New, Out-of-State Investors Looking into Kansas City and/or Charlotte

27 Replies

Hi! My husband and I live in Los Angeles, California, and are looking to invest buy-and-hold, out-of-state properties. We’re looking for 1-2 multifamily properties that don’t need rehabbing in a blue-collar or above neighborhood.  Our main goal is cash flow, and we’ve become increasingly interested in both the Charlotte and Kansas City markets thanks to good mortgage-to-rent ratios, strong local economies with growth potential, and personal/family connections.

Here's a question for the more experienced investors among us: How do you recommend we go about finding a TRULY AWESOME realtor and/or a turnkey management company in these two areas?  Personal recommendations are welcome, as is any additional advice you may have.  Thanks in advance!!

There are several people who specialize in that. Our very own @Ali Boone here on BP, for instance. @Julie Falen (who I think is here, too) does them in Kansas City. Black Belt Investments does them all over the country with a good bit of success and he is also local to the SoCal area. If you look around BP and get references for these turnkey enterprises, you will find some good ones.

In the mean time, read, read, read everything that you can here on BP and elsewhere.

Mark

Heya! Thanks @Mark Mynhier :)

I live in LA as well and have only bought turnkeys out-of-state. I never did anything in KC as the midwestern markets don't appeal to me as much because they have a lot less growth potential than other markets (they are considered stable markets) and Charlotte was great a couple years ago but the hedge funds ran into and depleted the inventory. All the turnkey folks I know there went out for lack of inventory. There are a lot of other markets out there though too, all just depends on what you are looking for. If you go the turnkey route, I don't necessarily recommend choosing a market just based on where you know people, because the PM will take care of it all anyway so you don't want to sacrifice returns for no reason.

I live in Charlotte and I agree with Ali.  I started looking for a rental property this year. I am atleast 6 months late as most of the deals are gone (based on the sold prices in zillow).  I short listed 7 properties and 4 of the top ones were gone in 2 weeks.  Market is getting hot.   Keep checking and you may get a good deal.  Good luck

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Hi @Ellyn S.  

I agree with @Ali Boone  . Choose a market for it's economic and demographic fundamentals, not because you know someone there. Kansas City and Indianapolis are both very good cash flow markets. I agree with what others are saying about Charlotte. The rent ratios aren't working anymore. 

Best of luck to you.

Hi @Ellyn S.  

I live in Los Angeles, and have been investing out of state for years (TX, TN and GA).

Great advice from everyone here. Don't invest until you have a good idea of what the market is like, growth, vacancy rates, etc etc etc.

Once you pick the market, figure out your team....and the deals come last!

Best of luck to you!

Andrew

@Ellyn S.  welcome to bigger pockets! I currently live/invest in Kansas City, as well as some surrounding suburbs and have had good success. 

Multi-family is harder to come by outside of the KC metro area. The type of MF areas you mentioned you are looking for (blue-collar and above) exist in pockets, but really vary block by block.

If you're at all interested in SFHs, there still seem to be an abundance of great B&H investments opportunities there in and around KC.

Best of luck!

Ray Orellano, Real Estate Agent in KS (#BR00231137)
913-998-6285

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Folks, this is NOT an opportunity to offer your services to @Ellyn S.    You guys know that goes in the Marketplace ONLY.

Charlotte has definitely changed over the past 2 years with the Hedge funds and all but there are still deals.  We market for them all, we are looking for rehabs, buy and holds, and then wholesale what we don't want.  But we are also looking to venture out where full service wholesalers are so we know our investment will be handled right.

Thanks everyone!  I appreciate the insights.

Originally posted by @Ellyn S.:

Hi! My husband and I live in Los Angeles, California, and are looking to invest buy-and-hold, out-of-state properties. We’re looking for 1-2 multifamily properties that don’t need rehabbing in a blue-collar or above neighborhood.  Our main goal is cash flow, and we’ve become increasingly interested in both the Charlotte and Kansas City markets thanks to good mortgage-to-rent ratios, strong local economies with growth potential, and personal/family connections.

Here's a question for the more experienced investors among us: How do you recommend we go about finding a TRULY AWESOME realtor and/or a turnkey management company in these two areas?  Personal recommendations are welcome, as is any additional advice you may have.  Thanks in advance!!

Just a note, if you are buying out-of-state in KC, I would focus on the working class suburbs (i.e. Grandview, Raytown, Belton and maybe Independence) along with some in-between areas like the Waldo (west of Troost between 90th and Gregory) and near the old Bannister mall (east of 435, north of 470 and south of Raytown) or north of the river in Clay County. Stay out of the urban core in both KCMO and KCK. You can make money there, but it is way too risky to try to manage something like that so far away. I've seen several people get taken by shysters who push them to invest in the core because the prices look so good, but before they know it, they're stuck with terrible asset they paid way too much for.

These areas are what locals sell to out of state investors :)  Come on guys...  These areas are catching the bleed of the ghetto gentrifing and a dieing base of older industry driven generation.  I doubt the GM plant will make it much longer, and anybody that lives in the MO burbs is in the Northland, Parkville, or Lee Summit.  Blue Springs is still pretty decent, but i don't see things getting better for any of those areas.  

Independence is still suffering from the meth epidemic, Raytown declines being next to Independence and catching people losing housing from the city cleaning up crime from the west.  Grandview catches the bleed of Ruskin becoming a ghetto rental nightmare.  Not a fan of the construction from those eras either.

People in there 20's and 30's continue to come to the city or go to Johnson county as it's the nicest suburbs in the metro area.  I would rather invest and go with the 1 percent rule in Johnson county than mess with anything that will continue to decline.

