I'm hearing a lot of people mention that they're only interested in buying in Class A or Class B locations. I think I understand why, I'm just not sure how it's possible to find a good deal in a better than average area. Wouldn't the price reflect the area the property is in?
I'm looking for MFRs in a fairly competitive market (Nashville, TN) and am running into wall after wall, trying to make a smart buying decision. Properties in the "right" areas are grossly overpriced, many of which still require a good amount of work. The ones I can afford (going FHA, owner-occupant) aren't getting the rents I'd like; not to mention the areas are less desirable.
Any advice on how to acquire a good deal in an overpriced market? Am I being too picky with the areas I'm looking for?
Thanks a million.
@Mark Douglas you're just not looking at enough property and making enough offers. I just got one in an "A" class neighborhood. It's a fantastic deal. You just need to do more to find motivated sellers. Send out more mail. Talk to more wholesalers and realtors. Do online advertising. Go door knocking. Just because it's an A class neighborhood doesn't mean there isn't a ugly property on the street. What you should do is make an offer per day.
An offer per day, never thought about that. Sounds like I need to be more assertive. That would definitely get some momentum going! Thanks.
With some exceptions you buy in better neighborhoods for appreciation. You buy in lower quality neighborhoods for cash flow. Sometimes you can uncover that amazing gem, but usually not. Likewise, you can find that B/C neighborhood that is just about to pop and reap the benefits when it does. Neighborhoods are all qualitative (excepts school district lines) and so considerable on the ground knowledge is needed to understand the dynamics.
Basically, the nicer the neighborhood, the lower the cash flow but the better chance your tenants are good.
Nashville is a hot market. Doesn't mean there aren't good deals, just means you have to look harder than you would normally. What Devin said is spot on.
I'm in Nashville too and I'm seeing aggressive cap rate compression here. The problem with the "Hot" parts of Nashville (East nashville, Sylvan Park, Nations...) is that you're competing with in fill developers who are willing to overpay for the land to build 2 homes instead of one. Owners know this and are pricing for dirt value rather than traditional cash flow value.
I've had to expand my search to "C" class neighborhoods and bordering counties (Rutherford, Sumner, Maury...)
Leo, I'm in the same boat with you. I'm mostly doing Rutherford county now.
I'm a newer investor and so I was looking to start in a more affordable area.
Mboro and Smyrna provide quite a few good opportunities especially for investors with limited budgets.
I'm hoping my next investment is somewhere in the Bellevue area, possibly Antioch. I've heard Antioch is a hit or miss area. There are some great neighborhoods and some very questionable ones. Does anyone have any insight?
@luke Murf and Smyrna aren't bad at all. I guess me, since I'm going owner occ, and work in Nashville I'm looking for an easier commute if at all possible. But prices drop considerably out that way.