Investor · Los Angeles · Member since 2018 · 134 posts · 117 votes
Nooby question here! Does anyone know where I can find a list of or advise me on the best cities to look for investment opportunities (rental) under $100k? Ideally, I would like to start with $50k property but $50k-$100k is my threshold. I live in Los Angeles and you won't get anything in a safe area for $700k+.
@David Waddleton I moved from San Diego to St. Louis specifically for this reason. I have 7 houses here and purchased them all over the past year. I paid 22,000-34,000 and they are all rented from $895-1200. Cashflowing 50% at least after taxes and insurance and maintainence are paid. For $50,000 you can get a turnkey property that’s Cashflow positive!
Just have boots on the ground or someone you trust in the area. You could develop a relationship with someone on BIgger Pockets!
In some of these cities it's not all that hard to find excellent cash flow rentals, and many of them come from turnkey rental providers, and they do not have to be in "war zones" as you describe.
For example, I was looking at a turnkey duplex at recently in Toledo, Oh that could be bought for $44,000. It had been remodeled, each side was 2 bedroom, 1 bath , around 1000 sq ft, renting for $550/month. That's $1100 per month on a $44k investment. The units were separately metered, so no electric or gas bills. The turnkey seller was offering to manage the property for the first year at no charge, but 10% of the rents thereafter. Out of $1100 per month, I estimated about $595 net, which is $7140 per year.
The expenses break down as follows:
Management 10% $110/month, but free for first year
Vacancies 10% $110
Taxes $100
Insurance $75
Maintenance 10% $110
Total estimated monthly deductions: $505 Net average cash flow/month: $595.
$7140 divided by $44000. equals cash on cash yield of around 16% per year.
This property was not in a "war zone" as you describe, but is in the Old West End area of Toledo, which is not bad, probably a "C" neighborhood.
Unfortunately, this property was snapped up by another investor before I had a chance to do the due diligence.
Deals like this are fairly common in cities like this.
"The units were separately metered, so no electric or gas bills." - care to elaborate?
@David Waddleton look at Mississippi. Get with someone that knows the better pockets so you don't fall prey to cheap properties that are high crime. I don't mind helping anyway I can
@Cody L. how are you finding these deals? are you doing your own direct marketing or wholesalers? Are you buying them with that much equity to be able to 100% leverage or do you have some kind of special financing?
All different. The one i just bought was all cash, but it's likely a ~$1.8m property, I got it for $1.4m. It'll likely appraise for $1.8, and I'll likely get a loan for ~$1.4m so I'll be in it for $0 and it'll cash flow nicely. That came from a broker. He called me when the previous buyer flaked.
One before that was on the MLS actually. And I did the same thing. Bought it way under since I was all cash and could close quick, refinanced it for all my $ back and then some
One before that was on loopnet for 18 months. Dude was asking for too much. I kept offering less. He finally took it if I'd pay all cash and close quick. I did. That one was the best in terms of refi. Took 5 weeks from purchase to refi. Paid $2.1m, put in $300k, it appraised for $3.4m, got a $2.6m loan. So I have that for "free" and $200k and it cash flows.
So I'd say 2/3 of my property come from one of 5-6 main multifamily brokers in town that call me with deals. The others are one I stumble on on MLS or loopnet.
In some of these cities it's not all that hard to find excellent cash flow rentals, and many of them come from turnkey rental providers, and they do not have to be in "war zones" as you describe.
For example, I was looking at a turnkey duplex at recently in Toledo, Oh that could be bought for $44,000. It had been remodeled, each side was 2 bedroom, 1 bath , around 1000 sq ft, renting for $550/month. That's $1100 per month on a $44k investment. The units were separately metered, so no electric or gas bills. The turnkey seller was offering to manage the property for the first year at no charge, but 10% of the rents thereafter. Out of $1100 per month, I estimated about $595 net, which is $7140 per year.
The expenses break down as follows:
Management 10% $110/month, but free for first year
Vacancies 10% $110
Taxes $100
Insurance $75
Maintenance 10% $110
Total estimated monthly deductions: $505 Net average cash flow/month: $595.
$7140 divided by $44000. equals cash on cash yield of around 16% per year.
This property was not in a "war zone" as you describe, but is in the Old West End area of Toledo, which is not bad, probably a "C" neighborhood.
Unfortunately, this property was snapped up by another investor before I had a chance to do the due diligence.
Deals like this are fairly common in cities like this.
"The units were separately metered, so no electric or gas bills." - care to elaborate?
Separately metered, meaning gas/electric are in the tenants name. So no bills for the owner (though owner normally has gas, and on larger properties there is normally a "house" electric meter for outdoor lights and maybe a house gas meter for laundry or hot water heater/broiler)
As opposed to single / 'master' metered properties where the units are leased as 'all bills paid'
Kokomo, Indiana is also a great place to look for rental properties! While the city's economy is pretty heavily tied to the auto manufacturing industry, rent-ready single family homes can easily be purchased for as little as $30,000. The "1%" rule here is attainable on nearly every investment property you look at.
