200k and a very low dti what would you buy and why

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200k and a very low dti what would you buy and why

Patrick Thomas Dickinson
Investor · Sf Bay Area · Member since 2021 · 90 posts · 41 votes

I have 200000k for a down payment and the ability to get around another   400000k in lending from a lender 

I own 2 single family homes, 1 in California and one in Texas there both newer and knock on wood don’t give me to many problems. I live in California. 

Im just wondering what would your next purchase be if you had my finances. I want to scale faster so I’m thinking out of state multifamily but any opinions would be appreciated. 

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Frank Rodrigues
Investor · Kansas City, MO · Member since 2021 · 110 posts · 65 votes
5y
Originally posted by @Patrick Thomas Dickinson:

@Frank Rodrigues

any other markets you think are worth a look outside of KC?. This is probably a three month goal for me, so I want to start analyzing deals now. 

I would look at Ohio as another option. I have had success in Cleveland and Dayton. Columbus has been great as well for many others. I hope that helps. 

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  • Grant SchroederPro Member
    Lender · OR ID AZ CA WA CO NV TN MT · Member since 2018 · 599 posts · 312 votes
    5y

    @Patrick Thomas Dickinson definitely small multifamily! Great way to create cash flow, get a solid ROI, and scale your wealth quickly.

    [email protected]541-231-1256
    0Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    5y

    Personally I'd buy STR across a few different spots. I like the cash flow they generate, being able to vacation there and the fun cabins/homes you can buy. I see investors BRRR, buy turn key, flip, or multi family. It comes down to goals and what excites you. Midwest is an ideal place for cheaper homes compared to CA or TX

    0Reply
  • Marc RiceBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    @Patrick Thomas Dickinson

    You’ll find affordable homes in the Midwest and may be able to get a few small multi family and have a property manager manage them. Some 4 units in my market start around the $200k point so could even buy 2 of those instead of 4-8 single families.

    It’s all your preference based upon your goals, but overall the Midwest is a great market.

    [email protected]614-363-2787
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    0Reply
  • Frank Rodrigues
    Investor · Kansas City, MO · Member since 2021 · 110 posts · 65 votes
    5y

    Personally, I would go with multi-family in a market that is reliable with a track record of good cashflow and appreciation like KC. Your money will go a lot further and with what you are working with you could be close to that annual six-figure threshold if you know where to look.

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    5y

    @Patrick Thomas Dickinson personally I would look outside of your two markets. CA is too expensive and property taxes and insurance are too high in TX to cash flow well. If you want to scale quickly, I recommend medium sized multi families in affordable markets with reasonably low property taxes. We focus on the Quad Cities and Davenport, IA in particular, for this asset class. I like Davenport because it's very affordable, has a growing population, a highly diverse economy, business friendly climate and IA is a landlord friendly state. In addition, Amazon just announced in July that they are building a $250M distribution center there and will be hiring 1000 new employees. I highly recommend adding it to your radar.

    2Reply
  • Patrick Thomas Dickinson
    OP
    Investor · Sf Bay Area · Member since 2021 · 90 posts · 41 votes
    5y

    @Frank Rodrigues

    any other markets you think are worth a look outside of KC?. This is probably a three month goal for me, so I want to start analyzing deals now. 

    1Reply
  • Frank Rodrigues
    Investor · Kansas City, MO · Member since 2021 · 110 posts · 65 votes
    5y
    Originally posted by @Patrick Thomas Dickinson:

    @Frank Rodrigues

    any other markets you think are worth a look outside of KC?. This is probably a three month goal for me, so I want to start analyzing deals now. 

    I would look at Ohio as another option. I have had success in Cleveland and Dayton. Columbus has been great as well for many others. I hope that helps. 

    2Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Patrick Thomas Dickinson:

    I have 200000k for a down payment and the ability to get around another   400000k in lending from a lender 

    I own 2 single family homes, 1 in California and one in Texas there both newer and knock on wood don’t give me to many problems. I live in California. 

    Im just wondering what would your next purchase be if you had my finances. I want to scale faster so I’m thinking out of state multifamily but any opinions would be appreciated. 

    I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager.

    https://www.biggerpockets.com/blog/core-four-real-estate-team

    I invest locally in Columbus, Ohio

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    1Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Patrick Thomas Dickinson the simple (and only) answer is to buy as many doors as possible in the most stable and growing market you can find...this would take on the form of a small multifamily property...probably in the 8-12 unit range within 20-minutes of a major metro city....you can find this in Columbus, Cleveland, Cincinnati, Kansas City, Raleigh-Durham, Nashville, Indianapolis, and other comparable cities...they key is finding the property...C-class value add with a strong property manager and you're off to the races...5-year hold with improvements made, operating expenses lowered, and income driven higher means your valuation will come back with enough equity to pull and repeat the process.

    937-979-7000
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    1Reply
  • Melinda McDonald
    Property Manager · Kansas City · Member since 2021 · 59 posts · 42 votes
    5y

    I will add my two cents for Kansas City.  There are a variety of properties available and certainly, with your investment goals, you should be able to find something that meets your return criteria.  As mentioned, getting your team in place is key.  Available if you have any questions!

    Melinda

    2Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    5y
    Originally posted by @Patrick Thomas Dickinson:

    I have 200000k for a down payment and the ability to get around another   400000k in lending from a lender 

    I own 2 single family homes, 1 in California and one in Texas there both newer and knock on wood don’t give me to many problems. I live in California. 

    Im just wondering what would your next purchase be if you had my finances. I want to scale faster so I’m thinking out of state multifamily but any opinions would be appreciated. 

