Where to buy and hold

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Where to buy and hold

Justin R.Pro Member
Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
Hello everyone. I am a newer invester looking for a few areas to purchase rentals. What areas have good rent to purchase ratios, along with low taxes and insurance. I have researched many states but it appears they all have their ups and downs. Of course i will contine to research but i thought this will open discussion. Thanks Justin
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
10y

Generally speaking, the Midwest and South will have by far the best rent/cost ratios and usually lower taxes too. The coasts, particularly New York and The People's Republic of California are very high priced and have pretty high taxes. The Southwest is sort of in between and generally speaking, I would avoid the Rust Belt even though it's relatively cheap, just because it is so economically challenged right now. I would recommend looking at places like Kansas City, Oklahoma City, Tulsa, Indianapolis, Raleigh, Charlotte and Memphis.

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  • Brit Foshee
    Investor · Fort Myers, FL · Member since 2012 · 462 posts · 200 votes
    10y

    @Justin R.

    Definitely hard to find decent rentals in California for cash flow solely.

    The midwest is generally considered one of the best areas for cash flow as the price of homes compared to rental is rather low.

    Some southeast markets like Memphis, Birmingham, Jackson.

    It really depends on what you're looking for.

    Each area is unique for many reasons.

    Best of Luck!

    1Reply
  • Alex Franks
    Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @Justin R.:

    Hello everyone. I am a newer invester looking for a few areas to purchase rentals.

    What areas have good rent to purchase ratios, along with low taxes and insurance. I have researched many states but it appears they all have their ups and downs.

    Of course i will contine to research but i thought this will open discussion.

    Thanks
    Justin

    Justin PM and read some of my Q&A for folks investing out of state. Give, what I think is good advice for all.  I was a turn key guy from 2010 -2013 but no longer involved in that aspect.

    Alex

    1Reply
  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Justin R.

    Hi Justin

    I like my market of Knoxville, TN.  Also look at neighboring cities, Chattanooga.

    I was talking to an investor in KC, seems like a good market.

    Rochester NY has great cash flow, but the city rentals can be pretty management intensive.

    Gino

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    1Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Justin R.:

    What areas have good rent to purchase ratios, 

    Thanks
    Justin

    What do you think a "good" rent to purchase ratio is?  Why?  

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    10y

    @Justin R.there a lot of markets with good rent to price ratio's but rent to price ratio's don't determine ROI by itself. It's good that you're asking about taxes and insurance because they can vary widely in different markets. TX for instance has some of the highest property taxes and insurance rates in the nation but markets like Dallas and Austin also have very strong economies so there's a trade off. Personally, for out of state, I like Indianapolis and Kansas City. Those markets offer a good balance of good cash flow with good economic and demographic fundamentals and they are landlord friendly markets which is also important.

    3Reply
  • Alex Franks
    Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @Mike D'Arrigo:

    @Justin R.there a lot of markets with good rent to price ratio's but rent to price ratio's don't determine ROI by itself. It's good that you're asking about taxes and insurance because they can vary widely in different markets. TX for instance has some of the highest property taxes and insurance rates in the nation but markets like Dallas and Austin also have very strong economies so there's a trade off. Personally, for out of state, I like Indianapolis and Kansas City. Those markets offer a good balance of good cash flow with good economic and demographic fundamentals and they are landlord friendly markets which is also important.

     Mike you hit the nail on the head. Here in SC taxes kill us on investment properties. North Carolina much better on the taxes for investment properties. Both states are landlord friendly, SC being a bit easier. I see Indy making a return on the circuit for turnkey deals. I suspect lack of product in some of the other markets is helping push that. Kansas City I was their with the guys who lend to most of the turnkey guys( any one around long enough know who ). Funny Market they took me by an apartment complex they own. Yet I was told do not get out of the car here. Yet a few miles away we were basically sitting in a corn field.

    I think any skilled investor can dig up enough articles, and facts to show why their city is the best. Actually for a project ,a bit back I had an intern do that for me, Came up with 13 different rental markets, had enough stats to show why each one could and did work.

    A lot  has to do with the team you buildyour self , or the team you use in these markets( such as turnkey or resellers ). Stats alone only get you so far.

    Just my two cents ,and Mike I have enjoyed reading some of your Q& A helping folks out.

    Alex,

    2Reply
  • Justin R.Pro Member
    OP
    Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
    10y

    Thank you all for your input. I am an extremely new investor have only purchased two sfd for the sole reason of rentals. I have used the benchmark of a minimum one percent rent to purchase ratio as a preliminary guide prior to digging deeper. 

    I would love a company to come out with a Zillow type program where you can base your initial search off of sale price and rental comparables all on one swoop!!!

    0Reply
  • Adam SchneiderPro Member
    Lender · Raleigh, NC · Member since 2012 · 955 posts · 639 votes
    10y

    The question about the best city to invest is sometimes like asking 10 parents which is the best school in their city...their kid's school always seems to get high marks!