David, are you looking to invest $50k and do some work to it or are you looking for turn key? My wife and I have a 3-2 single family home in Lithonia GA that we purchased back in January 2018, for just under $100k. Then in July we purchased a duplex in Valdosta GA for under $50k (never saw it personally). Both needed just minor work to it, and both in class C neighborhoods. All 3 properties have been cash flowing since we got them. You can also look into Columbus, GA and Augusta, GA. I have looked into Jacksonville, FL Cleveland, Detroit, and Indianapolis myself...
Killeen, TX still has good deals around 50K. It's a good market. The first house rented immediately, before I ever paid the first mortgage payment. Just bought a second property last week.
@David Waddleton
Memphis or Nashville are excellent entry level markets to buy in while living in hot markets like here in California. I am looking for a multi family in those areas and would entertain opportunities up to a 45min radius outside the city. All the best with your search!
Kenedy, 78119, Karnes City, 78118, Edna, 77957, Brazoria, 77422, and Lake Jackson (and surrounding areas Angleton, Clute)
All in Texas
Easier to leverage money and find owner finance deals, easier to find prices in the <$70k range, and rents are very good. Why invest in these "cities" of small populations?
Karnes County Oil Boom (Eagle Ford Shale), went from one of the poorest counties in the nation to one of the wealthiest due to fracking. Billions in commitment from ConnocoPhillips, Marathon Oil, Ashland Chemical, Pioneer, Wood Group, and more. Not to mention that even when oil was rock bottom, all of residential units stayed lease with reduced rent, which was still great return based on purchase price (Ex triplex purchased for 54,000+17,000 remodel/repairs nets 1300+/mo).
Edna (Jackson County) benefiting from jobs in Victoria, Port Lavaca, and Port Comfort. Duplex recently purchased < $55k and bottom unit leases for $850/mo (all utilities included up to $150), and upstairs scheduled to rent for $750 (same)
City of Brazoria experiencing growing pains due to Lake Jackson area overpopulation up and down 288, and seeing Hwy 36 as healthy alternative. Billions in commitments from Freeport LNG, DOW, BASF, more, and Port of Freeport. Port of Freeport will contribute jobs to economic growth and is taking great strides to be the deepest port along Texas coast in efforts to attract the Panamax Tankers from the Panama Canal. Most of Brazoria County flooded during Harvey, but deals can be had along Tx Hwy 36 (commercial/residential) that stayed high and dry.
If all else fails, consider buying half, or less, of a nn performing commercial asset where you'll receive 1/2 of the income, appreciation, and none of the management; however, you'd still be responsible for 1/2 taxes, liability, etc.
Available to answer any questions about any real estate anytime. These are examples of what I've done, and I've spent less and made more ROI overall than my inner city investment pals.
Rural is easily overlooked, but full of hidden gems in my opinion. Look for low cost, low taxes, Jobs, and path of progress.
@Charles A. I'm in S. FL and was hoping to invest in-state. Do you have experience investing in FL.. I've heard STR do well, I know some people who have made a lot of money on them. I'm a little afraid to invest out of state in a market I don't know and would have trouble accessing like Cleveland.
@Andrew Caldieraro, there are much nicer areas. I can't speak to the profit margin etc. but St. Charles, St Peters, Chesterfield. These are nicer areas but the buy in is higher so I stay in my zip code where I can learn everything about it.
When I worked as a Broker in San Diego I targeted a hyperlocal market, Clairemont. It's easier to be involved in the community and understand what's going on with planning and development.
I bought in around 20,000 and put 10,000 in. Zestimates and Redfin say they are worth 40,000-60,000 now. My strategy is buy and hold so that doesn't matter to me as much as cashflow.
In some of these cities it's not all that hard to find excellent cash flow rentals, and many of them come from turnkey rental providers, and they do not have to be in "war zones" as you describe.
For example, I was looking at a turnkey duplex at recently in Toledo, Oh that could be bought for $44,000. It had been remodeled, each side was 2 bedroom, 1 bath , around 1000 sq ft, renting for $550/month. That's $1100 per month on a $44k investment. The units were separately metered, so no electric or gas bills. The turnkey seller was offering to manage the property for the first year at no charge, but 10% of the rents thereafter. Out of $1100 per month, I estimated about $595 net, which is $7140 per year.
The expenses break down as follows:
Management 10% $110/month, but free for first year
Vacancies 10% $110
Taxes $100
Insurance $75
Maintenance 10% $110
Total estimated monthly deductions: $505 Net average cash flow/month: $595.
$7140 divided by $44000. equals cash on cash yield of around 16% per year.
This property was not in a "war zone" as you describe, but is in the Old West End area of Toledo, which is not bad, probably a "C" neighborhood.
Unfortunately, this property was snapped up by another investor before I had a chance to do the due diligence.
Deals like this are fairly common in cities like this.
"The units were separately metered, so no electric or gas bills." - care to elaborate?
Separately metered, meaning gas/electric are in the tenants name. So no bills for the owner (though owner normally has gas, and on larger properties there is normally a "house" electric meter for outdoor lights and maybe a house gas meter for laundry or hot water heater/broiler)
As opposed to single / 'master' metered properties where the units are leased as 'all bills paid'