Local or out of state

18 Replies

I am a newbie and trying to find a market to invest has been very difficult. I believe there may be some general rules such as growing population, job growth, population more than 100,000, crime rates. But, I see other investors who invest in markets where the above factors are not present and they seem to be doing well. What parameters do some of you out there use to find a city/town to invest in locally?

Also, I live in CT so it is very difficult to invest locally when the state is currently "failing". I thought about Boston, MA but the prices are well above my price point of $50-100K or so. 

Out of state investing leads to me either turnkey or buying a property, finding someone to rehab and manage it for me. I have a 9-5 job which keeps me busy during the day. Turnkey doesn't seem to be too great of an option because of the above market sales pice. Going out of state to find a relator, getting rehab done of of state seems like it may be tough since I will have to fly often to check on progress and I won't be able to obtain that much time off from my job.

I am hoping someone out there with much more experience would be able to guide me, especially since I am new to this and still have a lot to learn. Thanks

Hi @Vika Bha , I am also located in Windsor CT (for a few more weeks, when I'll be relocating to Windsor Locks). I currently invest in the area, and serve as a property manager for out of state investors in and around Windsor, Hartford, etc.. I think there are still properties that cash flow pretty well around here. I don't typically recommend that newbies get their first property more than 30 minutes away, but that's just me.

I strive to hit the 2% rule, but will admit that is hard to come by, so I find properties that cash flow well currently, and have the ability to become "2%ers" within 18 months of acquisition. 

Shoot me a message if you would like to sit down some time. I'd be happy to help any way that I can! 

Filipe

Welcome to the site @Vika Bha

One thing to note you when you target decent properties to have managed for you you do not need to target complete disasters that would require several month long renovations.

There are many homes that are in decent condition and would benefit greatly from minor cosmetic rehabs. Those types of properties make great rentals IMO.

@ James Wise

Thanks for that tip, it's definitely something I will consider. I am having a hard time finding decent properties (properties that aren't completely distressed) that would still meet the 1% rule. For instance, I considered Philadelphia since it is drivable distance for me but the neighborhoods in Philly (I am looking for neighborhoods without high crime) where I am looking are about $200K+ but the rent doesn't meet 1%. Since I am interested in long term buy and hold, I feel in 20 years or so, there will inevitably be cap expenditures and if I don't obtain a property that meets 1%, I may not be able to pay all the expenses in the future. Also, some other neighborhoods I thought were safe and decent, the property management companies I would like to manage will not manage in those areas. Thanks for all of the response and @Felipe, I'll reach out to discuss

@Vika Bha

I would continue to look into both local and turnkey deals.  You should never pay ABOVE market price on any deal, but don't assume that all turnkeys are price above market value.  If you find the right TK provider in the right market, you can find some deals that are at market value OR slightly below.

Originally posted by @Kyle M.:

@Vika Bha

I would continue to look into both local and turnkey deals.  You should never pay ABOVE market price on any deal, but don't assume that all turnkeys are price above market value.  If you find the right TK provider in the right market, you can find some deals that are at market value OR slightly below.

 What is market price? Is that the price that you would find on the county website or price based on recently  sold similar property in the area ?

Originally posted by @Kyle M.:

@Lana Lee

The price based on sold comps, within the last 6-12 months.

The price listed on the county website, many times, is not accurate.

 Thank you, Kyle. Also would like to ask you what is the definition of " up and coming" neighborhoods ?  A lotoof investors are looking to invest in those, but i have no idea what that is?

@Account Closed

It basically means a neighborhood that people are speculating will increase in value in the next few years.  So, it might not be very nice NOW, but people think it's going to be nice in the future.

Usually these neighborhoods are found in a city, or nearby to a large city.

@Vika Bha I am one of those investors that break the standard rules..  We invest in multi family in small rural markets.  The margins are ridiculously fantastic, however, you have to be careful and really know what your doing before you jump into a non conventional market.  There are a lot of potential downsides that can permanatly damage new investors.  I would try to stick as close to home as possible for your first few properties.  Then when you have some experience you can explore other possiblilities.  

@Vika Bha , I have no hesitation about investing in CT. Yes, the state is having a issues (budget, shrinking population), but at the end of the day I think there are still fundamental advantages that the state enjoys. I won't bore you with the details here.

