Best, most profitable region for rentals?
Investor · San Diego, CA · Member since 2015 · 20 posts · 2 votes
Hi-
Living in San Diego, I've decided that I want to pursue a portfolio of rentals out of state. I'm mainly seeking supplemental cash flow so multi-unit properties seem the most obvious to me, but open to other suggestions. What are areas of the country that others have had success with and positive cash flow deals are easily attained? Given that I want to purchase several sub 100k properties in the same area, finding one "super" deal isn't as important as finding an area that offers many "good" deals.
I'd appreciate any recommendations, or if anyone has info on a portfolio for sale I'd be interested in information. Thanks.
Welcome to the forums, @Christopher Monsour
1. pick a couple of cities in the US, with a healthy economy and where you have connections
2. Start reviewing home prices. Any place where you can get 3BR, 2BA houses for under 150k usually is a good market to start building a rental portfolio
3. Compare rental rates in the interested cities. Any area where the monthly rental rate is above 1% of the sale price (i.e. 1500 per month for a 150k home), then most likely you'll cash flow positively
Cities that are doing well are, parts of Denver, CO, Kansas City, MO/KS, Dallas, Houston, San Antonio, TX Upstate NY, further parts of Seattle - Olympia etc, parts of Indiana, certain parts of Arizona.
Here's the thing about high rent-ratio states. You have a certain window to act on high rent-ratio states. Pretty soon every investor is on it and you lose the advantage.
You should consider Kansas City. The ROI here is great for holding or flipping property.
@Jon W. I didnt even think about writing off trips to visit family. Thanks for the suggestion. I will definitely keep you in mind when Im looking at stuff back in MI.
Jacksonville Florida is a great place to invest. I can not say why, but the numbers just work. Florida is a landlord friendly state. The market is coming back strong, we were hit hard by the crash. Florida is a legislative state which means it was slower than other states in getting the foreclosed inventory on the market. As a result we are seeing steady growth and the inventory is still coming online, keeping prices under control. Rents have been steadily going up as employment increases.
If you are interested in more info you can PM me.
Make sure to check out how "landlord friendly" a state is before investing there. Some states make evictions very difficult.
I second this statement!
If you are investing out of state make sure you understand the landlord-tenant laws first among other things.
Where there is more demand then supply--but where there is still inventory you can buy at a good price that leaves room for profit.
Hi Christopher,
MF in San Antonio may work for you. I've done a deep dive study of the market I can share w/you as I mostly focus on apartments but its relevant to MF in general. I'm seeing good, solid numbers working in duplex / fourplexes and more than happy to share w/you what I'm learning. PM me for more discussion. I have great prop managers in place that can also help w/long distance support and most of the situations I get involved w/in small MF would be turnkey...new builds in path to progress areas seeing very strong rental demand along the I-35 corridor between Austin / SA.
It's amazing to me how many people recommend places like Ohio and Michigan. Sure you can get good cashflow there but is that really where you want to be long term? Why not invest where you can get good cashflow AND have good population and job growth? Texas, Florida, Georgia, Tennessee and the Carolinas.
@Jeff KehlI completely agree with you but you cannot really take a macro statistic of a state as a whole and use it to determine investing at a micro level. Not all parts of Michigan have poor population and job growth just like not all parts of Florida are booming.
In addition,the data is old. Since oil's dropped so much and fracing is becoming more cost prohibitive, I'm sure you'll start seeing Texas and Utah drop off the purch they are on, if not this past year, this year.
On a like note, the reason the Midwest was always good was the relatively high paying manufacturing jobs. As mentioned in the long term view, if tpp is passed, that could reduce Midwest's desirability.
@Christopher Monsour To answer your question in total returns the top five SFR areas for returns in Cali since 2009 are SF, SJ, LA, SD and Riverside. Those are also the top five for the nation. Since 2000 that is LA, SF, and San Diego and also the top 3 for the nation. This may not fit your goals but that is the answer if one is asking for total returns.
Good luck with your search!
Chris,
I own SFRs in Las Vegas, Montgomery AL, and Gulfport MS (all purchased under $200K). I gladly pay my 10% each month to my property managers in those locations. I purchased the properties as owner-occupied when I was in the military and turned them into rentals when I left. The only one I have regrets on is in Gulfport. I bought before Katrina when insurance was manageable. After Katrina, I now pay for a huge state wind and hail policy every year even though I'm not in any of the hurricane evac areas. What helps is property tax is very low. If you consider any of the Gulf states you might want to find out what the wind storm rates are in the area and what insurance companies are still writing policies. Also, renting to military can be a good source of tenants; however, do not let the base/post/installation housing office talk you into waiving security deposits for military. They will not pay you for damages if that military person leaves your property in a mess...it's your risk, not theirs to cover!
Tom, interested in hearing about your experience in Montgomery.
Jennifer,
I have a house near AUM and East Chase Mall (4 Bed, 2 car garage) I've owned since 2004 when I was a student at Air Command and Staff College. The house is nice and in a great location. Aronov has managed my property since and I'm very happy with their service. I've rented to other military students but I did not like the turnover every summer and usually the house sat empty for one month every year. My current tenant is not a student and appears to be settling in for at least several years. Insurance has gone up the last few years but not as bad as on the coast. Property tax is very reasonable. My own approach to rentals is to buy and hold SFRs in stable, middle class neighborhoods. I look for long term tenants and am willing to minimize rate increases for good tenants. This may not be the most profitable approach but I'm willing to trade decreased stress levels for smaller profits.
