It’s important not to get caught in the newbie trap of thinking that, because a market is cheaper than yours, it’s a bargain. We’re at the tail end of a very long national bull market for property that has pushed down returns everywhere. When looking at a market outside your own, you need to compare it to its own historical returns, not the returns in your expensive area. If not you could be in for a nasty surprise when the inevitable correction hits, and when it hits, it will hit these “bargain” markets the hardest. They are cheaper for a reason.
I am a big proponent of newbies investing local to where they are located regardless of cash flow and entry price. I realize Walnut Creek has a fairly high entry cost but some of that can be negated by house hacking a detached duplex. As owner occupied you would have a significantly lower down payment percentage and a lower rate. In addition, Walnut Creek has great historical appreciation which can help with ROI.
Do you know why a location like Walnut Creek has a high entry price? 1) it has a long history of appreciation 2) the demand is high with respect to supply 3) the investors expect a high return.
If you were in a low appreciation but high cash flow market I would recommend you invest local. The cash flow is easy to access but is unlikely to produce the ROI of the historically high appreciation market.
The primary reasons that I am a big proponent of investing local are 1) the learning opportunity that comes with self managing a property. This knowledge if so valuable. As Rich Dad Poor Dad indicates the knowledge is priceless and there is no way investing OOS with a PM you obtain the same type of knowledge 2) requires less reliance and trust on others. You are in control. You will be much better prepared to build that killer team for OOS after you have acquired certain knowledge that is best learned hands-on 3) Local provides the potential for owner occupied which has better loan terms (lower down payment and lower rate). 4) Local provides you the best opportunity to be an "expert" on the area.
So if I were you I house hack a detached duplex acquiring as much knowledge as I could. After I have a little experience I would consider if I was ready to take on the challenges of OOS RE investing.
Good luck.
@Tina Chen, Welcome to BP!
I personally like Cleveland, but that is because I have been investing here for over 20 years!
Cash flow is AMAZING! I deal with tons of folks from Cali.
I only deal off market, so I cant suggest any sites to find deals, but there is not a better place to find real world data than right here on BP.
Good luck on your Journey! :-)
@Jonathan Twombly I'd like to address what you said earlier in this thread about being careful about knowing your market. I live in North Alabama and have been trying to by property (MFD) here at a reasonable, cash flowing, price. I get that we may be at the top of the bubble. But I am constantly outbid by someone from "California" with a 10-31 to exchange. I don't begrudge that, but they buy at prices that can't possibly be profitable. Soon afterwards, the property falls way into disrepair because they don't have the funds/reserves to maintain the property or to pay a descent property manager to get the right tenant. This creates slums where, in the past, there were none. Sellers in the area actually ask agents to find a buyer from California...they know they'll get a ridiculous price.
@Jonathan Twombly I'd like to address what you said earlier in this thread about being careful about knowing your market. I live in North Alabama and have been trying to by property (MFD) here at a reasonable, cash flowing, price. I get that we may be at the top of the bubble. But I am constantly outbid by someone from "California" with a 10-31 to exchange. I don't begrudge that, but they buy at prices that can't possibly be profitable. Soon afterwards, the property falls way into disrepair because they don't have the funds/reserves to maintain the property or to pay a descent property manager to get the right tenant. This creates slums where, in the past, there were none. Sellers in the area actually ask agents to find a buyer from California...they know they'll get a ridiculous price.
Thank you for this information. It’s a ludicrous situation and reinforces my view, in addition to the precariousness of the market, that most people mis-use 1031. It’s not for selling at the top of the market and then wasting all your profits buying a bad deal at the top of the market. It’s for capturing long-term appreciation strategically at a lower point in the cycle, when it can be deployed to obtain bargains on great assets. You give up some short term gain for long term gain. Instead so many people grab short term gain and turn it into long term loss.
Have patience. Keep your powder dry and you will be buying some great deals out of foreclosure in a couple of years. Those out of state buyers are creating the value add deals of the next cycle without even knowing it.
Jonathan Twombly how have you been?
still down on Newburgh and up on Albany? Nothing new there I see. Any data that backs the theory?
Hey John! Well, Albany remains the state capital and the MSA is the second wealthiest in the state. The city recorded modest population growth from 2010-16, though it slowed from the previous ten year census.
Newburgh remains one of the poorest and most dangerous places in New York and the country as a whole. And, what’s new, is that the city population, which had seen positive growth for a couple of decades, turned negative from 2010-16. So people are actually voting with their feet and leaving.
So, I’d say, if anything, the stats actually show that Newburgh is getting worse.
I will say this, though, and I have not researched the answer. Population decline could actually result from gentrification IF you were seeing brownstones being reconverted back from triplexes into single family homes by more affluent people. I have not checked to see if per capita incomes have grown or not.
So it COULD be that. But I honestly don’t know.
@Jonathan Twombly I'd like to address what you said earlier in this thread about being careful about knowing your market. I live in North Alabama and have been trying to by property (MFD) here at a reasonable, cash flowing, price. I get that we may be at the top of the bubble. But I am constantly outbid by someone from "California" with a 10-31 to exchange. I don't begrudge that, but they buy at prices that can't possibly be profitable. Soon afterwards, the property falls way into disrepair because they don't have the funds/reserves to maintain the property or to pay a descent property manager to get the right tenant. This creates slums where, in the past, there were none. Sellers in the area actually ask agents to find a buyer from California...they know they'll get a ridiculous price.
Yeah, I have read about this problem in the past. I think it was in Indy and southside Chitown but communities were getting pissed because they get left with the issue and worse, no property taxes paid. There were thousands I think in Indy at one point. Most were OOS owners too. There was someone who once said " investing OOS is where California equity goes to die a slow death." There is some truth to that. Good luck!
@Jonathan Twombly, @Matt R. Maybe we should create state laws that require buyers of larger properties to present an industry-adopted plan of action for property maintenance and management at closing. Those of us who have educated ourselves in how to analyze properties properly do that as part of our analysis. I don't like control, but the brokers here don't care because it increases their fee. :)
Iron belt cities such as those in Ohio or Western Pennsylvania come to mind. However, be sure to think about what you make in additional rent vs. property value you may lose when it comes to appreciation and ensure that it looks positive. In some of these markets, properties sell for $50,000, but they sold for $45,000 twenty years ago.
I suggest you take a look at Rochester, NY! we have one of the best rental markets in the country. PM me and I'll be more than happy to send you information.
Hi @luz, I currently own one property in Rochester and looking forward to buy my second in the next couple of month and rent it. Any recommended area that's great for rental? My property is in Greece. You PM me Thanks
Interesting input all around. Thanks for asking @Tina Chen . Personally, I had considered the Birmingham area, but not upstate New York. Hmm...
@Tina Chen how did it go with your choice?
Bam. Or not actually. I would suggest to anyone looking for an appreciating market to pay attention to crime. Don’t pay attention for a few weeks. Years. Be very careful of stats on the internet, articles about the most dangerous city. Get real info.
And if your looking to invest in gentrification....we’ll thats more an art then science I’ve had a tremendous amount of success with it.
@jonathantwombley mentioned some stuff pop stats and all that. I don’t do any of that. I know plenty of people swear by it But that’s following the crowd to me
@Jonathan Twombly