Hello All,

I am a relatively new Boston based real estate investor. I currently own two properties in Boston but the local market is very expensive and I am looking to increase my portfolio's cash flow. My thought is that I may have to invest outside the New England region, as I am also interested in investing in mid to upper grade neighborhoods. Does anyone have any advice on areas I should consider/look into? I am grateful for any advice provided! Thank you.

-Ryan

@Ryan Ricciardelli Worcester is the best! FHA 203k Renovation loan is key! Add value to your properties.

I agree with Philip.  Most of the stuff in Worcester is JUNK as it is all built prior to 1920.  You need a rehab budget so the 203k route works.  The key is finding something that is worth fixing.  Worcester is built on neighborhoods and the traffic patterns are quite complex.  You need to know the neighborhood you are investing in, not just the size or quality of the building.

Metro West, Southern area (North Attleboro/Attleboro), and Lowell area offer great cash flow and more palatable purchase prices.

@Ryan Ricciardelli I'd have to look at a bit more specific goals to see if it's a good fit, but you may want to consider OKC. Price point is very approachable. Typically people focus on C class areas here for better cash flow, but you could over improve so you're sitting on a "better condition" house in a c class area with even more cash flow? Or, target A/B areas which will have lower returns, but likely better cash flow than what you're used to. Happy to answer questions. Good luck! 

@Philip Ganz Thanks for the feedback regarding the 203k loan. I haven't used this product before.  I'll do some research but are there any basic restrictions I should be aware of? Thanks.

@Ryan Ricciardelli The biggest restriction on FHA loans is when you buy a 3 or 4 unit property - the rents needs to be self sufficient.

@Ryan Ricciardelli

North Iowa. No appreciation. You can buy 2% rule, 1.5% is workable too. I have found success with small multi family there.

You want cashflow! Detroit is cashflow king! You can forget 2% rules we go by 4.5.6% rules. If your only looking for cashflow. 

@Arsen Atanasovski do people pay rent Detroit? whats the vacancy?

@Arsen Atanasovski As Philip indicated, I assume you have to be very careful with which Detroit neighborhood you choose? My understanding of the city is limited, but my perception (and it is limited and may be flawed) is that the local economy has stumbled a little (financial crisis, etc.) and has been slow to recover?  I'd be interested in what insight you can provide as I've heard rumors that things are "beginning" to turn around.  Appreciate the feedback!

-Ryan

Unfortunately, REI cashflow is all too similar to yield in the bond markets.

Think section 8 tentants, if you have the stomach for ranching those type of people. 

People pay rent in Detroit, just like in any city and in any rental business you need to screen your tenants. I ask a Cleveland investor before what areas are good to invest in Cleveland he told me it depends it's a block by block some are good some are not, when I mentioned that I'm from Detroit he considered the entire city a war zone. I've said this a lot on other posts people nationwide get the wrong picture about Detroit but the way I see it is it's better for me, more opportunities! I'm not trying to put down any areas but the reason I will mentioned this is for all the lenders nationwide I get almost 80% of them right off the bat tell me sorry we do not lend in Detroit or the metro area and I'm always amazed and ask why, they always say we do not lend in certain areas, Detroit and the metro areas are one of them. So late 2019 I took my family to LA a place where (you Can call a lender in Russia and he will give you money) and walking around visiting places and site seeing my wife and I were amazed of how much homeless people their are and we are from Detroit we don't even have no where near that much, and I right away I get from others "yea it expensive in LA" that's why there is a lot of homeless, oh so Detroit is cheap? there is million dollar houses in Detroit and river flats that rent for 4/5/6000 a month. But like I said Detroit is considered like Compton LA the entire Detroit but that's not the case. If only there would be lenders to lend here there are fortunes to be made. Sorry for the long post....

@Brendan F. Nagle

Sounds like your market has good returns.

Would love to have a conversation with you about your experiences and business. Please feel free to reach out to me and schedule a call. Best of luck in all your endeavors.

Originally posted by @Ryan Ricciardelli :

Hello All,

I am a relatively new Boston based real estate investor. I currently own two properties in Boston but the local market is very expensive and I am looking to increase my portfolio's cash flow. My thought is that I may have to invest outside the New England region, as I am also interested in investing in mid to upper grade neighborhoods. Does anyone have any advice on areas I should consider/look into? I am grateful for any advice provided! Thank you.

-Ryan

Cleveland is one of the best turnkey market and the most popular for investors because of high rental demand and low cost of entry, property prices are pretty inexpensive here. The first thing you will want to do is check out this Cleveland Price & Neighborhood Map which will help you have a better understanding of the neighborhoods and general market in Cleveland. Good luck!!

Originally posted by @Ryan Ricciardelli :

Hello All,

  I am a relatively new Boston based real estate investor.  I currently own two properties in Boston but the local market is very expensive and I am looking to increase my portfolio's cash flow.  My thought is that I may have to invest outside the New England region, as I am also interested in investing in mid to upper grade neighborhoods.  Does anyone have any advice on areas I should consider/look into?  I am grateful for any advice provided!  Thank you.

-Ryan

 Cleveland is a great mid-market city where many OOS investors find success. The Midwest is stable and has seen some growth, now is a good time to get in. 

Originally posted by @Ryan Ricciardelli :

Hello All,

  I am a relatively new Boston based real estate investor.  I currently own two properties in Boston but the local market is very expensive and I am looking to increase my portfolio's cash flow.  My thought is that I may have to invest outside the New England region, as I am also interested in investing in mid to upper grade neighborhoods.  Does anyone have any advice on areas I should consider/look into?  I am grateful for any advice provided!  Thank you.

-Ryan

Many cash flow focused markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. 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

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

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or lose 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 scam and/or Morris Invest fraud 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 averse, real estate, (especially out of state) is not for you.

Best markets for cash flow are in the Midwest (i.e. Oklahoma City, Indianapolis, etc.) and Southeast (Raleigh, Memphis, etc.) generally speaking. The Rust Belt has some cheap markets too, but it's very economically depressed so I would probably shy away from them a bit. 

Being from Memphis (A Memphian) I'm biased towards our city. However, I'm searching for new markets currently and I'm surprised by the numbers. Using the BP proforma, the cash on cash I'm finding in some of these other markets is impressive. The biggest determining factors being the taxes, and of course the rent to purchase price ratio. I will report back about these new (to me) markets as I consolidate the data. 

We've had good luck in Maryland. Best public schools in the country. Low unemployment, recession-resistant economy because of the federal govt. We like to invest near some of the large federal installations and military bases and recruit those tenants. Private-message me and I'll be glad to hook you up with our resources in the area. -Kenny

@Ryan Ricciardelli There are several markets throughout the Midwest and Southeast that will cash flow however if you are buying for long term hold, make sure that the market also has strong economic and demographic fundamentals. Many of the popular cash flow markets have stagnant or even declining jobs and populations which doesn't bode well for long term asset values. Personally, I think that Indianapolis and Kansas City have the best combination of cash flow and economic/demographic trends.