If you magically had 100,000 to invest...
Member since 2021 · 7 posts · 5 votes
If you magically had 100,000 to invest...
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Jonathan Greene:
There are a million ways you could go with it, but your first thought I would say isn't grounded in evidence (a video on BP). So start with the goal. What does a cash positive investment mean to you? Do you need cash flow from it for income or will light to no cash flow work if you can groundswell appreciation on a good asset? Where do you live and how far would you want to travel to manage the property? If you don't want to manage the property at all, you are losing money on the management when small scale management is not hard at all with a little help. Also, if your wife and her parents were the real estate investors first, why aren't they weighing in?
well there is only one answer to this Columbus Ohio.. full stop.
24 Replies
- 1yJonathan GreeneBusiness MemberReal Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
There are a million ways you could go with it, but your first thought I would say isn't grounded in evidence (a video on BP). So start with the goal. What does a cash positive investment mean to you? Do you need cash flow from it for income or will light to no cash flow work if you can groundswell appreciation on a good asset? Where do you live and how far would you want to travel to manage the property? If you don't want to manage the property at all, you are losing money on the management when small scale management is not hard at all with a little help. Also, if your wife and her parents were the real estate investors first, why aren't they weighing in?
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
I would not buy anything right now, I would wait a year or so and see where prices are headed. In the meantime I would put the money in a low risk account gaining 4-5% which for $250k would be around $1k/month.
7e investments53 Reviews - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Jonathan Greene:
There are a million ways you could go with it, but your first thought I would say isn't grounded in evidence (a video on BP). So start with the goal. What does a cash positive investment mean to you? Do you need cash flow from it for income or will light to no cash flow work if you can groundswell appreciation on a good asset? Where do you live and how far would you want to travel to manage the property? If you don't want to manage the property at all, you are losing money on the management when small scale management is not hard at all with a little help. Also, if your wife and her parents were the real estate investors first, why aren't they weighing in?
well there is only one answer to this Columbus Ohio.. full stop. - Investor · CA · Member since 2024 · 82 posts · 31 votes1y
Dave, first off, congrats on this incredible opportunity—it’s one many of us dream about! It sounds like you’ve built a strong foundation, and now it’s time to make that money work for you.
If I were in your shoes, I’d look into value-add multifamily properties in growing markets. Places with strong population and job growth (think the Sunbelt regions or emerging Midwestern cities) can offer solid cash flow and long-term appreciation.
Have you considered diversifying into multiple smaller properties or going all-in on one larger property? It might also be worth exploring creative financing to leverage that quarter million into even bigger opportunities.
What’s your priority—maximizing cash flow now, or focusing on long-term wealth building? Let’s chat ideas—I’d love to brainstorm with you!”
- Member since 2024 · 1 post · 1 vote1y
Quote from @Chris Seveney:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
I would not buy anything right now, I would wait a year or so and see where prices are headed. In the meantime I would put the money in a low risk account gaining 4-5% which for $250k would be around $1k/month.
Hey Chris - what is driving the sentiment not to buy anything right now? I came into about 800k and looking to go into commercial multi family in the Midwest (Iowa most likely).
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes1y
Quote from @Nico Welthy:
Quote from @Chris Seveney:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
I would not buy anything right now, I would wait a year or so and see where prices are headed. In the meantime I would put the money in a low risk account gaining 4-5% which for $250k would be around $1k/month.
Hey Chris - what is driving the sentiment not to buy anything right now? I came into about 800k and looking to go into commercial multi family in the Midwest (Iowa most likely).
I think it depends on the individual and opportunity. I would not buy something right now just to buy something. Now of course there are still deals to be had out there, I am not saying that, but its a lot harder to find those deals today than five years ago when everything was a deal due to low interest rates.
We are always buying but this is my business, so we have a team etc. to manage it. The person who comes into money but not a lot of experience in real estate should be a little more cautious right now.
So overall, I am not saying - do not buy, I am saying be careful. For example I know many who are now just lending because they are getting 10-12% short term which is far better than any cap rate on real estate. you do not have the equity upside as you do real estate but its a way to play the short game to see what happens over the next 12-24 months and decide when you want to buy.
