Hi everyone, I live and work in San Francisco, CA. I am new to the buying and selling world of real estate. As a strategy, I am thinking about owning multifamily properties (out of state). As a starter, I am looking to invest in 10+ units in emerging or high cash flow markets. My research is telling me that Kansas City,MO, Jacksonville,FL, Memphis,TN, Indianapolis, Cleveland,OH are hot spots. The problem that I am having is that a) are these markets too saturated? And b) what are some ways to find apartment buildings for sale besides sources such as loop.com? I am in the information consumption phase so any insight/guidance would be much appreciated.

Hey @Jameel Jason

Welcome to BP! We're so excited you're here and making connections. I highly suggest you to read, "The Ultimate Beginner’s Guide to Real Estate Investing". We wrote it with the beginner in mind. It’s an excellent place to start, and can answer many of your questions. You are in the right place to learn all about real estate investing! Best of luck! :)

Hello Jameel,

I am an investor and Realtor in the Kansas City area market. I can send you some options if you tell me what you are looking for.

Regards,
Garrett

@Jameel Jason Hello, fellow bay-area investor!

I've heard good things about all of those sub-markets. As a new investor, your challenge will be to narrow down a sub-market from all of the great opportunities that seem to present themselves. I would first start by coming up with your investor goals, and from their select a strategy, then a come up with a criteria for selecting your market. That will help you avoid the "Shiny new Object Syndrome" that most new investors fall into.

Each of those markets offer varying degrees of yield, appreciation, opportunities for progress, job growth, building stock, tenant classes, etc. Those are  just some of the variables that will influence your decision. 

Some resources that may help you narrow down your choices:

• CBRE Cap rate survey
• Marcus and Millichap Multifamily Investment Forcast
• IRR 2017 commerical real estate trends report

Also, I've seen this and similar questions already posted in this forum, and there was a lot more concrete suggestions, so give it a search!

Hope that helps!

James

I would like to piggy back off of what @James Kojo has said. In addition to identifying a market also know how you plan to invest. Do you want to put together your own team and own it outright, or do you want to passively invest in syndication? Both have their own strengths and weaknesses.

I represent a group that syndicates both commercial and multifamily investments in Kansas City and I could show you some examples of what we do. However, I am also more than willing to help connect you to people who can help you build your own team if that is where you are interested.

Happy Hunting!

A few of those are on my list. 

https://www.biggerpockets.com/blogs/10145/68178-to...

@Garrett Hawk thank you for the response. If you would like to send me some options that would be great! 

@Jared Kenealy I would open to connecting and looking at some examples you have. 

@Todd Dexheimer this is a great blog. Very detailed. This is going to help broaden my horizon. I wonder if Chicago would be a good option for low-income multifamily units? It seems as though you could by a 4 unit for $400,000 and rent it out to section 8. What are your thoughts on Chicago and low-income family units? 

@Jameel Jason Chicago is a tale of 2 cities. You have the growing and vibrant parts, with jobs and people wanting to live there and you have shrinking neighborhoods, with no jobs and people looking at how they can move out. Be careful of buying in the wrong areas. @John Casmon knows a lot more than I do about Chicago. 

@Jameel Jason The midwest is a great place to invest. The markets are usually clumped together, but they are fairly different. Cincinnati, Columbus, Minneapolis and Indianapolis are all seeing population growth, while still delivering solid cash-flow. Cleveland and Detroit are cashflow cows seeing growth in pockets, but the overall metro is still declining. 

As for Chicago, it has 77 neighborhoods. Even the south side is nuanced where you have neighborhoods like Gage Park which is seeing significant growth, but just to the east in New City, they have been shrinking since 1940.  

Lots of people are making great money in low-income housing, but property management is going to be critical. Chicago is extremely tenant-friendly and can take up to 9 months for an eviction so that cashflow you see on paper could turnout to be negative cashflow in a heartbeat if you place the wrong tenant.

