Hottest states to invest in
Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes
Hottest states to invest in
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Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6yOriginally posted by @Michael Bell:
What are the hottest states to invest in rental property right now? People seem to moving out of California to Texas, Idaho, and Colorado. Are there any other states that are hot right now?
Californian here to defend my state!
It seems like Californians are flooding out of CA into Texas, etc., because there are SO MANY OF US! For example, anecdotally, Boise, ID is overrun with Californians. Do you know how big Boise is? 229K people! California's population is 39.5M. So a few Californians moving to Boise make it feel (to residents of Boise) like an exodus.
Another fun fact to illustrate my point: in 2018, 118K Californians left the state for other states. But 188K people moved into California from other countries (source: https://calmatters.org/explainers/california-population-migration-census-demographics-immigration/)
136 Replies
- Flipper/Rehabber · Memphis, TN · Member since 2020 · 758 posts · 285 votes6y
If you are going for rentals: Tennessee, New Jersey & Pennsylvania.
- Rental Property Investor · Tempe, AZ · Member since 2020 · 75 posts · 39 votes6y
Originally posted by @Account Closed:
Originally posted by @Geoff Husa:
Originally posted by @Account Closed:
Originally posted by @Geoff Husa:
@John Farady
Curious what strategy you use primarily in Phoenix area. Straight buy and hold, or brrrr, or.... ?
I'm buying "off market" Turnkeys for $60k plus taking over the existing mortgage (it's called Subject To) and then selling to tenant buyers on a lease option who give me $20k as an option fee and pay a premium rent for a cash flow of greater than $500 a month. The tenant buyer takes care of all maintenance and repairs so I have no CapEx. Not bad for SoCal OOS investing. I know that is a lot packed into a couple of statements but that's the general idea.
A couple of months ago I wouldn't have understood a bit of this... haha. But thanks to BP and it's resources (and a rather large time investment in reading and youtube vids) I get gist of what you're saying here. I've actually been reading more about subject to, and lease options (both as the lessor and even the lessee, for acquisitions) lately. The part that throws me is the bit about off-market turnkeys for $60K... Whaaaaat?! Where are you scoring that kind of deal in Phoenix area? Or is it one of those secrets you could tell me, but then have to kill me?
This might be getting off track for this post, but it starts with having a goal of reaching FI. I don't know if I could say I'm in as much of a hurry as the subjects the OP is asking for. I also have a bit of time (as I currently live overseas) before I can do much. But when we return to my home area in Tempe/Chandler next year... Anyway been learning about creative financing and how to find and negotiate deals and much more... how wholesaling works, the steps to take when you find a deal, etc. Just trying to define how we want to move forward. I like the possibilities of subject to and lease options though. I've been running my ideas by a friend of mine who I've known for close to 30 years, who is a long-time reputable wholesaler/flipper/agent in the area (over 20 years), and the feedback I'm getting is that the market is so hot right now that a lot of the stuff I'm reading about on BP about finding and negotiating deals just isn't realistic for someone like me who just wants to score a deal or two a year. So when you talk about getting turnkey deals for $60K...! Throw this dog a bone, dude! What kind of properties and areas are you talking about?
@Shiloh Lundahl is doing some cool stuff with the lease options. I don't think he's getting nearly as much as you mention for the option payments (I think he's mentioned $2-3K), but he can correct me if I'm wrong. @Jay Hinrichs, regarding what you mentioned, Shiloh seems to be following some of the recommendations in Brandon Turner's book on financing deals with little or no money. He helps people get on track with education about finances and connects them with a lender and provides some accountability so they can reach their goals of making that purchase. I like that a lot too! Shiloh, you can correct me here if I've misrepresented anything you do.
@Geoff Husa: In answer to your question:I'm not the only one doing these. In fact, they are being done all over the country, all week long. Here are the keys:
You are looking for people who want to or need to move but they have a house that won't be a good fit for the MLS. That could be neglected repairs, dated kitchen, bad landscaping, doesn't show well for any number of reason, don't want people walking through their house opening drawers and medicine closets, complicated title, probate, they've taken a job elsewhere and have to move quickly and a host of other situations.
Sometimes you can spend $5,000 on mailers and get no phone calls. Sometimes you can spend $500 on mailers and get 2 deals. You just never know. Mailers is just one way to find properties by the way.
You "solution" sell. They have a problem and you help them. If it is all about "you", you'll never do a deal.
You have to have money to give the seller for their equity, money to pay for their closing costs, money for the title report, money for escrow, money for your closing costs, money to make at least 3 months of the payments (safety precaution) money to pay for the electrical and water while you are looking for the right tenant buyer. You have to "sometimes" have money to have the place cleaned up, to have a dumpster delivered, to hire guys to put junk into the dumpster, money to do repairs or paint or other things on the property.
My mentor requires that I have $5,000 in reserves for each Turnkey he sells me. I haven't needed to use any of it for the turnkeys I have, but it's there in the event it's needed. This is a safety guarantee to the seller. Remember, the seller is still on the loan and you have to protect the seller's interests.
And, that $60k I pay doesn't include the mortgage amount I am taking over. My cost to own the property is the $60K, and the underlying mortgage gets paid off by the tenant buyer. It's just that I don't have to involve a bank or hard money for the rest.
