What states/areas to invest in now?

Buying & Selling Real Estate
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What states/areas to invest in now?

Allison R.
Lincoln, NE · Member since 2014 · 24 posts · 11 votes
Hi everyone! My husband and I would like to buy our first investment property (buy and hold) this year but would like to know about other markets than the one we are currently in! We live in Los Angeles, and prices are high right now. We would like to invest out of state, but I don't know much about other markets. We have thought about Phoenix area, TX, St. Louis or Lincoln/Omaha, NE - only because we have friends/family in these areas, visit the areas often, and are familiar with them. But again, I'm not sure how those markets are! I know now here in LA, it's more of a sellers market, and honestly, I'm not sure we have the funds for an investment in LA. I'm open to investing in CA outside of LA too if we find the right thing. What are the great cities to buy in this year? Anyone familiar with the markets in the cities I listed above? Thanks in advance for any advise! MODERATOR: DO NOT USE THIS THREAD TO ADVERTISE. ADS WILL BE REMOVED WITHOUT NOTICE. THAT INCLUDES "CONTACT ME IF YOU WANT MORE INFO."
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Mike McKinzie
Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes
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With the exception of @Ali Boone , everyone is touting their HOME market.  I wonder how many posters on here, other than Ali Boone and Jay Heinrichs actually own property in another area?  I live in Orange County, California, I was born here.  And I own a total of one rental in Orange County.  But I have rentals in the Fresno, CA area, AZ, OK, CO, TX and TN.  The highest return on my investment is TN but I bought there in 2012.  Hedge Funds and other institutional investors have been buying heaving in Memphis, just like they did in Phoenix.  So good deals are hard to find there.  The next best return I have is in Oklahoma.  I do not expect appreciation, I buy newer homes, less than 10 years old, and get 1% plus in rent.  Texas has been good as far as being steady, but no appreciation and high property tax bite into your return.  I don't know much about other markets as I DO NOT OWN THERE.  So for all the posters on here touting your own market, how much do you know about other markets?  We enjoy reading about the returns in YOUR market, but to be fair, you need to know how they compare to other markets.  It can be great to buy a house for $40,000 and get $800 rent, but if the house needs $25,000 in refurbishing and is in a war zone, you might be better off paying $100,000 for a newer house that rents for $1,100 a month and is in a middle class neighborhood and a great school zone.

The best advice I can give is to read, read, and read some more.  Read Business Magazines, read Business Newspapers, follow trends of where businesses are moving, population growth, demographics in general are you FRIEND.

This question is asked about three times a day on BP, it seems.  And most of the same answers follow, posters marketing their home territories.  Do your own research.  Visit areas that appear to have potential.  Have a solid set of guidelines for what you want in the way of return, potential appreciation, price range, rent range, pride of ownership, and much more.

Remember, the lower you go in price and rent, the closer you come to crossing that 50% guideline threshold.  My average rent is $1,000.00 a unit and I average 40-45% expense ratio, 43% in 2014.  A water heater cost the same, whether the unit rents for $750 or $1,500.  But the percentages change a LOT!

Best of luck to you, and everyone, in 2015!

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  • Sean Hurwitz
    Investor · Van Nuys, CA · Member since 2014 · 151 posts · 38 votes
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    @Allison R. Great question.
    Can't wait to see what people say. Newbie here as well.
    Good luck on the hunt and have a great weekend!

    2Reply
  • Joshua Houchins
    Real Estate Investor · Raleigh, NC · Member since 2011 · 142 posts · 39 votes
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    @Allison R. Raleigh and Charlotte nc are stable markets.  Not sure if coast to coast rentals is a great idea but the market here is never bad ever. Just a consideration good luck

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
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    I have always thought the best state to invest in is YOUR state. I know CA is expensive but I have heard there are some low priced areas in LA.  I grew up in the DC area which is very expensive, yet baltimore is only an hour away and is very reasonably priced.  My guess is there is an affordable area withing 1-1 1/2 hours of where you live. 

    7Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
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    @Allison R. Michigan.  Many publications, including articles here on BP, have stated the same thing.  Specifically Wayne County...which is where I live...and invest.

    This isn't a secret anymore either.  I have a number of out of state investors I work with that see the same thing.

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
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    Originally posted by @Sean Hurwitz:

    @Allison R. Great question.
    Can't wait to see what people say. Newbie here as well.
    Good luck on the hunt and have a great weekend!

