Where to Purchase First Rental Property

[Logan French]

Hello,

My wife and I just moved to Boston, MA and we are looking to start investing in real estate soon. From what I have been told so far, it seems like it difficult for new investors with limited starting capital to be able to purchase a cash flowing property in or around the Boston market, and I have been told that MA is not a landlord friendly state. This leads me to think I might should invest OOS. I am originally from Arkansas and the lived in Memphis, TN for some time, and I know it would be easier to cash flow in those markets. However, everyone I have spoken with has told me my first real estate investment should be local. 

I am conflicted if I should invest locally in a more challenging market for new investors, or invest in OOS markets, like AR or TN, that would be easier to cash flow. 

What are your thoughts? Also, if anyone knows of a great area around Boston, or even outside of Boston, to invest in 2-4 unit properties, I am open to any and all suggestions. Thank you! 

[Patrick Drury]

@Logan French
I would definitely recommend Columbus OH. It's a solid hybrid market of cash flow and appreciation. Columbus has lots of job opportunities and population growth. I currently live and invest here in Columbus OH and would recommend it. Also, Columbus is very landlord friendly. 

[Steven Foster Wilson]

Quote from @Logan French:

Hello,

My wife and I just moved to Boston, MA and we are looking to start investing in real estate soon. From what I have been told so far, it seems like it difficult for new investors with limited starting capital to be able to purchase a cash flowing property in or around the Boston market, and I have been told that MA is not a landlord friendly state. This leads me to think I might should invest OOS. I am originally from Arkansas and the lived in Memphis, TN for some time, and I know it would be easier to cash flow in those markets. However, everyone I have spoken with has told me my first real estate investment should be local. 

I am conflicted if I should invest locally in a more challenging market for new investors, or invest in OOS markets, like AR or TN, that would be easier to cash flow. 

What are your thoughts? Also, if anyone knows of a great area around Boston, or even outside of Boston, to invest in 2-4 unit properties, I am open to any and all suggestions. Thank you! 

 Hi Logan,

Have you started to even look at the Boston market? If you are really considering then I would start to run numbers. I think that will help it be more clear to you if you should invest there or not. I like to use this calculator https://www.calculator.net/ren.... I would also start to go to meet ups in that area. Find a mentor who is doing what you want to be doing and you can bounce ideas off of. 

If you are considering OOS then first things first, get your core 4 https://www.biggerpockets.com/.... I personally even have that here locally because if I do ever move I already want to have all my systems in place.

I agree with Patrick that Columbus is a great market. Wherever you choose to invest in look at population growths and are their jobs. Here in Columbus we have huge corporations choosing to set up shop here like Amazon, Intel, the Limited, and more. Check out AR and TN to see are there companies moving there? Will it continue to appreciate? 

Are you wanting to get into A class rentals, B class rentals, C class, or F class. Know this and why will also help you choose the market. Write out your plan and how you want to get there. 

[Jonathan R McLaughlin]

There are probably a dozen different market dynamics within relatively easy driving distance of Boston, including NH, ME and RI. If you have any interest in learning real estate and growing a portfolio it would be foolish to go really far out of state instead of investigating here. Happy to help, but I think you need to do at least a little research first for us to be most effective. 

Give us a sense of your budget and we can provide more guidance.

People say MA is not a landlord friendly state but I think we get a bad rap on that one. If you play by the rules you will be ok. Most of the so called "tenant friendly" laws are common sense practices. Learn about lead liability though :)

[David Lyons]

Hey @Logan French I grew up on the South Shore of Boston and living outside Atlanta now!   I would recommend a variation of a house-hack in the greater Boston area - I personally like what I call the "Airbnb House-Hack".  There are many variations of doing this that don't necessarily involve sharing a common entrance.  This can offset your cost of living to the tune of $2 - $4k a month.

That being said, if you've thought about and crossed off house-hacking as an option, Atlanta is a great market.  Specifically, furnished mid-term rentals are a great recession-resistant way to generate cash-flow in this market.

[Jack Davitt]

Have you looked into the Western MA area? Only about an hour and a half to Springfield and the prices are way cheaper. Lots of local colleges/universities as well. 

[Alex Evans]

Hey @Logan French

Investing out of state for your first investment is very normal. This is especially due to the value of properties that are in other areas, and the cash flow that can be made. 

Whether you are looking for good cash flow or better appreciation the Memphis market can offer it!

I would be more than happy to discuss the opportunities that are out here! 

[Scott Allen]

@Logan French

Look into Columbus, OH if you're looking for a landlord friendly state with good cash flow and solid appreciation. If you invest out of state, first identify the market you want to invest in then build your core four.

[Logan French]

@Alex Evans What do the "X" and "$$" represent in your map? I actually used to live in one of the "X" areas before moving to Boston. 

