Choosing a market - thoughts and recommendations?

Question

Hello BP folks!

I am relatively new to real estate, specifically in the US market. I live in So Cal and have 3 properties in Toronto, Canada. My husband has been doing well with flipping homes to accelerate our cash savings. Our vision is to use these profits in addition to some cash saved aside and invest into buy and holds in the US. We have some ambitious goals to grow our portfolio through BRRRR, and I'm currently exploring markets for out of state real estate (So Cali is not an option!).

We are looking for RE under $100k that will cash flow positive and has some appreciation (but cash flow is priority). We are trying to decide whether we should go with a SFH or MFH as our first "get our feet wet" opportunity. But where I would love to get some advice is on WHERE to invest? Through some research and advice, I've come up with a few locations, but would love to get your thoughts on any of the below locations or others not included. I know I will have to take it further and narrow down the neighborhoods, but once I lock in my "where," I will look for some local agent support (will probably start with finding someone through referral or BP!):

- Columbus and Cleveland, Ohio

- Saint Louis, Missouri

- Phoenix, Arizona

- Kansas City

- Oklahoma City

Looking forward to hearing what you all have to say...!

Uzma Abdullah · Answer

@Mark Albini Thanks for the info on Evansville, Indiana - will look into this and reach out to you if I end up coming to this area to invest.

@Alyssa Dyer Thanks for your insight! Would be happy to reach out when the time is right.

@Zeke Liston @Michael Reisman @Mikael Winkler @Brandon Goldsmith @Remington Lyman Thanks everyone, seems like Columbus is a popular one!

Uzma Abdullah · Answer

Account Closed Thanks for the encouragement and advice!

@Brandon Goldsmith Yes, Columbus seems hot because of the growth market! What percentage rent can you expect there? Is it at 1% and is there appreciation? I’m also curious whether the MFHs would be higher maintenance due to the older age of the units?

Account Closed · Answer

Hi @Uzma Abdullah,

You already have 3 properties, which is more than most people ever get!

Pick an area you feel comfortable betting your money on. It sounds like you did a lot of research to narrow down to these 5, and it's not a bad idea to diversify in different cities, instead of focusing on one.

Good luck!

Tom Ott · Answer

Cleveland is perfect for investing right now. It is not flooded with as many investors as some of those other markets. Prices are still low and the rent keeps going up, even during the pandemic!

Chad Stark · Answer

I purchased 2 properties in Kansas City and I'm happy to share my experiences and referrals. Shoot me a PM.

James Wise · Answer

Welcome aboard Uzma. Many markets available. Saw you mentioned Cleveland among other markets. 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 scam 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.

Brandon Goldsmith · Answer

The 1% is very achievable here. The city is pretty pocketed so it depends on what area you invest in. As far as maintenance goes, some of the homes will be older but a lot of investors see that as an opportunity to add a lot of value to a gentrifying area. @Uzma Abdullah

Mark Albini · Answer

@Uzma Abdullah Hey Uzma, I would recommend adding Evansville, Indiana to that list.

I am from Southern California as well. Started in 29 Palm (USMC) then Palm Springs then Oceanside.

I can tell you, as you know, that market there is absolutely crazy to try to invest in, 20% down is nearly 100k!

I have since moved to Evansville Indiana and have helped many investors, like yourself, from California start their financial freedom here.

It isnt a one horse town as most people think the Midwest is. We have a booming inner city with a rural outskirts. Approximately 118k people live here across 50 sq miles. Mostly blue collar workers.

We have a multitude of demographics depending on where in the city you reside. There are different neighborhoods, some median price ranges from 50k and others that give you that feel you're back in a California HOA of $1m+ homes.

I specialize in the rental homes from 30-75k as they have a low cost to purchase (typically $10-15k) and cashflow between 20-30% .

If you're interested, I'd be more than happy to talk to you about it.

Alyssa Dyer · Answer

@Uzma Abdullah you can grab properties that are cash flowing as-is for 60-80k in OKC. It's a super stable market so it's not a market I would invest in for appreciation. However there are some higher risk areas right outside of development that will likely see more appreciation than other areas in OKC. That's where I buy all my properties! Happy to discuss the market with you. Good luck!

Mike D'Arrigo · Answer

@Uzma Abdullah the markets that you mentioned are all very different so I recommend narrowing down your criteria more. Although both are in OH, these two markets couldn't be more different. Columbus has a vibrant, modern economy with a growing population and job growth whereas Cleveland has a shrinking population. St Louis is a depressed market with a local government that is unwilling to invest in their infrastructure and redevelopment. Phoenix has a booming economy with strong population and job growth but the time to buy in phoenix was several years ago before the recovery. Prices are now too high to cash flow well. Of the markets that you are looking at, I think Kansas City is the strongest. It has a good combination of cash flow coupled with strong economic and demographic fundamentals and a vibrant, diverse economy. I would also add Indianapolis to your list. It is very similar to Kansas City.

Choosing a market - thoughts and recommendations?

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