First Time Investor from California - Where should I invest?

18 Replies

My husband and I are looking to purchase a few invest properties this year as funds become available to us. To begin with we have about $30,000 to invest. 

Can someone please suggest which city would be ideal to invest in for our first rental property. Also, are university towns a goos place to invest? I was thinking Winston Salem since I went to school there?

Thanks in advance!

$30k is probably enough for one property so keep saving for the rest, if Winston-Salem is a town you know well it could be a good option, you probably won't be renting to students though.

@Aaron K. Thanks for your response. What do you mean when you say I would not be renting to students?

I have also read multiple articles on top cities to invest in and none of them are university towns. Is it generally a good idea to invest in a university town?

@Aaron K. may have a better answer, but I’m guessing what he meant is that $30k won’t be enough for the section of the city where university students tend to live while in semester.

My observation of university towns is that the university can breathe some life into an area, but it won’t define the area. An example is Arcata, CA where HSU lives. The town just about doubles when school is in, and is a ghost town during summer. Property prices are high because rent is good. But all the surrounding areas continue to struggle financially. The university has little impact outside a certain radius.

We have a property in Austin, TX. It’s only one section of the city that sees students renting. The rest of the city is buoyed by its tech and government sectors. Totally separate from the school.

My friend went to Duke. He said the university was amazing. Venture outside it and the town was basically no different than the little town we grew up in. Same dynamic with USC in Los Angeles - outside campus the streets revert quickly back to reflect the economic hardships of the community.

I believe there is a similar dynamic with military bases. Look in both San Antonio and El Paso. The troops tend to flow their housing allowances out to certain neighborhoods surrounding the bases, while ignoring others. So you see neighborhoods smooshed right up against the bases that are still depressed.

Universities can by a boon, but to a limited degree. You have to study where the dollars flow to know whether it affects the city sections you’re considering.

Hi Roopali, 

Investing in a town that you are familiar with is always the best way to start because you'll have background info on good neighborhoods and bad neighborhoods. 

Some markets that yield really high returns and may appreciate in the future include: Central Florida, Tampa, Jacksonville, SC, NC, and Texas. 

Since you're considering a rental, i suggest you stick to multifamily (2+ units). The reason for this is because you mitigate your risks and increase your changes of a higher cash-flow. Multifamily properties may appreciate a little slower however, if you're in it for cash flow it's always better to have multiple streams of income. 

[Solicitation Removed by Moderators]

Hope this helps and good luck! 

Hello @Roopali Bahal ,

There are more and more out of state investors looking to the El Paso, TX, market, And there are a ton of reasons, for a long time this Texan city has been ignored especially for the other big cities (Dallas, Houston, Austin and San Antonio), but now the city is showing so much potential for Real Estate Investors.

Students - Having UTEP, Community Colleagues, Texas A&M campuses - With over 25K students on UTEP alone.

Affordability - El Paso was named the most affordable city of the entire country by a move.org study.

Link here

Infrastructure - There is a new toll charge high-way that recently opened up, with an investment of over 600 million dollars from the Feds. That means we rarely have any traffic

Employment - The vicinity with Mexico attracts a ton of companies who make business with Mexico.

El Paso–Juárez is a major center for manufacturing and international trade. It is one of the largest ports of entry on the U.S./Mexico border.

Military Base - Major employer and source of renters (I currently have 4 military personnel as tenants).

Returns

With some creativity you can find single family rentals that meet the 1% rule, Although multi family is the way to go and you can reach the 2% Rule. 2% Price = Rent per month. These numbers are hard to find in any of the other 4 cities in Texas. On top of that you can get small single family units for $70-$80K which if you use a conventional loan with a 15% down payment (since its an investment property) makes it very affordable to get started in Real Estate.

Good luck in choosing the city and getting started with Real Estate Investment!

All the best!

Yasir Einaudi 

Best to go where the number make sense and you can build the best team.  Honestly with that sum of money and wanting to invest out of state I would start with a turnkey provider for a couple of years to get my feet wet.

I lived in Tallahassee, FL for 11 years and moved to Winston 6 years ago. I've certainly had my share of college towns and have invested in both. Have multiple rentals, with great tenants and easy to find, and a flip on the market in Winston. I'll definitely continue to invest in and around Winston as well as look for opportunities in Tallahassee. [Solicitation Removed by Moderators] Good luck.

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Originally posted by @Roopali Bahal :

My husband and I are looking to purchase a few invest properties this year as funds become available to us. To begin with we have about $30,000 to invest. 

Can someone please suggest which city would be ideal to invest in for our first rental property. Also, are university towns a goos place to invest? I was thinking Winston Salem since I went to school there?

Thanks in advance!

You'll need to hit up the flyover states in the Midwest to find properties in that price range. With $30k cash you can leverage it and get two decent $60k singles or even a nice solid 2-3 unit. Start setting up keyword alerts for turnkey as all of these flyover states are in what we call the turnkey markets. Tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cleveland, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Birmingham, Alabama
  • Kansas City, Missouri
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • 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.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • 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.

If college towns interest you, do not neglect Davis. Prices are high now but on a downturn this is a very good buy. In addition to the thousands of students searching for housing Davis serves as a bedroom community for Sacramento because the public schools are good. We bought in 2010 for low $400K near campus. Property worth now abut $700K. Rents funded college for our student and much more. We actually made money sending a kid to college there - maybe first in recent US history.

With $30k to invest you are going to need to look a properties around or under $100k.  Need to keep some cash on hand for issues that WILL happen.  Davis is too expensive.  

I would avoid low value homes, under ~$80k, too much drama with that demographic.   Maybe later when you have more experience.   Look for markets with: good rent to value ratio,  job growth, population growth, rent growth. 

I rent to college students, but I would not invest in a market where that is the only thing happening.  UNLESS you are very familiar with that market, and the longer term trends.  Safer to be in a market with a more diversified economy.  

@Roopali Bahal If simplicity and cash flow is your goal I'd put Oklahoma City on your list of areas to consider! I've seen hundreds of out of state investors come to OKC in the last year, most of them from CA. Our market is approachable because we have a massive C class area with 60-80k deals that need no rehab, already have a tenant in place and cash flow from day one! Something to put on the "maybe" list! 

Hey @Roopali Bahal welcome to BP!!

A non-owner occupied rental property will need a minimum 20% down payment, this isn't accounting for closing costs such as appraisal, inspections, etc (depending on the negotiations your agent is able to work in your favor :)

With this being said you shouldn't anticipate buying anything over 100k-110k with that kind of cash on hand. BUT FEAR NOT!!


While something in California may not fit your needs there are plenty of options all over the country that can be worked in your favor if surrounded with a SOLID team of individuals (such as prop managers, realtors, handymen, etc.)


best of luck!!!