Personally, I prefer market rent tenants in B class neighborhoods where I can get a balance of strong cash flow and appreciation. Think this is the best play in Chicago so you can avoid the professional tenants and take advantage of the major metro appreciation. 

@Jameel Jason All of those are strong cash flow markets. I'm not sure what you mean by oversaturated but I can tell you that all of them are still producing strong returns. I know the Indianapolis and Kansas City markets well. We've been active in both those markets for several years. Personally, I prefer Indy and KC because of their strong economic and demographic fundamentals on top of good cash flow. Both have growing populations, jobs and diverse economies. I'd be happy to share my thought on the markets and their opportunities if you'd like to reach out.

@Jameel Jason how’s it going. Are you a newbie investor? If so I wouldn’t recommend starting with a large number of units.  Also are you looking to flip as well? There seems to be a ton of people on the West Coast in places like Seattle and California  cities looking to invest in the Midwest. Chicago has high rent numbers and nice room for appreciation on properties but there’s some areas I would never recommend any investor to go. Also watch out for the taxes on properties. 

The Midwest is thriving right now in terms of good ROI and cash on cash return percentages. Like most investors who invest out of town I recommend you work closely with people who has experience within the area. In addition, also look into areas of northwest Indiana. They have a good number of areas with very nice CCR.

I personallly work with a couple of property managers and two sets of rehab guys that do excellent work, so I have built a nice system for out of state and foreign investors. So if you need any help on where to start looking to invest or have any other questions in general please let me know and I’ll do my best to help you. 

@Jameel Jason they problem when you go higher than 4 units is that you go into commercial realm. And having no track record is hard for a bank to loan and is a big risk. You don’t really know what you don’t know.

If you want to stick with investing in-state, I highly recommend looking into Kern County (it's a couple hours north of Los Angeles).  Very inexpensive to buy here, but a strong rental economy.

@Todd Dexheimer Thanks for the list! I am glad to see Las Vegas in there as well. We have calculated a similar population growth actually!

What exactly is a sub-market? I came across it in my research, but not sure i fully understand it?

Thank you, everyone, for responding to my post. @John Casmon I appreciate the overview on Cashflow markets. I have been toying with the idea of Detroit - it's just so far out. My reasoning for Chicago was cheap entry.  I was thinking about finding a location that qualifies for section 8 tenants and renting it out to them.  I guess it would make more sense to (as a starter) to look for a place that is landlord friendly.

@Mike D'Arrigo just sent you a PM.

@Elbert D. I am not looking to flip - I want to purchase multifamily units for rental purposes.  I'd love to learn more about your journey. 

@Max Gradowitz  

@Max Gradowitz  I just looked into Kern County - it seems like a good place to invest. Do you own some rental properties out there? If you have anyone you could put me in touch with - it would be much appreciated. 

Originally posted by @Tonette Whitted :

What exactly is a sub-market? I came across it in my research, but not sure i fully understand it?

Sub-market is a neighborhood within a market. Downtown is a sub-market, but you could potentially break that down to west downtown or east down town or even between 3rd St and 10th St from Park Ave to Lincoln Ave. Sub market could be fairly large like the northern suburbs or small. 

@Todd Dexheimer thank you for you contribution here on the site!  I've heard you say you were getting into the Milwaukee market, but I didn't see it on your list.  Any reason you left it off?

@Rick Decker I own a dozen units in Milwaukee. The cash flow is there, but the growth is limited. If you invest in Milwaukee, I suggest east of the Wisconsin river or the suburbs

@Todd Dexheimer , I agree with your recommendation on where to invest in the Milwaukee market.  East of the river is becoming harder and harder to make the numbers work so just wanted to touch base to see if you would be willing to share your criteria used before buying?  What numbers are you looking for?

I would highly recommend looking at syndications in the markets you listed. It allows you to scale, take advantage of economies of scale (as in 150-400 units), while not sacrificing much if any in terms of ROI. The key is to find and vet good quality sponsors/syndicator/operators that are professional and have a proven track record. I have experience with quite a few operators in the Indy and other Midwestern markets and would be happy to connect you.