7e investments53 Reviews - 1yShiloh LundahlPro MemberRental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
Hey @Dave Allen I agree with @Jonathan Greene. It's best to start with a goal. Think of it like the idea of wanting to go on Vacation and asking a group of a million people where you should go. Tons of people would be willing to tell you where you should go, possibly because they have had a great experience there themselves. They could tell you the Swiss alps, New York, Australia, Japan, or my favorite, Costa Rica. However, without more information on what your preferences are, it is difficult to give you good advice. Here are some things to consider when wanting to invest your money. And you may not know the answers right now because you may not have much experience with each different option; and that is okay. You can change your mind on what you would like to do as you get more experience.
1. Do you want to be more of a passive investor or active investor or somewhere in the middle?
2. Would you like to manage the property yourself, have an assistant do it for you, or have a management company do it for you?
3. Do you want to own the asset yourself or would you like to be partners with someone else who may have more experience and you could be the money partner? Or do you want to be a part owner with a group of people like in a fund or syndication?
4. Do you want an investment that you can use yourself such as a short-term rental in an area you like to vacation in, or does it matter which type of asset it is?
5. Is your highest priority immediate cash flow or would you rather have an investment that may give you a greater return but it may take a couple of years?
6. Is cash flow the most important or is equity growth more important to you?
7. Do you want something close to you that you can go look at for yourself or are you okay with investing in something far away that you would probably have to fly to if you wanted to take a look at it in person?
These are just some questions. And you may not know the answers to all of them right now and that is completely fine. You may just want to jump in and get started and learn along the way and figure out what you like over time. That is fine too. If that is the case, I would encourage you to intentionally start making connections with successful real estate investors. Then, over time, probably a few months, start to determine who you would feel comfortable doing a deal with. Make sure it would be someone you could learn from in the deal and then I would encourage you to only use a portion (probably only 50k to 100k) of your available capital in the deal. This can help you gain experience and start to network and develop a team of people who can help you invest in future deals.
Hopefully this gives you some ideas that you can use as you decide how you would like to redeploy the money that you referenced above.
Good luck to you.
- Member since 2024 · 46 posts · 22 votes1y
@Shiloh Lundahl great answer. Lurking as I'm in a similar scenario IF I sell an owned property currently being used as a rental in my home state.
Ill apologize in advance for hijacking the post but wanted to keep this public for others' input too.
The rental is currently managed by my husband and I and I do the paperwork and lease etc, and hire contractors or husband does light repairs. Anyhow, we can sell the home within the next 1.5 years and take the equity tax free or we can keep as a rental as we lived in it 2 of last 5. I'm so torn. The end goal for us is to be in TX (in 8-11 years) and would prefer to have investments there as I don't want to be returning to Colorado all of the time once we move. We visit TX several times a year to investigate new areas of interest. I decided to answer your questions as I'm interested in your response.
1. Do you want to be more of a passive investor or active investor or somewhere in the middle? Ideally, middle. Letting go of control into passive investing and being a money investor makes me nervous. Which means it may make me an active investor.
2. Would you like to manage the property yourself, have an assistant do it for you, or have a management company do it for you? If out of state, it'd be a combination of someone else (maybe an assistant) and I'd manage paperwork, leasing, as much as I could from here. Coming out to the property once or twice a year would be a given however.
3. Do you want to own the asset yourself or would you like to be partners with someone else who may have more experience and you could be the money partner? Or do you want to be a part owner with a group of people like in a fund or syndication? Lean heavily towards owning myself. Possibly partner with a group but would only do money lending or group in exchange for gaining knowledge of how to independently do things. I don't want to sit back and collect, I'm always hungry for more knowledge and never satiated. I make a decent income in a corporate type job and have an end goal of someday replacing that. Anything to propel that goal forward is of value.
4. Do you want an investment that you can use yourself such as a short-term rental in an area you like to vacation in, or does it matter which type of asset it is? I've considered this and it is a nice-to-have and would love this, but it's not the first goal.
5. Is your highest priority immediate cash flow or would you rather have an investment that may give you a greater return but it may take a couple of years? In between. I'd like to cash flow about half and keep half the investment in the investment and continue to grow. We currently net about 1k from the rental now and rely on about $500. We could cut things and not rely on it, but it would be a little uncomfortable. Not impossible.
6. Is cash flow the most important or is equity growth more important to you? Both, as above
7. Do you want something close to you that you can go look at for yourself or are you okay with investing in something far away that you would probably have to fly to if you wanted to take a look at it in person? I believe this is mostly stated for me in response to earlier questions- I'm stuck in CO for time being but want to invest elsewhere.