    I was at an open house yesterday in Van Nuys. There was 100k equity to gain at the 350k price. I made an offer for full price....as did several others:) There is a goldmine in our backyards. Not specualting either as it has been producing gold for 50 years now. There were also two high end rehabs going on same street a few houses away.

    3Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 587 votes
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    You can find homes in the St Louis and Kansas city markets that are not in war zones and get 2% rents compared to purchase price. Mortgage rates just dropped so now is a good time to start if you have to finance a purchase.

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  • Tom MolePro Member
    Investor · Sunland, CA · Member since 2013 · 260 posts · 240 votes
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    @Allison R., what constitutes a good deal for your business depends a great deal on your investment goals. How much effort are you willing to put into this? What sort of return on your investment do you expect? In fact the biggest question is, "What is your Why?" By that I mean, why do you want to invest in a buy and hold?

    Long distant landlording is not for the meek. Investing for cashflow in LA is challenging as well. Have you considered areas just outside of Los Angeles, such as Bakersfield, Victorville, Murrietta, etc. You could still reach them by car in reasonable time, yet there is a higher degree of more cost effective housing in locations like these.

    Do you or your husband feel comfortable evaluating potential deals? Are you willing to deal with the 3 T's (Tenants, termites and toilets)? If this is something you're not really interested in getting good at and your ROI requirements are modest, you may want to consider an REIT (Real Estate Investment Trust) or syndication.

    Bottom line: I'm sure you had a simpler answer in mind, but it's just not that simple. Giving you a responsible answer requires a little more info. I'd hate to give you half-cocked advice just to have you follow it into bankruptcy.

    Please don't be discouraged. We're here to help you get successful. Just keep dialing in your investment target before you risk your nest egg on the first shiny thing that come along. (Ask me how I know about that.) We'll get you there in no time. Keep asking and never stop learning.

    All the best.

    10Reply
  • Sean Hurwitz
    Investor · Van Nuys, CA · Member since 2014 · 151 posts · 38 votes
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    Originally posted by @Matt R.:
    Originally posted by @Sean Hurwitz:

    @Allison R. Great question.
    Can't wait to see what people say. Newbie here as well.
    Good luck on the hunt and have a great weekend!

    I was at an open house yesterday in Van Nuys. There was 100k equity to gain at the 350k price. I made an offer for full price....as did several others:) There is a goldmine in our backyards. Not specualting either as it has been producing gold for 50 years now. There were also two high end rehabs going on same street a few houses away.

     Hi end rehabs in Van Nuys...where?

    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
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    Originally posted by @Sean Hurwitz:
    Originally posted by @Matt R.:
    Originally posted by @Sean Hurwitz:

    @Allison R. Great question.
    Can't wait to see what people say. Newbie here as well.
    Good luck on the hunt and have a great weekend!

    I was at an open house yesterday in Van Nuys. There was 100k equity to gain at the 350k price. I made an offer for full price....as did several others:) There is a goldmine in our backyards. Not specualting either as it has been producing gold for 50 years now. There were also two high end rehabs going on same street a few houses away.

     Hi end rehabs in Van Nuys...where?

     Stansbury and Gault. A couple were already done on that street too. Highest end roofs, new roof lines etc. I did not see the inside so some speculation on exact finishes. I don't think they were cheap based on quality of roofs.

    0Reply
  • Sean Hurwitz
    Investor · Van Nuys, CA · Member since 2014 · 151 posts · 38 votes
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    Originally posted by @Matt R.:

     Stansbury and Gault. A couple were already done on that street too. Highest end roofs, new roof lines etc. I did not see the inside so some speculation on exact finishes. I don't think they were cheap based on quality of roofs.

    Good to know!

    Thanks Matt.

    0Reply
  • Francis A.
    Los Angeles, CA · Member since 2014 · 352 posts · 142 votes
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    Long beach is not a bad place to cash flow if you have the right sleuth to guide you ( duplex, tri, 4 plex).  I've met the RE agents who run this RE Licensing program. They're Long Beach (and more) knowledge base is amazing. 

    http://www.alwaysgonationwide.com/about/

    You can also cash flow in Los Angeles (albeit in smaller %ages) if you're willing to look at these zip codes and especially so IF you owner occupy for 1 year and then move and rent out your now formerly occupied unit. And then you hit the "repeat" button. I am drinking my own prescribed "medicine" btw. :-)

    90011, 90205, 90280, 90018, 90201 etc

    http://www.zipmap.net/California/Los_Angeles_Count...