Check out Danbury, Waterbury, and parts of Bridgeport. As long as you stay out of the rough neighborhoods, you can find some good deals. You may not get great appreciation (at least not in the beginning), but you can definitely CF pretty well.

Have you considered student rentals around UConn?

@Brian Simmons A family friend of mine has 19 properties in a very small Texas town and she does well. I was curious to know some other techniques investors use that are out of the norm such as yourself and my family friend. Good to see investing in smaller markets works in certain instances.

@Jaysen Medhurst thanks for the suggestions. I'll look into them. 

hi, i am a new investor as well and investing in new haven area currently. I am also studying Hartford and i do see some opportunities of cash flowing properties around Hartford. I agree with you CT is failing state but there are opportunities around college towns(not necessarily student rental). I also see some properties in meriden, naugatuck, Waterbury area but i am scared of going there because those are old industrial towns with nothing let anymore. 

Good luck. I am sure you can find some deals around you. 

@Vika Bha
You need to decide whether you want to self manage locally to achieve 1percent yield or go out of state and have your rentals professionally managed and still get decent cash flow
@jay hinrichs has turnkey review website where you can check providers
@chris clothier has a great blog about turnkey advantages and runs memphis invest with his family
There is lot of information in this forum so please do your due diligence
Also If your family friend has portfolio of rentals in small community, why not do the follow her lead in the same community

Originally posted by @Vika Bha :

I am a newbie and trying to find a market to invest has been very difficult. I believe there may be some general rules such as growing population, job growth, population more than 100,000, crime rates. But, I see other investors who invest in markets where the above factors are not present and they seem to be doing well. What parameters do some of you out there use to find a city/town to invest in locally?

Also, I live in CT so it is very difficult to invest locally when the state is currently "failing". I thought about Boston, MA but the prices are well above my price point of $50-100K or so. 

Out of state investing leads to me either turnkey or buying a property, finding someone to rehab and manage it for me. I have a 9-5 job which keeps me busy during the day. Turnkey doesn't seem to be too great of an option because of the above market sales pice. Going out of state to find a relator, getting rehab done of of state seems like it may be tough since I will have to fly often to check on progress and I won't be able to obtain that much time off from my job.

I am hoping someone out there with much more experience would be able to guide me, especially since I am new to this and still have a lot to learn. Thanks

When you work a 9-5 investing in a true Turnkey might be a good way to go. Ideally, the provider you go with will own, renovate and manage the property all in house. Even if you try to go it alone, you might end up becoming a full time landlord. Without being in the same area as the property, it might be difficult to answer the late night maintenance calls. 

If you do go with a Turnkey, try reading the following:

The Best Types of Markets for Profitable Turnkey Properties

and

What to Ask When Working With a Turnkey Provider

@Vika Bha I started turnkey OOS REI some 5 years ago, and it can certainly work well for someone who lives in a market where the prices are too high to make for good cash flow, as it has me. There are other avenues for OOS investing that are even more passive than direct buy and hold, as I have written about in my BP article

Three Key Routes for Passive Real Estate Investing

@Tom Ott read the articles, thanks for the advice. 

@Larry Fried , I did look into crowdfunding websites, downside is the lack of tax benefits. You invested in turnkeys for 5 years, has it overall been working well? Is there anything in particular you definitely look for? stay away from?

@AJ Singh I absolutely would not be able to self manage due to my day job. My family friend has all her investments locally in Texas, I live in CT so I wouldn't be able to invest where she invests. I'll look into the sites

Originally posted by :

@Larry Fried, I did look into crowdfunding websites, downside is the lack of tax benefits. You invested in turnkeys for 5 years, has it overall been working well? Is there anything in particular you definitely look for? stay away from?

Vika, tax benefits are available to some crowdfunding/syndications.  For example the equity portfolios I've invested in all receive the depreciation allowance - although not relevant when investing with retirement funds.

Yes the turnkey properties I actually bought have all worked out very nicely thus far, however there were a couple of properties along the way that I pulled out of before closing due to some red flags.  I should say, I don't currently buy individually owned turnkey homes, but work with other investors who do.