Investment Bayarea and out of state

[Ash Tee]

I am a newbie and would like to know if its better to buy a 1.5K home in Bayarea to rent or buy several out of state. If out of state which state and area will you recommend. 

[Bjorn Ahlblad]

@Ash Tee welcome to BP! it is impossible to get cash flow in Bay Area, so many invest in other states. I invested in the Bay Area when I lived there and also Wa state. At the end of the day I made way more money in Ca from appreciation than cash flow OOS.

We now live in Wa and bought cash flowing properties here to fund our retirement. It is difficult/impossible to find decent investment property here today, but 7 or 8 years ago it was very doable.

[Aj Parikh]

Hi Ash, I have found value investing in Cleveland, OH because it is home to Cleveland Clinic, lot of good neighborhoods, landlord friendly laws, stable appreciation and good cash flowing properties. There are also abundant opportunities for small multi family and SFH. I have been able to scale up to 12 doors in 2 years so definitely recommend this area. Feel free to reach out and we can discuss.

[James Wise]

Quote from @Ash Tee:

I am a newbie and would like to know if its better to buy a 1.5K home in Bayarea to rent or buy several out of state. If out of state which state and area will you recommend. 

Welcome aboard Ash. I saw Cleveland was suggested as a market for you. Cleveland is very similar to a lot of other markets you'll find in the Midwest. These are areas with low prices and a high population of renters. Major thing to watch out for is blight though. Many parts of these kinds of markets is filled with blight and high crime.

If you delve deeper into Cleveland, I suggest reading The Ultimate Guide to Grading Cleveland Neighborhoods. Biggest mistake I see out of state investors make here in Cleveland is overpaying for a property because they compared it to where they lived and thought there was no way they could lose since it was so cheap....You can still lose on a cheap though... Trust me.

[Liezel Pineda]

Hi Ash - I'm in the same boat... and was ideally considering multifamily in the Bay Area.  I'm looking to reinvest, but like @Bjorn Ahlblad said, cash flow in the Bay Area is hard to come by.  I've slaved over my numbers on several options recently, and haven't come across much that will hit the mark for me.  Another poster also mentioned that "breaking even in the Bay Area is a blessing" and right now, that's a stunningly accurate summary after scouring through my inventory.  That being said... I still see the Bay Area as prime, and if immediate cashflow was not a primary objective for you, I do believe that you'll still see the values appreciate over the long term.  I may be biased because the Bay Area has been home to me forever, so the Bay will always be near and dear to me.  But I am definitely exploring outside of the Bay simply because immediate cash flow is a bit more optimal elsewhere.  There are, of course, a gazillion other variables to consider, and there are always ways to adjust, but if you're looking for significant cash flow - which I probably am leaning more towards, than it'll be quite tough to find in the Bay unless the stars line up for you.

[James Dainard]

Quote from @Ash Tee:

I am a newbie and would like to know if its better to buy a 1.5K home in Bayarea to rent or buy several out of state. If out of state which state and area will you recommend. 

 It's typically easier to manage a property that's close to you so you can drive to check on your project if anything happens.

Like @Bjorn Ahlblad said, most people typically end up making more money investing in state as opposed to out-of-state. The small efficiencies you get by being close to your project add up. Also if you're investing out of state and get hit with an unexpected cap ex it's going to wipe your cashflow for quite some time.

If you have people you trust and can rely on in other states that will help you manage and run your assets you stand a better chance of getting yourself a well-performing asset.

Whatever you do, make sure you pad your proforma by adding in contingencies to your budget and by increasing your projected hold times. We're adding in 10-15% on top of our budgets and adding 30-45 days to our proformas for sale times.

[Jeet Sangha]

Ash,

I'm assuming it is 1.5M. I'd highly recommend you check out Gilroy and Hollister markets in South County. Prices have been on the decline, but the rental market is stronger than ever. I personally own several properties here. There's no reason you can't have great deals in your own backyard! 😀

[Steven Foster Wilson]

Quote from @Ash Tee:

I am a newbie and would like to know if its better to buy a 1.5K home in Bayarea to rent or buy several out of state. If out of state which state and area will you recommend. 

 Hey Ash, welcome to BiggerPockets!

You should check out Cleveland, Columbus or Cincinnati. Your money will go very far, you'd be able to pick up a multifamily portfolio and start your cash flow. Not to mention Ohio is a landlord-friendly state.

-Columbus is great for appreciation, pp is a bit higher around $220k for multifamily https://learn.roofstock.com/bl...
-Cincinnati has a mix of cash flow and appreciation, average multifamily around $180k. https://www.noradarealestate.c...
-Cleveland has alot of cashflow potential, average multifamily is around $140k. https://learn.roofstock.com/bl...

[Remington Lyman]

Quote from @Ash Tee:

I am a newbie and would like to know if its better to buy a 1.5K home in Bayarea to rent or buy several out of state. If out of state which state and area will you recommend. 

Columbus, Cincinnati, and Cleveland, Ohio.

[Sam McCormack]

@Ash Tee

The 3 headed monster of Ohio... Columbus, Cincinnati, and Cleveland

[James Wise]

Quote from @Sam McCormack:

@Ash Tee

The 3 headed monster of Ohio... Columbus, Cincinnati, and Cleveland

 boom