    Keep in mind what's happening downtown is starting to spiral outwards. When I first moved to LA, downtown was a ghost town at night. Now I go downtown and revel at all the sights. Ah-mazing what's going on there.

    And then good old University of SoCal has made the waves even higher and is due to complete this massive $650 million project by 2017. USC is adding at least 3k - 4k permanent jobs to the area meaning, folks are going to be looking for units to rent. The 2500 student housing units they are also adding as part of this mixed use project will not alleviate the need for housing in this 5 mile radius plus.

    http://www.latimes.com/local/education/la-me-usc-v...

    http://la.curbed.com/places/the-village-at-usc

    Plant your flag within a 1 - 5 mile radius (preferably a triplex or 4 plex), force your rents up (paint, etc) and wait because by then you can "afford to".  It won't hurt to offer "partially furnished" units (fridge, microwave, stove and maybe a bed - there are a ton of places to find fairly nice furniture without breaking the bank). All that is worth it ($) after you screen heavily and get the right tenants in. 

    Food for thought!

    5Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
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    @Allison R. 

    The last thing you want to do is buy somewhere because you have friends or family there unless those markets happen to have strong economic and demographic fundamentals. I'm in CA too so I know you can't get anything to cash flow here. I like both Indianapolis and Kansas City a lot. Both have good economies and good rent to price ratio's. I wrote a paper on investing out of state. I'll be happy to share it with you if you'd like. Feel free to reach out with any questions.

    1Reply
  • Rusty Scott
    Real Estate Broker & Investor · Indianapolis, IN · Member since 2012 · 218 posts · 83 votes
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    I'm in Indy and can continually find great rentals at true 1.5x ratios. In nice solid neighborhoods, no war zones. 

    You MUST know what you are doing here though...

    1Reply
  • Audrey Truesdale
    Wholesaler · Charlotte, NC · Member since 2013 · 269 posts · 66 votes
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    Mike D'Arrigo could you share a copy of that book with me as well.....
    0Reply
  • Lance A WhitePro Member
    Flipper/Rehabber · Lincoln, NE · Member since 2014 · 171 posts · 54 votes
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    Allison,

    I have had a lot of California investors contact me. Most of them are looking for a less volatile market to balance their portfolio. We do deals in the Lincoln/Omaha/Council Bluffs IA area. Council Bluffs is right across the river from Omaha.

    Each city has a unique market and they are all different right now. Lincoln has a shortage of houses, so our strategy here is generating our own leads for flips. Omaha has a substantial inventory so we use the MLS and FSBO market. Council Bluffs right now is great for renovate and rent, as the property values are low and rents are similar to Omaha and Lincoln.

    Average SFR's are in the $130K range with 15-1700 sq ft. We provide our investors with a minimum 10% cap rate, with management and tenant in place.

    0Reply
  • Peter MacKercherBusiness Member
    Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
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    I Have several client that live in CoCal area. That I have been able to help them buy MFH and SFH with 12-18% COC rate of returns. That are in nice neighborhoods not in war zones. Let me Know if you would like more information.

    I love investing in St Louis. Of course I'm biased because i live here. But i'm able to find lots of property that fits my needs as well as my clients. 

    [email protected]
    1Reply
  • Dan Perrott
    Rental Property Investor · Indianapolis, IN · Member since 2014 · 354 posts · 167 votes
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    @Allison R. 

    Indianapolis.  I agree with Rusty @Rusty Scott  in that there are properties to be found with at least 1.5 - most I find push 2.0.  Closing this week on a 1.8 property.

    0Reply
  • Billy Guyette
    Property Manager · Montgomery, AL · Member since 2014 · 28 posts · 5 votes
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    Alabama! best cash flow in the Union!

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
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    @Allison R. SE Michigan.  NON War Zone, before anyone asks, or assumes, can look like this all the time:

    City #1:

    $72k+ ARV
    $50k-        All cost
    $54k          75% ARV (so potential for a Cash Out Refi is very real)
                    (Potential Cash Out $4000)
    $50k         70% ARV (so even the conservative Refit source can give you cash back in 2                        months)

    925/month      Rent
    250/m             T/I
     95/m             PM
    265/month      Debt Payment (50k loan)
    315/month.....with a PM, and NO CASH LEFT in the deal.

    ....or...