[Alex Evans]

Hey @Logan French

The X areas are just places that we do not buy in.

We tend to stay away from the Downtown and Midtown area as well just because we focus more on the rest of the city and the suburbs! So that is why there are those X's around the downtown area. 

The $ or $$ sign place are just places where it does not typically make sense to invest for cashflow purposes here in the city because the value of them are too high when you compare it to the rents that you would be able to get. 

[Billy Daniel]

Hey @Logan French!  David Greene wrote the book on long distance investing.  Its available on here.  I would start with that so you get a good idea of what it looks like.  I'm a realtor here in Arkansas, and I will say we have plenty of investors from out of state.  Because it is your first, I would say its wise to have your first at least somewhat nearby.  It really comes down to what you are most comfortable with!  Good luck!

[Sean Mcentee]

@Logan French There are a ton of cash flowing areas outside of Boston. I have investments in Florida, North Carolina and Massachusetts. However, these were all purchased while I was living in those states. Buying in areas you are not familiar with is very risky. There are plenty of places in the country with great cash flow but without being able to personally inspect the houses you are putting yourself at great risk of missing potential pitfalls such as hidden issues with the home and buying in deteriorating neighborhoods. Stick to what you know. If you have questions about the Massachusetts market feel free to reach out to me.

[Kiera Underwood]

@Logan French where are you from in Arkansas? I have a friend that hasn't listed his income producing property in Bentonville AR and am happy to connect you with him for a FSBO situation. It's positioned as an LTR now but tenants move out in a couple of months. At the 300k appraised value it won't cash flow as an LTR but Bentonville is PRIME for STR. I've ran the numbers and it absolutely works! I'd honestly be purchasing if I hadn't just bought two in Oklahoma City. I'm most familiar with the OKC market and own LTR and STR there if you're curious about what those numbers look like. I've seen hundreds of people over the last couple of years invest OOS in OKC, and most of them were purchasing their first or second rental. Happy to overview what that looks like for you so that you have it in your back pocket as you compare markets! Good luck getting started!

[Joshua Messinger]

Hey @Logan French! 

It's very common for investors to get started in OOS REI to begin with due to extremely inflated home values in certain parts of the country making it nearly impossible for people to get a property in the area they live in.

If you intend to go the OOS  route I would recommend finding a one-stop property management company that can take care of all operations so you do not have to travel to the unit all the time. There are PM companies all around the country that operate like this but you need to make sure that you vet them heavily so they offer everything you need.

Otherwise, one of the best areas I have found right now for OOS investing with lower home values is Poconos, PA. If you'd like more info on the area please don't hesitate to reach out! 

All the best,

Josh Messinger

[Drew Sygit]

@Logan French

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

[Andre Crabb]

Quote from @Logan French:

Hello,

My wife and I just moved to Boston, MA and we are looking to start investing in real estate soon. From what I have been told so far, it seems like it difficult for new investors with limited starting capital to be able to purchase a cash flowing property in or around the Boston market, and I have been told that MA is not a landlord friendly state. This leads me to think I might should invest OOS. I am originally from Arkansas and the lived in Memphis, TN for some time, and I know it would be easier to cash flow in those markets. However, everyone I have spoken with has told me my first real estate investment should be local. 

I am conflicted if I should invest locally in a more challenging market for new investors, or invest in OOS markets, like AR or TN, that would be easier to cash flow. 

What are your thoughts? Also, if anyone knows of a great area around Boston, or even outside of Boston, to invest in 2-4 unit properties, I am open to any and all suggestions. Thank you! 

Hey Logan, I'd be happy to help you look around the Boston area or even out of state. Are there other cities you're considering?

I got tired of always updating spreadsheets with data so I built a website to do the heavy lifting for us investors...Its really easy to compare different cities and even neighborhoods in your area using Lazyboots. Having the data points and rankings right there really helps make objective decisions.

Maybe we can find a market close to you that still makes sense and won't be as challenging as you think.

Best of luck!

[Dale Bertrand]

@Logan French I'm in Boston too. Highly recommend a house hack in Boston. You could get better cash on cash return elsewhere but everyone's situation is unique. You need a place to live in/near Boston and you are on the ground learning about different neighborhoods already. Get started learning real estate with a local deal. It's ok if it's a base hit and not a home run. The key is to get started so you start learning and then find better deals has you matured as an investor.

[Jonathan Bombaci]

We help many clients househack 2-4 unit properties in Greater Boston with 3.5% down. The market is still very competitive but we’ve been able to get quite a few fha offers accepted in the last few months. Its a great way to get started in expensive markets with limited capital. 

We’re also investing in quite a bit of real estate in southern NH and along Route 2 in central MA. We’ve been buying lots of real estate specifically in Gardner MA and the Dover area in NH, both are within driving distance of Boston. Prices are better and you can find decent properties that cashflow. 

