I live in ny and I’m refinancing my house in order to continue investing. I’m thinking to invest out of nyc cause is too expensive. I’m going to receive 100g should I buy in cash or finance my next purchase? And any recommendations of location too. I’m 27 years old with a good job with no kids so I don’t have no fear of going out of the state to obtain cash flow. Also How Can I manage a property out of the state?
I would personally leverage (finance) my properties. Buy 3 single families or 2 Multi-families, use $30K-$40K to cover down payment and closing cost for each house. I would personally avoid New Jersey because of the high property taxes. Pennsylvania, Ohio and Indiana would be my go to states for investing. Pennsylvania would give you best of both worlds where you can either actively or passively manage the property because its still close enough to NY where you can drive there to check on your property. Ohio and Indiana means you automatically have to get a property management team to be taking care of the property for you.
Take a breath.
Welcome to BP by the way.
Dig a bit on the site here. find the tips to help you study your market. Ask detailed questions and more specific opinions can be expressed. Find out who is making it work out near you, and how. Its about who you know right?
with your question I would say check out the blogs and education tabs here on BP. 2 nights reading or some podcasts will give you so many more ideas.
Don't forget to look around you first. But I have to say I like your energy.
you got this
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Leverage. Paying cash reduces your return to a point of not being of much real value.
I will play devils advocate. Buying with all cash has some very tangible benefits.
The argument that buying without leverage creates returns that arent worth pursuing is neglecting a VERY important factor with any form of investing. RISK! Buying with all cash eliminates virtually all cashflow risk. If you dont have a mortgage you need to ensure you can pay the taxes and that should be VERY easy to do without the weight of a mortgage weighing down the property. Cash will build up very quickly and you can buy another one with all cash in a year or two. With virtually no cashflow risk your only other risks are liability for negligence, fire, tornado, etc. All of which can be mitigated with insurance. The argument that investing with all cash creates a return that is so poor or substandard ignores the risk in the equation.
Ask yourself this question, if I could invest in the stock market and earn 12% per year with risk of principal lose OR invest in the stock market for 8% with 100% guarantee that I wont lose my principal which would I chose?
The answer will be different for everyone and it is a personal answer. But ignoring risk in any investment is a recipe for disaster. Quantify the risk levels for varying strategies and determine your level of risk tolerance.
Furthermore, investing with all cash allows you to move more quickly on deals which could allow you to get better deals to begin with. Its not a cut and dry answer. Determining the pros and cons of each strategy and coupling those strategies with your individual tolerances and skill set will determine your success more than anything. Good question, but nobody can provide you with your answer. Keep seeking information and keep tweaking the strategy to find your sweet spot.
Best of luck! Real Estate is a great investment tool!
You can easily manage the property via a property manager. I live in LA and my closest properties are in Atlanta. I have a property manager on them and then the only thing I have to keep an eye on is the manager.
Cash or financing, I'm personally a fan of financing. Here's why:
Locations...close to you are Baltimore and Philly, both with good cash flow. I know some amazing deal opportunities there that would actually max out your returns on $100k, still by buying rental properties but also being able to force appreciation. That way you can rinse and repeat more times than you otherwise would.
Otherwise, there are some midwestern cities that are decent- Indy, Kansas City, Chicago, etc.
Happy to chat anytime if you want to reach out!
@Francis Jimenez First I would research some cities that you may be interested in investing in. I am one of the fortunate ones who has a great back yard, but most of my clients are from California, Israel, New York, and Colorado. People all over the world are investing across the midwest in various markets. The things to understand are more than just ROI. Get an idea of landlord-tenant laws, property taxes, job markets, fiscal stability, growth, crime, schools, etc. Many of my CA investors will tell you that they not only invest out of state because the rental market in CA is expensive, it also has very tenant friendly laws that make things very difficult when your investment runs into an issue. The most common markets that many of my clients are in are:
Those are the more common ones that I see.
After identifying your market, search Zillow for rental properties in the area. Compile a list of property managers who are listing. Rate their pictures, descriptions, days on the market, etc. Visit those PM's websites, social media accounts, BBB listings, etc. How is their website? How are their reviews?
Call the more favorable PM's and interview them. After getting their "pitch" ask them questions about what their other clients are doing. Ask them for client referrals. Find out if they are networked with Realtors or other inventory providers. Ask them if they have contractors that they can recommend. A good PM will have a strong network and reputation. Start building your team. I personally feel that a good PM should be a core member of your team as they are in the trenches much more than many other real estate professionals. I do not care for one-stop shop outfits though. You want due diligence from multiple perspectives, not just someone who is getting paid to close a deal. A good PM can put you in touch with investor oriented realtors, wholesalers, other investors, GC's, project managers, insurance agents, mortgage brokers or other lending organizations, etc.
Don't base everything on just PM fees. While they are important, I've had too many people call me back a year or two after choosing a "value" PM who literally breaks their portfolio. Now they are selling or having to spend thousands of dollars to get bailed out of a mess. The difference in fees between to top to bottom for your PM will only be a few hundred dollars annually, but bad property management can cost thousands... but their fees will still be low. I've seen plenty of property management nightmares and have turned down many prospective clients who started with the wrong team. Be selective about the properties you invest in and who you work with. This is a large amount of money you are turning over to someone else. You have to ensure that they are doing what is going to benefit you best in the long run, not just make their money and move on.
As a lender for 16 years, I'd of course say to leverage diligently and buy more units - and wearing my investor/developer hat, I know that's the only way for me to scale and grow. Unless you have an endless stockpile of cash, your investment strategy will stop short (especially for younger investors). But you need to go about the purchase and financing the right way. If you find good properties in the right markets, cash-flow concerns should not be as much of a risk. It's always a risk (even if free & clear, because you'll have taxes, insurance, and upkeep), but it can be minimized if you buy smart.
A bunch of my clients come from NYC to buy in Chicagoland. It's a market that "feels familiar" but at half the cost. I'd give a good look at this market. I've invested all over the country, but I prefer the Midwest for many reasons and hold most of my investments here.
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