Crossroads: Stick with New England or Branch out to the Midwest

2 Replies

Please feel free to direct me to the correct sub-forum if this is not the correct one.

I have been steadily investing buy and holds in southern New England (MA, RI, CT) with some decent success. However, when I look at the Midwest (primarily Indianapolis, Canton-Akron, OH markets), I really like the price stability, cash flow, and the opportunity to purchase many high quality single and multi-families (Class A-B areas).

Some additional background, I truly enjoy my current (non-RE) day job, prepping for the CPA exams, so my time is limited. I went ahead and created a pros/cons list:

New England Pros:

  • Close to home base (drive within 2 hours max) and comfort with the region (know the cities/towns)
  • Good opportunity for price appreciation (not that I am looking for some huge increases)
  • As a result of price appreciation, I am considering taking out a HELOC to do more deals.

New England Cons:

  • High acquisition costs (purchase price/down payments/reserve requirements)
  • Lower cap rates/slim cash flow
  • Expensive repair costs

Midwest Pros:

  • Great cash flow/cap rates
  • Price stability (prices don’t increase or drop significantly)
  • I can scale the portfolio and really achieve my goals rather quickly (more on that later)

Midwest Cons:

  • Investing distance (I’ll need to get on a plane rather than jumping in a car and going to see the houses, whenever)
  • Low familiarity with the region. I will need to make multiple trips to get comfortable (which is fine) however I would still not feel as comfortable as areas change, industries leave etc. With New England, I live/work here and can visit very frequently. Please keep in mind, I have been busy with the non-RE endeavors.

What pros/cons list would be complete without a goals discussion? My goal is to achieve $5,000/month in cash flow (post tax money in my pocket). Thankfully, I don’t need that kind of money live on, as I have my day job, however I would like to accelerate the payoff on that expanded RE portfolio with the mindset that all mortgage debt payoff will entail my retirement.

I would love to get your thoughts/critiques regarding my plan. In particular, if you have invested in the Midwest/outside of your home region – I was gearing up for it earlier this year however my partner ran into financial issues/got cold feet with respect to the Midwest.

@Jahan Habib Just look at your goals and then your #2 New England Con and #1 Midwest Pro and you have your answer. Let your goals and objectives lead you to your market of choice. If your local market doesn't fit your goals then you really have no choice but to go out of state. Don't bend your goals to fit your market. Think of real estate as any other asset class, You wouldn't buy stock because the companies headquarters is local and you can drive around and look at the building. Out of state investing does have more challenges but they can be easily overcome. The Midwest can cash flow well if you know which areas perform. Personally, I like Indianapolis and Kansas City but like most markets, they vary neighborhood to neighborhood. The biggest mistake investors make in my opinion is not knowing the neighborhoods and buying in bad areas. Learn the areas and work with someone you can trust and you can do well.

Originally posted by @Mike D'Arrigo :

@Jahan Habib Just look at your goals and then your #2 New England Con and #1 Midwest Pro and you have your answer. Let your goals and objectives lead you to your market of choice. If your local market doesn't fit your goals then you really have no choice but to go out of state. Don't bend your goals to fit your market. Think of real estate as any other asset class, You wouldn't buy stock because the companies headquarters is local and you can drive around and look at the building. Out of state investing does have more challenges but they can be easily overcome. The Midwest can cash flow well if you know which areas perform. Personally, I like Indianapolis and Kansas City but like most markets, they vary neighborhood to neighborhood. The biggest mistake investors make in my opinion is not knowing the neighborhoods and buying in bad areas. Learn the areas and work with someone you can trust and you can do well.

Well stated Mike. I do quite a bit of investing in other asset classes, however never saw RE as an asset class on the same level as the stock market. You're perspective is the right one, I am going to learn as much as possible about out of state investing before pulling the trigger.

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