Best,

Jon  

[Nicholas Coulter]

Quote from @Logan French:

Hello,

My wife and I just moved to Boston, MA and we are looking to start investing in real estate soon. From what I have been told so far, it seems like it difficult for new investors with limited starting capital to be able to purchase a cash flowing property in or around the Boston market, and I have been told that MA is not a landlord friendly state. This leads me to think I might should invest OOS. I am originally from Arkansas and the lived in Memphis, TN for some time, and I know it would be easier to cash flow in those markets. However, everyone I have spoken with has told me my first real estate investment should be local. 

I am conflicted if I should invest locally in a more challenging market for new investors, or invest in OOS markets, like AR or TN, that would be easier to cash flow. 

What are your thoughts? Also, if anyone knows of a great area around Boston, or even outside of Boston, to invest in 2-4 unit properties, I am open to any and all suggestions. Thank you! 

My vote is a local market house hack! If you and your wife are up to it rent out spare rooms in a SFR. If not get a multi unit. Pick your neighbors and get a steep discount on your mortgage. This I think will allow you to feel more comfortable about the ins and outs of RE investing and then you can go out of state if you like! My wife and I rent out our spare rooms and we haven't had much inconvenience and it's been the best financial decision we have ever made.

[Nicholas D.]

Massachusetts is definitely an area where you have to be creative with numbers, like short term rentrals/AirBNB or something near a college.

You would be hard pressed to find anything like a 2-4 FHA qualified multifamily that cash flows anywhere near Boston or the South Shore. Too much competition and prices don't work. Investors focus more on appreciation, or the hope there of.

A previous poster mentioned Western Massachusetts which might be possible, but it wouldn't be worth it if you want to scale your portfolio in that area since it's too spread out.

You would be best served looking down in Rhode Island where the multi family's are better return on investment, but more of a lower income area however.

I'm local to the South Shore area but am relocating out of State to invest in an area where I can reach strong cash flow, and scale my portfolio.

[Trent Reeve]

Quote from @David Lyons:

Hey @Logan French I grew up on the South Shore of Boston and living outside Atlanta now!   I would recommend a variation of a house-hack in the greater Boston area - I personally like what I call the "Airbnb House-Hack".  There are many variations of doing this that don't necessarily involve sharing a common entrance.  This can offset your cost of living to the tune of $2 - $4k a month.

That being said, if you've thought about and crossed off house-hacking as an option, Atlanta is a great market.  Specifically, furnished mid-term rentals are a great recession-resistant way to generate cash-flow in this market.

 as a very new, want to invest person, where are you finding these deals in Atlanta? i am not seeing them

[Eliott Elias]

Within a 30 min radius from where you live. There are going to be a lot of lessons to be learned through your first property. 

[David Lyons]

Quote from @Trent Reeve:

Quote from @David Lyons:

Hey @Logan French I grew up on the South Shore of Boston and living outside Atlanta now!   I would recommend a variation of a house-hack in the greater Boston area - I personally like what I call the "Airbnb House-Hack".  There are many variations of doing this that don't necessarily involve sharing a common entrance.  This can offset your cost of living to the tune of $2 - $4k a month.

That being said, if you've thought about and crossed off house-hacking as an option, Atlanta is a great market.  Specifically, furnished mid-term rentals are a great recession-resistant way to generate cash-flow in this market.

 as a very new, want to invest person, where are you finding these deals in Atlanta? i am not seeing them

 @Trent Reeve I look in about 20-30 miles north of Atlanta.   Though it takes putting together a creative deal where you can create/extract value that most do not see.   This is why I like furnished rentals.   Also, for example, identifying a single family that you can make two Airbnb units out of.  It's not typical 3/2, put in your average tenant on a long-term lease type deals.

[Brendan Harrison]

Have you looked into Oklahoma? Our numbers are staying strong, cost of living is low and the state is very landlord friendly. We're also growing like crazy, so tons of cashflow opportunity.

I'm a real estate investment specialist in the Oklahoma City and Tulsa markets and I work with a lot of investors like yourself to help connect them to investment properties. My team is moving 35 properties/month across Oklahoma. I'd love to connect and share some info on the market. Feel free to reach out if you're interested in a phone call at some point!

[Brendan Harrison]

Hi Logan! 

Have you looked into Oklahoma? Our numbers are staying strong, cost of living is low and the state is very landlord friendly. We're also growing like crazy, so tons of cashflow opportunity.

I'm a real estate investment specialist in the Oklahoma City and Tulsa markets and I work with a lot of investors like yourself to help connect them to investment properties. My team is moving 35 properties/month across Oklahoma. I'd love to connect and share some info on the market. Feel free to reach out if you're interested in a phone call at some point!