    I saw it mentioned that you should target 8-12 unit buildings in markets like Cleveland. Note that in Cleveland the price per unit on buildings like that combined with the difficulty in financing those types of assets leads investors to a lower ROI per unit than a 2-4 unit would net them. 8-12 unit buildings are very unattractive investments to commercial lenders, while 2-4 unit buildings will qualify for 30 year residential financing. This is the best type of financing in the game.

    1Reply
  • Tyler Anderson
    Member since 2021 · 14 posts · 8 votes
    5y

    My partner and I will be in a similar situation soon, with hundreds of thousands of dollars of available cash and then opportunities for financing on top of that. Its fun to think of the possibilities (we are looking at short term rentals for now).  Seems like we want to try and use the cash for as many down payments as possible so that we can use low interest rate loans to expand our portfolio much more than if we just payed cash for 1 or 2 places. 

    0Reply
  • Kendall Short
    Lender · Kansas City, KS · Member since 2017 · 68 posts · 112 votes
    5y

    Kansas City is still a hidden gem. 1.5-2 DSCR is very achievable, and the appreciation looks to have major continuity. With a major hospital downtown and 30+ colleges in the surrounding cities, the growth has been insane for those that have been in this market for the past few years.

    2Reply
  • Patrick Thomas Dickinson
    OP
    Investor · Sf Bay Area · Member since 2021 · 90 posts · 41 votes
    5y

    @Kendall Short Is there a specific area or certain ZIP Codes that you would focus your research on I’m looking for C class or higher properties

    0Reply
  • Melinda McDonald
    Property Manager · Kansas City · Member since 2021 · 59 posts · 42 votes
    5y

    @Patrick Thomas Dickinson - Good morning - Zip codes can sometimes be tricky as neighborhoods can change within a particular zip.  Areas to consider are Raytown, Liberty, parts of Independence, Gladstone, Lee's Summit and Blue Springs.  There are a number of good areas within KC proper.  The areas around Research Hospital are proving to be good in terms of good value.  Reach out if I can be of any assistance.

    Best,

    Melinda

    1Reply
  • Michael Plante
    Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes
    5y

    You can have:

    Good cashflow 

    Good appreciation 

    Stable rental situation

    pick two of the above . 

    Take a look at the cities you are considering 

    how much appreciation has there been in the last 5 years?   10 years?

    0Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 997 posts · 1k+ votes
    4y

    Hello Patrick,

    I recommend starting with a written set of goals and work backward to where you are today. It does not have to be lengthy, but you need to know where you are heading.

    Also, look beyond the initial return. Metrics like ROI and cash flow only predict how a property is likely to perform on day one under ideal conditions. Such metrics tell you nothing about what is likely to happen beyond the first day; most people hold properties indefinitely so this is important. As to the property type, it does not matter. Let the numbers make the property selection for you. The best opportunity you find could be a townhouse, a multi-family, or whatever. Do not let dogma drive your selection.

    The most important investment decision you will make is the location, not the property. Below are the key indicators of a good investment location.

    • Appreciation - The number one criteria in location selection is appreciation. Inflation is constantly eroding buying power; each year, it costs more to buy the same set of goods. If you buy in a location where prices and rents are rising faster than the inflation rate, you will be able to buy the same set of goods because you will have the additional dollars you need from increased rents. When you are evaluating appreciation, ignore the COVID period. During the last year+, locations with low appreciation rates suddenly started performing. This is a blip and not a long-term change. If you buy in a location where prices and rents are increasing below the inflation rate, the amount of goods you can buy will decline over time.
    • Population Size - Greater than 1 million. Small towns may rely too much on a single business or market segment.
    • Population Growth - If people are moving into a location, many things have to be right. I would not invest in any location where the population is stagnant or declining.
    • Crime - People and companies will not move to locations perceived as dangerous. One source of cities to avoid is Neighborhood Scout's 100 most dangerous cities. Avoid any city on this list.
    • Disaster Risk - Some parts of the country are more prone to natural disasters. The best indicator for natural disaster probability is homeowners insurance cost. I would avoid states with high insurance rates. Note, even if insurance pays for all the damage your property suffers, you still lose. When a significant disaster occurs, people and jobs move to locations where they can make money today. The location may take years to recover, or it may never recover. ValuePenguin is a good source for the relative cost of insurance by state.
    • Operational Costs - Costs like property taxes, insurance cost, state income taxes, regulatory costs (ex: time and cost to evict), inspections, rent control, etc., have a tremendous impact on your return. Select a location with relatively low operational costs. Operational costs are a direct hit on profitability.

    In Conclusion

    Start with defining your goals. Remember that location is the most important decision you will make. After that, let the numbers drive everything else, not dogma.

    ...Eric

    [email protected]702-358-8884
    FERNWOOD Team, KW VIP Realty520 Reviews
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    1Reply
  • Laura MarksBusiness Member
    Real Estate Broker · Independence, MO · Member since 2020 · 131 posts · 111 votes
    4y

    Good PM's will handle all of these 4, no need to find all of them, individually.  A Realtor that can accurately tell you rent prices just based on the address is GOLD. I don't want to help anyone purchase something I can't rent. I get so excited trying to find great cash flow for my clients. Expect Better! 

    816-592-1185
    0Reply
  • Laura MarksBusiness Member
    Real Estate Broker · Independence, MO · Member since 2020 · 131 posts · 111 votes
    4y
    Originally posted by @Tyler Anderson:

    My partner and I will be in a similar situation soon, with hundreds of thousands of dollars of available cash and then opportunities for financing on top of that. Its fun to think of the possibilities (we are looking at short term rentals for now).  Seems like we want to try and use the cash for as many down payments as possible so that we can use low interest rate loans to expand our portfolio much more than if we just payed cash for 1 or 2 places. 

     You should think about doing this now, interest rates aren't going to be this low much longer. 

    816-592-1185
    0Reply
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