- 1yTim SwierczekPro MemberLender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
Do you have any connections or boots on the ground in Duluth, MN? The best deal in the world can get screwed up by poor management. You need a management plan in a market to make it viable. I think Duluth is a good if not great market but it means nothing if you can't execute.
- Member since 2021 · 7 posts · 5 votes1yHey Tim thanks for chiming in, yes I have friends in st Paul who frequent Duluth.
Quote from @Tim Swierczek:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
Do you have any connections or boots on the ground in Duluth, MN? The best deal in the world can get screwed up by poor management. You need a management plan in a market to make it viable. I think Duluth is a good if not great market but it means nothing if you can't execute.
- Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes1y
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
$250,000 tax-free? Not bad. Why not run it back? House hack another property with a low down payment loan and use the remainder or the proceeds to either renovate or purchase another investment property?
@Chris Seveney, and @Jonathan Greene are spot on. Outside of HYSA-- that's 4-5% gross, not taxed. Still park it & be ready bid side until the opportunity comes. I think it comes in equities before RE though.
1)Don't buy for the sake of it. Like Duluth cause you saw a video on it. You're literally the prey these ad predators work off of, do you not see how gullible you appear?
2) I would buy in this environment, but be absolutely more cautious. Rates are high and trending higher, as is inventory in most markets. This means pricing pressure. It's just math & logic. Bid to serve yourself, not serve your emotion.
3) Develop your own thesis, stop asking others. Read around and investigate what makes sense to you, and what you can stick to. Physical investing is a long term ball game, not no quick game. Get your focus and understand that before you divulge.
4) Quit watching videos for the city, person, or anything else. Simply analyze the strategy and how you could do it better or differently. You need to watch the game, not watch the players, theatrics and colors.
- Member since 2021 · 7 posts · 5 votes1y
Quote from @Zeke Liston:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
$250,000 tax-free? Not bad. Why not run it back? House hack another property with a low down payment loan and use the remainder or the proceeds to either renovate or purchase another investment property?
I live in California, this is a bay area property.
were not looking to move out of state and house hacking is less palatable when a duplex costs 1.6 million. We have found some fixers farther away for as "little" as 600ks. But the rents don't justify it, for example we are renting a 3 bed 2 bath house with a huge backyard in rancho Cordova for 2350/mo, so duplex rents around here are 1800-2200 ballpark. So you can understand why I was blown away to see prices half that or less with rents 1500-1800 in Duluth. Have done some preliminary research and will do a deep dive, just wanted to see what folks thought of there were any obvious reasons why or why not or any markets similar that I should be considering. I have friends who bought in Texas, Chicago, Minnesota and Tennessee so I've been watching those markets.
- Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes1y
Quote from @Dave Allen:
Quote from @Zeke Liston:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
$250,000 tax-free? Not bad. Why not run it back? House hack another property with a low down payment loan and use the remainder or the proceeds to either renovate or purchase another investment property?
I live in California, this is a bay area property.
were not looking to move out of state and house hacking is less palatable when a duplex costs 1.6 million. We have found some fixers farther away for as "little" as 600ks. But the rents don't justify it, for example we are renting a 3 bed 2 bath house with a huge backyard in rancho Cordova for 2350/mo, so duplex rents around here are 1800-2200 ballpark. So you can understand why I was blown away to see prices half that or less with rents 1500-1800 in Duluth. Have done some preliminary research and will do a deep dive, just wanted to see what folks thought of there were any obvious reasons why or why not or any markets similar that I should be considering. I have friends who bought in Texas, Chicago, Minnesota and Tennessee so I've been watching those markets.
That makes a lot of sense. I live here in Columbus, and it's very attainable to house hack a duplex for $400,000-$600,000 in an A-class neighborhood and gross $3,500-$5,000 in rent, which is why I asked.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes1y
If you are going to invest in Columbus @Dave Allen you should for sure connect with @Michael K Gallagher! He's an investor friendly agent there!
Personally, I love Chicago because I know the market decently well and more importantly have a VERY SOLID TEAM, of people I know, like, and trust!
In my opinion, the best place to invest is where you have the best advantage which is usually an area you know best or a place where you have great connectings!