I am from San Diego and realize you requested out of state REI locations but I want to pitch San Diego.
Positives:
Good luck where ever you decide to purchase.
I forgot one bullet. Even though San Diego has not successfully passed any significant anti-growth initiative the real estate is very constrained (limited supply):
- To the North Camp Pendleton constrains.
- To the South Mexico constrains.
- To the West the ocean constrains (poor us :=).
- To the East the harsh climate constrains (good luck living in Anza Borrego through a summer)
The supply will always be constrained. The climate will always be the finest in continental US. The beach/ocean, mountains, desert, arts, and sports will always make San Diego desirable. There is a reason so many pro athletes and wealthy people choose to make San Diego county their home.
The point being that even though real estate has risen ~500% since 1980 in San Diego there is little reason to think it will not continue to rise.
Make sure to check out how "landlord friendly" a state is before investing there. Some states make evictions very difficult.
Amen, Nate.
We have several clients from San Diego; they've had great success in Phoenix. Plus, you can get here quickly via a 45 min flight or half-day drive.
Find areas where there are military bases located nearby. Those areas offer many advantages such as:
***You'll find a High Demand / Low Supply ratio = higher rents and less vacancy time
***Military families are usually looking for multi-year leases (usually 2-3 years)
***By renting to military families you'll hit the win/win/win lottery for Landlords. Which is:
1. The military provides a housing allowance.....therefore you know you're going to get paid
2. Because of the housing allowance they receive...you're going to get paid on time.
3. And in most all cases, they're going to take care of the property. They can get in a lot of hot water at the military base should they fail to do so. The ideal is to rent to an officer. Then you know 100% that they will take care of the property = Landlord Peace of Mind
***And if you have any problems related to items 1,2, and 3........you can contact their CO (commanding officer) and usually get the problem fixed quickly.
thanks for this tip! does it matter what kind of base it is?
Regarding renting to the military, here in Beaufort we have 3 bases. The names of which are:
To answer your question, yes, as a Property Manager I am interested in knowing what type of base a prospective tenant is stationed at. Knowing that information leads me down the path of understanding who/what I'm dealing with. Meaning am I dealing with a Marine Corps Drill Instructor, a Marine Corps Dentist or a Marine Corps Pilot (those are just 3 examples.....they are many different job types). Because the dynamics of those three are entirely different. IMO, more important than type of base is what is their rank and are they an officer. The higher the rank the more money they receive in housing allowance. The higher the rank ---- especially if they're an officer ---- the more apt they are to take care of the property. Going back to your question about type of base, etc., some thoughts on my experiences are:
the best state and area for turnkey rental investing in northeastern Pennsylvania. My Home region near Scranton.
15 to 23% cap rate after maintenance vacancy and management.
Very easy-going magistrates an eviction process is. We have everyone out within about 30 to 45 days. Sometimes as little as 10.
30000 / unit price point that's for finish ready to rent operational and beautiful units,
rents in the 6-700 range and
very low taxes.
And as a local, I am always open to joint ventures
@David Thompson, I'd also be interested in hearing about your experiences with turnkey on multi-unit dwellings as that is a strategy I'm currently leaning towards. Ok to PM you?
Hi-
Living in San Diego, I've decided that I want to pursue a portfolio of rentals out of state. I'm mainly seeking supplemental cash flow so multi-unit properties seem the most obvious to me, but open to other suggestions. What are areas of the country that others have had success with and positive cash flow deals are easily attained? Given that I want to purchase several sub 100k properties in the same area, finding one "super" deal isn't as important as finding an area that offers many "good" deals.
I'd appreciate any recommendations, or if anyone has info on a portfolio for sale I'd be interested in information. Thanks.
Christopher, Cleveland offers this exact solution you are seeking, coupled with an experienced team, you will find ultimate and simple success. I recommend checking into this market.
#TeamTurnkey
Orlando has really good rental income properties around the disney area. Miami is known for the highest return on your investment with short term rentals via airbnb. Let me know if you're interested in exploring any of those areas, I'd Love to help! Enjoy the cali weather! I use to live in carlsbad and miss it dearly!
Make sure to check out how "landlord friendly" a state is before investing there. Some states make evictions very difficult.
Amen, Nate.
We have several clients from San Diego; they've had great success in Phoenix. Plus, you can get here quickly via a 45 min flight or half-day drive.
Regarding renting to the military, here in Beaufort we have 3 bases. The names of which are:
To answer your question, yes, as a Property Manager I am interested in knowing what type of base a prospective tenant is stationed at. Knowing that information leads me down the path of understanding who/what I'm dealing with. Meaning am I dealing with a Marine Corps Drill Instructor, a Marine Corps Dentist or a Marine Corps Pilot (those are just 3 examples.....they are many different job types). Because the dynamics of those three are entirely different. IMO, more important than type of base is what is their rank and are they an officer. The higher the rank the more money they receive in housing allowance. The higher the rank ---- especially if they're an officer ---- the more apt they are to take care of the property. Going back to your question about type of base, etc., some thoughts on my experiences are:
Thank you for the detailed explanation!
Look into Warner Robins, Georgia. Cheap properties with a very high demand for rentals!