT cashflowed for the first 3-5 years of ownership!

Everyone got spoiled with the historically low interest rates caused by COVID that did make it possible for Class A rentals to cashflow from acquisition.

Historically, most DIY landlords have bought Class B or C rental properties, that cashflow immediately, or soon after being properly repositioned with higher rents.

Jimmy Lieu · Answer

Hi Ryan, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!

Samuel Diouf · Answer

Columbus, Ohio is a great market to consider if you're leaning towards appreciation. Multiple, billion dollar companies are investing heavy in our area, such as Intel, Google, and Amazon. Which will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

Mike Paolucci · Answer

Hey @Ryan Holtz

Have you thought about out of state investing? I'm originally from San Francisco, CA and started investing in 2021. It was pretty hard to find properties where the numbers and landlord laws made sense which is what ultimately led me to investing in Columbus, OH. Here's an example of the CA landlord laws not making sense I'm referring to --> "Justice for Renters Act" This is going to be on the upcoming November CA ballot.

The numbers and landlord laws out here made sense in 2021, and they still do today. I've been able to get a healthy combination of both cashflow and appreciation from all my properties after a little TLC.

Happy to share my experiences. Good luck on your REI journey and property search!!

What Real Estate Markets Should I Invest In As A First Time Investor?

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