If you can wait on the cash flow I'd consider a sydication or something more passive if you aren't looking to be quite as active.
Quality Builders4.968 Reviews - 1yTim SwierczekPro MemberLender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
Quote from @Dave Allen:
Hey Tim thanks for chiming in, yes I have friends in st Paul who frequent Duluth.Quote from @Tim Swierczek:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
Do you have any connections or boots on the ground in Duluth, MN? The best deal in the world can get screwed up by poor management. You need a management plan in a market to make it viable. I think Duluth is a good if not great market but it means nothing if you can't execute.
I respect that thought, but Duluth to St Paul is more than two hours each way. That is not a management plan. You will need someone more local who is incentivized to be available to do showings and handle issues. Heirloom Properties has a good reputation with the people I know.
- I’m with Chris. You’re already getting the tax benefit, so I wouldn’t feel the need to roll the gains into more real estate. I’d use it as an opportunity to diversify into some other investment classes where you might be getting a more attractive risk premium for less work right now. As long as you stay invested and let your hard earned capital continue to grow, you can pick your spots when a real estate opportunity offers outsized returns comparatively to other investments.
Quote from @Chris Seveney:
Quote from @Nico Welthy:
Quote from @Chris Seveney:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
I would not buy anything right now, I would wait a year or so and see where prices are headed. In the meantime I would put the money in a low risk account gaining 4-5% which for $250k would be around $1k/month.
Hey Chris - what is driving the sentiment not to buy anything right now? I came into about 800k and looking to go into commercial multi family in the Midwest (Iowa most likely).
I think it depends on the individual and opportunity. I would not buy something right now just to buy something. Now of course there are still deals to be had out there, I am not saying that, but its a lot harder to find those deals today than five years ago when everything was a deal due to low interest rates.
We are always buying but this is my business, so we have a team etc. to manage it. The person who comes into money but not a lot of experience in real estate should be a little more cautious right now.
So overall, I am not saying - do not buy, I am saying be careful. For example I know many who are now just lending because they are getting 10-12% short term which is far better than any cap rate on real estate. you do not have the equity upside as you do real estate but its a way to play the short game to see what happens over the next 12-24 months and decide when you want to buy.
- 1yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
hello. this is going to sound reductive but if you want something immediately cash positive... i'd go with a savings account.
rentals are long-term cash positive. i don't know if you've owned any before (feel free to chime in with more info) but the costs of entry get understated. and, with interest rates high, it's very, very difficult to cash flow right now in the short term. you've got closing costs, a down payment, rent-ready costs, a month's rent to lease it out... it takes years to recoup those costs. making $150 net in month 1 because a spreadsheet said so is fantasy.
here's a fantastic thread about 'cash flow' investing from California - i highly recommend it.
https://www.biggerpockets.com/forums/48/topics/1159104-overl...
i say all this not to be discouraging but to be realistic - hope it helps
- Member since 2021 · 7 posts · 5 votes1y
Quote from @Tim Swierczek:
Quote from @Dave Allen:
Hey Tim thanks for chiming in, yes I have friends in st Paul who frequent Duluth.Quote from @Tim Swierczek:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
Do you have any connections or boots on the ground in Duluth, MN? The best deal in the world can get screwed up by poor management. You need a management plan in a market to make it viable. I think Duluth is a good if not great market but it means nothing if you can't execute.
I respect that thought, but Duluth to St Paul is more than two hours each way. That is not a management plan. You will need someone more local who is incentivized to be available to do showings and handle issues. Heirloom Properties has a good reputation with the people I know.
He would not be managing he just knows the area. I would factor in 6-10% for property management.
i have worked in property management for 3 years before and through the pandemic, and I have been seriously searching for property to invest in for about two years. I currently manage my wife's duplex, and we're hoping to reposition ourselves so we can buy a home to live in and still purchase investment property, but one that can pay for itself.
- 1yMichael SmytheBusiness MemberReal Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.
If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.
If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?
Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?
So, when investing in areas they don’t really know, investors should research the different property Class submarkets.
Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:
Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 yearsClass C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
The City of Detroit has 183 Neighborhoods we’ve analyzed.
DM us if you’d like to discuss this logical approach in greater detail!
Logical Property Management4.9464 Reviews - Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes1y
Quote from @Dave Allen:
Quote from @Zeke Liston:
Quote from @Dave Allen:
I'm in a bit of a situation
My wife and her parents are selling a duplex they own together.
