Do I try to Start Investing in an Expensive Area or Move?

15 Replies

I want to start out buying multi-family properties for rental income. I just landed a good job at a large engineering company, but the housing market is expensive here in Flagstaff, AZ, making the barrier to entry difficult for beginner investors. Almost all the properties I find on MLS are condos, townhouses and SFRs, and the average list price is $445k. There doesn't seem to be very many MFRs, and a decent SFR with 3 beds, good location will be at least $350k. But when I look at say, Atlanta's MLS, theres dozens of fourplexes in great shape and locations listing for $150-$500k. I found several fourplexes listed for 150-200k that currently have tenants, that generate $3k a month in rent. In Flagstaff $150k might get you a shack out in the boonies or a 3 bed 2 bath mobile home that needs some major work and would rent for $1.8k. So do I save up for a few years for a down payment and buy one property with at the most, 4 rooms to rent out, or move jobs to a large metropolitan area (like Atlanta), and buy 4 or 5 MFRs? The price-to-rent ratio seems so skewed in my area. Has anyone ever moved for this reason or know of other discussions on the subject?

Thanks,

- Sam

@Samuel Hunker Good morning Samuel! 

I was in the exact same spot as you three years ago... aerospace engineer in Phoenix (still at the same company). How long do you see yourself being in Flagstaff? Do they have any real estate meetups that you could attend? Personally, I would try meeting some of the bigger players in the area to see what they are doing. They might open your eyes to strategies, techniques, creative financing that you didn't know existed.

Good luck!

@Samuel Hunker Why have you limited your choices to 1) buy expensive or 2) move?

Both my wife and I work for the same large automotive company in Detroit. When 2008 hit, 25% of our colleagues got let go and we realized how at risk we were. We decided we needed passive streams of income so started investing. But, we felt investing in Detroit property would be foolish. We started buying out-of-state. At one point we had 14 SFRs in 6 different states. As long as you know what you are doing and get independent 3rd party verification of condition and repairs, you can live anywhere and buy anywhere. As the Real Estate Guys say, live where you want to live and invest where the numbers make sense.

@Matt Bonestroo Thanks for the reply Matt,

I could be here for 3-5 years, depending on a number of factors. I have been meeting with a local investor who is also a real estate agent, and he's mentioned partnerships. I'm not quite sure if I want to go with a partnership strategy, but maybe its something worth looking into.

@Samuel Hunker can you share more about those fourplexes in Atlanta for 150-200k that generate 3k/month in rent? I’ve been tracking the Atlanta market for deals and haven’t found this to be the case. I’m hard pressed to find a duplex in the Atlanta area for 150k that generates $1500+/month in rent, much less a quad with double the gross monthly rent. 

@Samuel Hunker

There's no reason to move. You can invest out of state or even in Phoenix, Glendale, etc. There are cash-flow opportunities in Arizona.

And if you prefer Atlanta, GA, you don't have to move there to invest there. Maybe you'd feel more secure being close by? If that's the case, then make Phoenix and the surrounding areas your target for now. Don't limit yourself and best of luck!

I was going to make the same suggestion as @Enrique Huerta ... no need to move just to invest! There are great opportunities all across Phoenix. You could be within a 2 hour drive of your investment property if it was on the north side of town. Worth at least looking into. Feel free to PM me with any questions about the Phoenix market! 

I live in Oregon and invest in Ohio purely because of the price point. Decide where you want to and can afford to invest. Go there, Look around, decide what areas look best for you. Connect with a Real Estate professional who works with investors. Start your journey. Don't move.

I agree with @Courtney Jones  

I live in Washington State. As a new investor the competition here is too fierce and too expensive. I am working on investing out of state however have no desire to move. Just need to find the right out of state market and build a team in that area. 

I echo what @Enrique Huerta said. Invest in parts of Phoenix and the valley a 2 hour drive away. Especially for your first rental property. 

I invest in Flagstaff, Tempe, Phoenix, and Scottsdale and manage everything myself from now living in Phoenix. I use to live in Flagstaff. 

Be aware that the properties in Arizona and Atlanta at those price points require more management that a B neighborhood or higher. You are probably not going to get a property manager in Atlanta at 10% fees, if you do there will be plenty of ala carte management fee's you will have to utilize to get the job done correctly and preserve your asset from Flagstaff.

@Samuel Hunker it's not all about investing or dollars and cents. Would you rather live in Flagstaff or Atlanta? What is your quality of life worth? Housing is scarce in Flagstaff, so I believe any investment you make there (even for just a primary residence) would be stable and appreciate nicely. Even adding one roommate to your living situation is financially not much different than owning a duplex and living in one half. 

I was just up in Flagstaff staying at a really nice AirBnB with some other families and our rental had a great income suite above the garage. Are you seeing any single family opportunities with an attached or detached guest suite? 

@Samuel Hunker

Why aren't you looking a Phoenix? Phoenix has seen 7% rent increases, is seeing extremely strong job growth with many large companies building all over the city, and population growth is great. There are suburbs out in the West Valley like Glendale and Peoria that have the type of thing you are looking for and is only a 2 hr drive away.

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