    City #2:

    $176k+ ARV
    $100k-           All cost
    $132k            75%  ARV (so potential for a Cash Out Refi is very real)
                         (Potential Cash Out $32,000)

    $123k 70% ARV (so even the conservative Refit source can give you cash back in 2
                        months)...(Potential Cash Out $23,000)

    1650/month     Rent
    350/m              T/I
    145/m              PM
    660/month       Debt Payment (123k loan)
    495/month.....with a PM, and NO CASH LEFT in the deal and,...(Potential Cash Out
                              $23,000)

    City #3:

    $192k+ ARV
    $110k-       All cost
    $144k        75% ARV (so potential for a Cash Out Refi is very real)
                      (Potential Cash Out $34,000)

    $134k 70% ARV (so even the conservative Refit source can give you cash back in 2
                      months)...(Potential Cash Out $24,000)

    1850/month             Rent
    385/m                      T/I
    185/m                      PM
    720/month              Debt Payment (134k loan)
    560/month.....with a PM, and NO CASH LEFT in the deal and,...(Potential Cash Out                                           $24,000)

    2Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
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    Originally posted by @Allison R.:

    Hi everyone! My husband and I would like to buy our first investment property (buy and hold) this year but would like to know about other markets than the one we are currently in!

    We live in Los Angeles, and prices are high right now. We would like to invest out of state, but I don't know much about other markets. We have thought about Phoenix area, TX, St. Louis or Lincoln/Omaha, NE - only because we have friends/family in these areas, visit the areas often, and are familiar with them. But again, I'm not sure how those markets are! I know now here in LA, it's more of a sellers market, and honestly, I'm not sure we have the funds for an investment in LA. I'm open to investing in CA outside of LA too if we find the right thing.

    What are the great cities to buy in this year? Anyone familiar with the markets in the cities I listed above? Thanks in advance for any advise!

    Hi Allison,

    Ohio and Michigan are my picks.

    No activity from institutional buyers and mum and dad investors are still on the sidelines.

    Media is pumping "high" unemployment and "declining" population which in return is making everyone fearful.

    On the other hand, we live and breathe the Ohio market and feel like kids in a candy store.

    Many awesome deals for the taking. Some at 20-30 cents on the dollar.

    I hope it stays this way for at least another 2-3 years,

    Thanks and have a great day.

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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
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    Originally posted by @Engelo Rumora:
    Originally posted by @Allison R.:

    Hi everyone! My husband and I would like to buy our first investment property (buy 

    "   On the other hand, we live and breathe the Ohio market and feel like kids in a candy store...."

    We feel the exact same way here in Michigan.

    2Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
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    Hey Allison! Oooh North Hollywood, I love it there. I'm down in Venice. 

    I've always bought out-of-state and the best markets are always changing, for sure. St. Louis and those, midwest cities, are usually fairly stable and can do well for cash flow. Lincoln specifically, not sure because of how desirable the college is, so would have to check that one. The thing I've never liked about the midwestern cities for investing though is they are very stable markets, which is great for not having to worry about depreciation, but at the same time there's not a big hope for major appreciation there either. The growth in the midwestern cities, or lack thereof, is what keeps me away from there. Although I'd invest there any day over declining markets like Detroit and Cleveland and such. 

    Phoenix is another animal... it honestly tapped out about 3 years ago. You'll have a really hard time finding cash flow there now too. There's occasionally a diamond in the ruff there, but investors flocked there so hard a few years ago, all the cash flow basically got eaten up.

    If I were to buy today, I'd buy in Philly, Birmingham, or Chicago. Houston and Dallas are still good, but lowest on the cash flow and low on inventory to an extent (Dallas especially). You can still get deals in Memphis or Atlanta but I'm not a fan of either of those for buying right now (and I own in Atlanta). Indy is another option too.

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Allison R.   check out the northwest.. I think that is were Brandon Turner owns his cash flow rentals.  among others.. Portland market offers cash flow and appreciation not as big of swings as CA.. but  very solid play with minimum rental hassle.

    Bend Oregon  Spokane  Boise   check those out as well.

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  • J Benoit
    Residential Real Estate Agent, Investor and Mentor · Birmingham, AL · Member since 2013 · 257 posts · 61 votes
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    Birmingham is a great place to invest.  Please let me know if you would like some guidance or want to look at some deals. We have turn key properties in C and B areas.

    1Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 824 posts · 470 votes
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    Hey @Ali Boone what aren't you liking about Memphis and Atlanta anymore? And I totally agree about appreciation in the midwest - if you buy there, it is a very long-term buy and hold play.

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