Originally posted by @Kyler Rice:

These areas are what locals sell to out of state investors :)  Come on guys...  These areas are catching the bleed of the ghetto gentrifing and a dieing base of older industry driven generation.  I doubt the GM plant will make it much longer, and anybody that lives in the MO burbs is in the Northland, Parkville, or Lee Summit.  Blue Springs is still pretty decent, but i don't see things getting better for any of those areas.  

Independence is still suffering from the meth epidemic, Raytown declines being next to Independence and catching people losing housing from the city cleaning up crime from the west.  Grandview catches the bleed of Ruskin becoming a ghetto rental nightmare.  Not a fan of the construction from those eras either.

People in there 20's and 30's continue to come to the city or go to Johnson county as it's the nicest suburbs in the metro area.  I would rather invest and go with the 1 percent rule in Johnson county than mess with anything that will continue to decline.

The core is generally what is sold to out-of-state investors by less reputable investors, not the working class suburbs. Grandview gets some runoff from Ruskin, but that's nothing new. Generally, Grandview is on the upswing. Prices have certainly gone up there recently, especially with the Intermodal and Honeywell plant going in the in the south. The new Cerner development where the old Bannister mall is should be a big boon to that area. Raytown's demographics have hardly changed in the last 10 years. Independence is touch and go depending on the area, but yes, it does have a lot of meth. And yes, these areas require more diligent property management than Johnson county or Lee's Summit, but it's not like they are the "ghetto" or are even becoming that way. It's not hard to find quality tenants and they cash flow really well.

There's no real reason to invest out-of-state in Johnson county. You might as well just invest closer to home unless you live in San Francisco or the like, and even then, invest somewhere else in California. Then again, I'm not a fan of investing out-of-state in general.

I lean more on the side of @Account Closed   said regarding those areas, that if you're looking solely for high cash flow or a strict 2% rule, some of those working class suburbs may be better, but those and parts of the inner city also have much higher risk and vacancy in my opinion.

I see JOCO as a tremendous value for in-state or out of state investors. You're purchasing an established market, with A/A+ schools & tenants. While the prices may be higher than most of the other suburbs mentioned, it's still the midwest. To me, anyone coming from the coast areas (I'm from the east coast myself) should appreciate the value of being able to get into a SFH in a fantastic area for the low $100s. I'd agree though that there's not a lot of appeal for those investing from other Midwest/Southern states.

Ray Orellano, Real Estate Agent in KS (#BR00231137)
913-998-6285

The core was sold before the GFC hit, nobody buys it now.  Hence, why people now get the next in line.  You can paint the picture anyway you like...  They cash flow ok if you wanna deal with all the problems, or as you put it "these areas require more diligent property management"  Same type of management the ghetto takes!

I would rather invest in JOCO, i wasn't suggesting out of state investors do so.  

Originally posted by @Kyler Rice:

The core was sold before the GFC hit, nobody buys it now.  Hence, why people now get the next in line.  You can paint the picture anyway you like...  They cash flow ok if you wanna deal with all the problems, or as you put it "these areas require more diligent property management"  Same type of management the ghetto takes!

I would rather invest in JOCO, i wasn't suggesting out of state investors do so.  

I still see plenty of wholesellers and agents sending me properties in the core. It certainly has slowed down there, but some are still buying and more definitely still trying to sell that stuff.

As far as "diligent property management" is concerned, it's basically good screening and being quick to evict. In fact, we have a dozen properties in Lee's Summit and half a dozen in JoCo and do the same thing there. It's easier in those places of course, but the margins are smaller. I mean, what are there only two markets in the KC area? The ghetto and JoCo? That's like saying investing in Overland Park is the same as investing in Mission Hills. 

I mean let's compare one "ghetto" zip code at random, say 64128, to Grandview. 

Crime Rate (national average = 100)

Grandview: 109

64128:  346

Population Growth Since 2000

Grandview: + 6.24%

64128: -16.20%

Median Household Income

Grandview: $47,504

64128: $27,697

Occupancy Rate

Grandview: 95.61%

64128: 88.03%


Yeah, they're exactly the same.

Source: www.CLRSearch.com

Thanks, @J Martin!

And thanks, @Andrew Syrios, for your input, as well!

I am an active investor in the Grandview rental market.  If you have any questions please don't hesitate to ask.  I own 9 properties in the Grandview market and know the market very well. I don't mind helping!

Quality is in the eye of the beholder. One persons trash is another persons treasure.

I don't touch anything residential. Too much drama and headache for me. If you have limited capital then that is what is available to most investors starting out. New investors with smaller capital also generally relate to people renting out houses or units etc. whereas the other asset types it takes more to learn them.

I think investing in subpar areas with a house depending on landing an AWESOME agent as someone put it is  a long shot. Those agents managing a low income house is making peanuts per month. As soon as a house sale comes along they tend to drop managing your rental actively like a ton of bricks.

All agents are not this way. I am just saying do not expect agents to jump up and down for joy and manage houses in the ghetto for peanuts in PM fees. They will have to go there multiple times for rent to collect and then hear all these complaints.

Some investors will of course  chime in and say they love these types of houses and they do not mind dealing with it for the extra cash.

If you talk to enough seasoned investors they will tell you from decades of experience that it is hard enough keeping a C type property performing living close by much less out of state.

You might want to buy only in those areas if it throws off a 3% etc. to make it worth your time. People look at it with the 2% of purchase price with rents and think it's an okay area it's worth it but it's not. At least to me.

The name of the game is to find QUALITY areas and PROPERTIES for the best price. 

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