    2Reply
  • Stephen FrancoPro Member
    Scranton, PA · Member since 2016 · 201 posts · 44 votes
    10y

    I probably sound like a broken record on the forums, but I believe in my home market in northeastern Pennsylvania. Conservatively buy-and-hold rentals kick off 15% cap rates, depending on how you do u do math...some people see it as high as 23%.

    0Reply
  • Lance Robinson
    Investor · Scottsdale, AZ · Member since 2015 · 130 posts · 102 votes
    10y
    Justin Rick what type of neighborhood and asset class (SFR or MFR) are you looking for the market return wise? Will you be self-managing remotely or higher inflation a PM? Turnkey or doing it yourself?
    0Reply
  • Justin R.Pro Member
    OP
    Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
    10y

    Currently I have only SFD. I am willing to do a multi unit as well. I would definitely utilize a PM. I could either do a turn key, or a reno with PM oversight.

    0Reply
  • Charles McClure
    Investor · Raleigh, NC · Member since 2016 · 37 posts · 7 votes
    10y

    @Stephen Franco, minimum 15% Cap Rate "conservatively" on buy/holds in PA sounds too good to be true. Care to tell us more?

    0Reply
  • Sean Tarpenning
    Turnkey Investment Provider · Kansas City, MO · Member since 2015 · 1k+ posts · 116 votes
    10y

    I definitely enjoy our Kansas City market! Great community and great return on investments.

    1Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Stephen Franco:

    I probably sound like a broken record on the forums, but I believe in my home market in northeastern Pennsylvania. Conservatively buy-and-hold rentals kick off 15% cap rates, depending on how you do u do math...some people see it as high as 23%.

    What is so wrong with these properties that a NOI is ONLY worth $6,667? Where I invest this NOI is easily worth $20,000.

    0Reply
  • Stephen FrancoPro Member
    Scranton, PA · Member since 2016 · 201 posts · 44 votes
    10y

    @Account Closed.... I guess what an NOI of 20k says to me is that your gross must be high (assuming same pads), which would mean the buy in is much larger...

    Our market has small (dollar) NOI but great %, with small buy ins. If you're budget is larger and you want more cash NOI (at same % or whatever) we can take you to other markets. No problem

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Justin R.:

    Hello everyone. I am a newer invester looking for a few areas to purchase rentals.

    What areas have good rent to purchase ratios, along with low taxes and insurance. I have researched many states but it appears they all have their ups and downs.

    Of course i will contine to research but i thought this will open discussion.

    Thanks
    Justin

     Hello Justin,

    Welcome to BP and REI! It is a great idea to do some research into which markets are performing well. It all depends on what you are looking for. Some markets have high property values, which could lead to high returns. But that depends on what you are able to invest with.

    A more affordable market at this time, might be the Midwest. Homes seem to be affordable, but there is still a great return.

    Send me a message if you have any questions.

    0Reply
  • Rod HanksBusiness Member
    Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes
    10y

    The Dallas area is great for rentals. PM is you need help in finding rentals here.

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  • Brit Foshee
    Investor · Fort Myers, FL · Member since 2012 · 462 posts · 200 votes
    10y

    @Justin R.

    As I am sure you can see, everyone is going to tell you why their market is the best and then proceed to try to sell you turnkeys.  I would be very cautious purchasing turnkeys out of your area unless the company his highly reputable. 

    2Reply
  • Justin R.Pro Member
    OP
    Rental Property Investor · San Anselmo · Member since 2015 · 659 posts · 600 votes
    10y

    thank you for the heads up !

    0Reply
  • Jason Hawk
    Real Estate Services · Olathe, KS · Member since 2015 · 329 posts · 57 votes
    10y
    Kansas City is a great area to look into. Feel free to connect!
    0Reply
  • Aaron B Lee
    Pocatello, ID · Member since 2016 · 46 posts · 11 votes
    10y

    Boise Idaho is growing at substantial rates. it also holds a great rent to purchase ratio. feel free to message me anytime if you would like to talk more.

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y

    Please explain what a great rent to purchase ratio is.

    0Reply
  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    10y

    Generally speaking, the Midwest and South will have by far the best rent/cost ratios and usually lower taxes too. The coasts, particularly New York and The People's Republic of California are very high priced and have pretty high taxes. The Southwest is sort of in between and generally speaking, I would avoid the Rust Belt even though it's relatively cheap, just because it is so economically challenged right now. I would recommend looking at places like Kansas City, Oklahoma City, Tulsa, Indianapolis, Raleigh, Charlotte and Memphis.

    Podcast Guest on Show #121
    4Reply
  • Sandra R.
    Investor · Queens, NY · Member since 2010 · 8 posts · 2 votes
    10y

    Thank you Andrew, I will def look into other states.  

    Sandra

    0Reply
  • Mark Mosch
    Rental Property Investor · Los Angeles, CA · Member since 2014 · 120 posts · 88 votes
    10y

    One good tool to help you narrow down is the Milken best cities index - it shows which large and small cities are best on a number of mostly economic and demographic metrics.  If I'm interested in an area, I usually start there to check out how it ranks up compared to the other several hundred metro areas.  It can be a useful tool:  http://best-cities.org/best-performing-cities-2015...

    Take a look...

    0Reply
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