First Time Investor: Which Midwest Cities?

Question

Hi All,

I'm from New York City and looking to invest in a single fam or multi fam property out of state somewhere in the midwest or southern states. I don't know much about these states out of New York except for Florida. I've only lived in Tampa, Florida for a year. However, I really want to invest in an area that's growing and have stable high cashflow (the higher the cash flow the better). Here are the cities I have considered: Jacksonville, FL, Memphis, TN, Cincinnati, OH, Kansas City, MO, and Huntsville/Montgomery, AL, and somewhere in Texas if possible? perhaps San Antonio?

Let me know your thoughts!

Thanks,

John Tan

James Wise · Answer

Valid question. I work the Cleveland market. As such I created The Ultimate Guide for Grading Cleveland Neighborhoods. I did this so when I refer to a B-Class property to a potential client or investor they are on the same page as me. What I think you need to do is 1st pick a market you want to narrow in on. Then open up dialogue with investors & operators in said neighborhood to see if they have something like my Ultimate Guide that is market specific to their market.

Larry Fried · Answer

John, Jacksonville is very competitive right.  Midwest markets are better for newer entries.  Are you looking for something turnkey or something to fix up?  If you are buying turnkey you should consider holding the property for at least 5-10 years in order to be able to exit without taking a loss on the sale (counting commissions and closing costs).  Also, best to focus on B areas where there are a good number of owner occupiers and you can potentially sell retail rather than to another investor.

Yonah Weiss · Answer

The main thing you'll need to focus on is finding and vetting property management companies. Higherr potential cash-flow, often times comes with higher risks, vacancies, poorly run properties, so focus on finding PMs. There are properties in all of those locations. I have some contacts in Memphis, Jacksonville and San Antonio, from those that you listed.

Account Closed · Answer

@John Tan I'm familiar with Cincinnati/Dayton and also Kansas City. Would be happy to enlighten you with more information regarding the different cities!

John Tan · Answer

@James Wise what really classify a B type class property? because a B type class property is in new jersey or new york is totally different than a B type class property in the midwest.

James Wise · Answer

I would focus more on what you want to accomplish.

• Are you looking for a pure cash flow play?
• Are you planning on holding while the market shifts then selling everything at a profit?
• Are you looking to enter a market on the cheap & build up a big ole' scaled up business?

After you determine your answers to the above 3 here are some other best practices I give out to all new out of state investors here on Bigger Pockets.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Tom Ott · Answer

Some of those markets may be a bit oversaturated with investors at this point. Have you looked into Cleveland? I may be a bit biased (I am) but it is a great performing market with decent ROIs!

Good luck!

John Tan · Answer

Thanks for the wonderful reply!

@Larry Fried i’m looking to do long distance buy and hold, currently looking in the area with great returns.

The one thing i’m concern about is the vacancy rate and how hard it is to sell it back out to the market if I choose it sell it back out.

Are there any markets that aren’t too crowded?

Larry Fried · Answer

@John Tan Not sure what kind of REI you are looking to do, but of the ones you mention I have experience with Jacksonville, FL, Cincy, KCMO.

First Time Investor: Which Midwest Cities?

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