Sara, along with just the obvious of getting cash flow and ROI, you want to seek out a company that has a great track record and reputation.
Those are two markets that aren't going to see much appreciation. I'd say to stay away from homes in the sub 100k market. Capex will kill you on those deals. Replacing a roof on a 60k home hurts more than say a home at $120k because it may take longer to recoup any lost profits from rent.
I ran a basic cash flow scenario for my market taking into account conventional financing and what a $60k home would produce and a $120k home based on average statistics.
The $120k home going strictly by the numbers only brings in $10 more per month in total cash flow then the $60k home. I think if investors are buying homes in the $80k-$100k range they can still do well. Once you start getting into higher priced homes the ratio starts to get closer to 1% or even lower. The only saving grace is you hope you have great tenants who stay longer and have lower maintenance costs.
Hey Sara! Aliso...nice! I used to have a group of friends down there and I loved going down to visit. Such a great area! Especially the short hop to Laguna :)
I live up in LA and have always bought out-of-state properties, and I work with them a lot. If I were to buy a property in either of those markets today, I'd go KC all day long. The returns are higher, the growth potential of the market is higher, less saturation, it hasn't been eaten up by funds and private investors like Memphis has, etc. All around I like the stats better with KC.
I have no doubt that Memphis folks won't argue me on it, and rock on if they do, but for my personal investing I have never liked Memphis and I prefer KC.
I am in KC if you need a non biased 3rd party opinion. KC is great in some areas but I think some areas are sold unethically to out of stater's. Cavet Emptor always.
Well, I chime in for Memphis! I love it here and for me personally, I won't get a better return anywhere else in the country than Memphis, BUT I live here! I think what turn-key investors have to realize is that you will always get less of a return than a local investor because you are paying someone to do everything for you! So it just makes it super important that you do all your due diligence on your provider. There are a lot of people selling turn key investment products here in Memphis but only a handful of them who are honest, ethical and truly care about their clients earning good returns. So please make SURE you KNOW who you are doing business with, but Memphis is a great place to put your money to work!
How many homes in KC or Memphis did you say you own?
Each market has their own pros and cons. To say one overall is better then the other is a personal opinion and also based on specifics of who you purchase through.
Heck, if someone was looking for artificial high cash flow one could look at junkers under $50k with rents of $875+ in Ohio where all the companies are offering every guarantee under the moon !!! If that doesnt scare you I dont know what will.
I never been to KC nor have I invested there, I would contact some of the local investors, turnkey providers, and realtors so they can give you a good idea if that city is better than another city. while we all can debate who's city has better cash flow which city has more or less appreciation, I would look for the best team that you can trust in each area and interview them and see if there business model fits yours and vice versa.
@Sara Hodge whether it is Kansas City or Memphis I think what you are looking for is the best bang for your buck. Real estate investing, as you know, is about the numbers all of the time. Go with where you get the better deal in the best area. Personally I seek out "C" areas for my own rentals. Whatever you do keep in mind property management is the most critical component to an investor's long term success in rental property, especially when the investor is out of state. You can have the best cash flow, best deal, best ROI, but if you also have a bad manager your property will be ran into the ground.
@Curt Davis is right regardless where you invest the local team you have is essential to your long term success.
I've personally lived and invested in Kansas City for the past 12 years. I am sure Memphis has great areas for investors too.
Good luck in your endeavors!
@Sara Hodge Kansas City and Memphis are pretty comparable in terms of prices, rent and returns. Those things being equal, I prefer Kansas City because I believe it has stronger economic and demographics. I've done an analysis on several markets that I'd be happy to share with you.
I think the Cerner Corp project that is going on at the site of the old Bannister Mall will be a big boom for Kansas City. This is a $4.5B development and is the biggest commercial development in the history of the state of MO. It's expected to generate 16,000 new jobs which will have a huge impact on the east side of the city. I talk about that on my radio show with my partner in KC. You can hear a podcast of the show on my website.
The area at bannister is going to be hit or miss - only time will really tell, the main issue is that is a high crime area - I work there actually in my day job and its not a safe place. Maybe this investment will turn it around in 5+ years but it most likely wont be over night. The people that live in that area, will most likely not be Cerner associates working there - its generally lower income blue colar workes, so over time people would have to relocate to that area, homes would come back up to par, crime levels go down, prices go up to due to demand, etc... I do hope it does though - I recently passed on a cash deal there on a SF b/c of the crime rate.
Feel free to reach Sara via BP to me, my wife and I are active investors in KC and we live here and can give you some direction. We're working to build a turn key business, its not ready so we cant help in that area just yet - but I'm definitely here to at least give you some tips on areas and what we've found that works well.
I've heard several people talk about the "Cerner Effect" in the Bannister area. I'm curious if there are any stats that reflect the "Cerner Effect" on the Kansas side by the raceway. I haven't been able to find any evidence of property values spiking (or even increasing at a higher rate) since that Cerner campus was completed. Is there any reason the Bannister campus would be different than the raceway campus?
The two areas are very different. Cerner going into the Bannister area is more analogous to when they built the racetrack and legends shopping area up in the northwest. Cerner by the racetrack was a late addition to a huge amount of investment in the area. Cerner will be the first and possibly only major investment in the Bannister area for a very long time.
I do not know what the effect will be but the areas are quite different.
@Rob Scarborough I think the main thing to keep in mind that this isn't simply Cerner moving their headquarters to a new site. This project includes 2 11 story towers, a 150,000 sq ft distribution center and data center an early learning educational center and a 150 room boutigue hotel and restaurants. Cerner is already hiring 300 addition employees per month.
Great point @John Mattox ! I hadn't thought about the order in which Legends was built.
Wi that in mind, was there a bump in property values when Legends broke ground, or in the next few years after?
What are the property boundaries for the Cerner project? I know it says above on the east side of KC, but can you tell me specifically? TIA
It's where Bannister Rd and 435 meet
I'm very open in saying my opinions are exactly that....personal opinion. Hence why I said for my personal investments. Obviously you will be pro-Memphis...that is where your company is based. I have no ties to any particular market so can give a less biased 'personal opinion'.
I won't touch Ohio cities with a 10-ft pole, so we aren't too far off on that one at least!
@Rob Scarborough good question. I bet someone with MLS access could answer that for you with a simple search.
Here is an article describing how developing the Village West (Legends) shopping area impacted KCK: http://www.post-gazette.com/news/nation/2006/12/22....
I guess my point is that Cerner at the racetrack was additive and the hope and possibility, I'd say likelihood, is that in the long term Cerner at Bannister will be transformative for the area in the way Village West was for KCK.
Here is the planned development:
I would view most developments of this scale with a skeptical eye. Planning a 4.5 billion development is easier than making it happen. That said, Cerner is the real deal. I worked there before going to law school. They have the vision, drive and money to do it. As an example, in my group at Cerner we signed 1-2 new contracts every month. The last one we signed before I left was a $300 million deal.