My wife is trusting me to re invest into cash positive investments.
We could stand to take as much as a quarter million, and tax free since we lived in the property 2 of the last 5 years.
What are some suggestions for markets that would provide cashflow? I'm looking at Duluth MN because of a video posted on BP, but I recognize this is an opportunity most would dream of, because it's one I've often dreamed of
Well now it's in my lap, and the pressure is on.Hit me with your scenarios, what would you buy? Where?
Thanks for reading
David
$250,000 tax-free? Not bad. Why not run it back? House hack another property with a low down payment loan and use the remainder or the proceeds to either renovate or purchase another investment property?
I live in California, this is a bay area property.
were not looking to move out of state and house hacking is less palatable when a duplex costs 1.6 million. We have found some fixers farther away for as "little" as 600ks. But the rents don't justify it, for example we are renting a 3 bed 2 bath house with a huge backyard in rancho Cordova for 2350/mo, so duplex rents around here are 1800-2200 ballpark. So you can understand why I was blown away to see prices half that or less with rents 1500-1800 in Duluth. Have done some preliminary research and will do a deep dive, just wanted to see what folks thought of there were any obvious reasons why or why not or any markets similar that I should be considering. I have friends who bought in Texas, Chicago, Minnesota and Tennessee so I've been watching those markets.
For me TX is over-built. Not saying it's bad, it's just the way these kinds of things work. Consolidation needs to cycle, with all infrastructure maturing to fully meet new size and facilitate continued growth. Those chasing the last 5yrs experience are going to be rather sad at what the next 5yrs hold for them I think. Again, not saying it will be "bad" but certainly nothing like the last 5yrs.
I just completed a second boots-on market tour of TN markets. I have upgraded my opinion from neutral to heavily leaning bearish.
Look, lot's of great to be said of TN but end of day the numbers are the numbers. Median incomes are an insane gap from cost of household/properties. And my #1 issue is I don't see any actions to address this in a meaningful, market specific manner.
The TN focus is on adopting remote workers. I think TN forgot these people are coined "Digital Nomads" for a reason, there nomadic as in readily relocate. So infilling an income gap via people who can disappear just as easily as appear seems short sighted to me.
Chicago, look it's Chicago, there's good n bad with that. Not much really changing on that front, it is what it is. Plenty of opportunities to make $, loose $, stagnate and everywhere in between. I lean bearish because it's a consolidated market, not much of any room for any significant appreciating event. But hey, it's not gonna disappear over night either.
Minnesota..... I just read a new ranking of market ratings and I was not a fan seeing MN ranked 99.9 out of 100 potential score. Because I'm here, active in the market and I do NOT want every fool rushing in and ruining it for me and my clients.
So yeah.... That's my MN opinion; look away, just ignore us here and look away, lol.
Aside from my opinion, do the research, what do the #'s say. Look at median household incomes, look at market economy base and diversification, look at what's being done to protect and grow economic performance, just run the #'s and the message should be crystal clear.
- 1yScott ScovilleBusiness MemberReal Estate Agent · Sacramento, CA · Member since 2019 · 502 posts · 276 votes
Hey David, great question. I'm buying seller finance deals that cash flow $500-$1,000 per month in Sacramento, CA. While they typically have considerable deferred maintenance, we're getting great terms. And with price and rent appreciation in CA, we feel confident in the long term approach with these properties.
- 1yAaron ZimmermanBusiness MemberAccountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
It really depends upon your goals. If you're willing to be more active, purchase a property or two in an area you personally know well and have key contacts (handypeople, contractor, lender, etc.). If you're looking for more passive, you can invest passively in syndications.
Like others said, there's no specific area that you could invest but rather the area where you have a competitive advantage. The biggest thing to me is buying in quality areas that will increase in value over time.
Brick House CPAs53 Reviews - 1yScott ScovilleBusiness MemberReal Estate Agent · Sacramento, CA · Member since 2019 · 502 posts · 276 votes
Hey Dave, depends on your goals. If it were me, I would buy cash flowing, seller finance deals, keeping my debt to income low, low down payments and negotiate competitive terms. I'd also spend some money in direct marketing to get more sellers, and either wholesale those deals or buy them myself. I'm in Sacramento, so happy to chat anytime. Congrats and best of luck.
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