So, my cash on cash is $60k into it, $20k back plus at least $500 a month cash flow, whatever that works out to. And I get to own a $250,000 house that I get to depreciate.
It is *NOT* a "no money needed" type of transaction, but it works nicely where applicable.
Thanks. Your response lines up with a lot of what I've been coming to understand regarding marketing and financing and the other stuff. And yeah, I can imagine the seller needs to feel pretty confident that you've got him covered!
Elliot Smith has a fair bit to say about negotiating and selling a 'solution' and just addressing people respectfully and being real with them in negotiations. Sounds like you're saying the same thing.
Anyway, I'm not looking to get into REI with no money. I've got some saved up that, after we take care of our primary residence (which we'll be turning into a rental after we return overseas, by the way), should allow us to do another deal (using your numbers as a higher end hypothetical for the second property) while leaving plenty of reserves for both properties. Of course there are any number of other strategies I could employ on the second property depending on whatever financing possibilities I can utilize.
It sounds like my struggle will be finding the deals. I keep wondering if maybe sticking with a trusted wholesaler wouldn't just be the best way to go. But D4D sounds fun, as does experimenting with other methods like mailing and calling and sms; if nothing else, just for the education and experience... but hopefully maybe even to get a deal out of it!
It's good to chat a bit with another investor in the area! Thanks for your responses!
- Rental Property Investor · Melbourne, FL · Member since 2017 · 114 posts · 108 votes6y
@David Bell People are moving to places such as Florida, where the climate is warmer. I am seeing that specific areas in Florida, such as Brevard county, are experiencing population growth from those moving from other areas, particularly the north.
- Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes6y
I personally would love to find "subject to" deals but where can you find a market with buyers who have the means to fork over $20K in option consideration and yet have such poor credit that they would choose to rent (paying a rent premium no less) rather than secure a conventional loan, especially in an environment where houses sell for 60K? Honestly, it sounds like Oz.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Darius Ogloza:
I personally would love to find "subject to" deals but where can you find a market with buyers who have the means to fork over $20K in option consideration and yet have such poor credit that they would choose to rent (paying a rent premium no less) rather than secure a conventional loan, especially in an environment where houses sell for 60K? Honestly, it sounds like Oz.
sounds like what he is describing is 250k houses and the down payment he uses is 60k per house and then he takes sub too.. then he gets 20k option payment so he has 40k in cash into each deal that is netting him about 6k a year if it all goes right..
Sub prime borrowers and a lot of cash usually dont go together.
I have sold a house or two .. on options that were higher end and those went to folks who had a job move but their house back in Iowa was not yet sold and they needed a place had perfect credit and had some cash.. And followed through on the option and paid off the house.
The risk in sub too is to the severely undercapitalized investor thinking its a no money down play.. As discussed above.. those that try this without the proper cash reserves are setting themselves up for some pretty hard falls.. the first time their lease to own tenant stops paying and they still have to pay the mortgage.. I have seen this show before it becomes a nightmare ..
But if you have the wherewithal and 10 to 12% return on your cash is acceptable along with some equity ( hopefully you sold it for more than you paid for it).. this model can work..
when I did it in earnest I wanted to make sure we had a lot of equity so i did all of mine as pre foreclosure rescues we had to be buying for at least 70% of ARV to make it worth while the cash flow is OK but unless you can really scale it just becomes a lot of work.. We made the money when we sold those assets in appreciation and equity day one.. to do sub too with little or no equity and JUST cash flow.. is a different investing scheme.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes6y
Originally posted by @Ebi Amiri:
As a San Digan, I should say I agree that investment in CA needs more capital but the long term reward is much bigger. You can get a crappy cheap duplex in TN with a cash flow of $100 and small appreciation OR get a CA single unit apartment with $200 cash flow (and rent appreciation) and very solid appreciation. CA is the best place someone can dream of living in, but what about TN? Have you ever seen someone saying they dream of living in TN or Idaho?!!
and Yes, a lot of people move out of CA but they are usually very low-income people whose move-out does not really affect the real estate or business market. They can't afford to paying rent, let alone buying a house.
Wow. That's one of the dumbest things I've read in a long time. Yes, I have heard people say they dream of living in TN or Idaho. I'm one of them.
As for the OP's question, "what state" is way too broad a question. You have to first figure out what you want to invest in, then figure out where that strategy is possible. Personally, I think it is best to invest where you know, but if you're willing to put in the effort or gamble you can invest anywhere.
Skyline Properties - Rental Property Investor · Franklin, TN · Member since 2019 · 160 posts · 125 votes6yTennessee.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @JD Martin:
Originally posted by @Ebi Amiri:
As a San Digan, I should say I agree that investment in CA needs more capital but the long term reward is much bigger. You can get a crappy cheap duplex in TN with a cash flow of $100 and small appreciation OR get a CA single unit apartment with $200 cash flow (and rent appreciation) and very solid appreciation. CA is the best place someone can dream of living in, but what about TN? Have you ever seen someone saying they dream of living in TN or Idaho?!!
and Yes, a lot of people move out of CA but they are usually very low-income people whose move-out does not really affect the real estate or business market. They can't afford to paying rent, let alone buying a house.
Wow. That's one of the dumbest things I've read in a long time. Yes, I have heard people say they dream of living in TN or Idaho. I'm one of them.
As for the OP's question, "what state" is way too broad a question. You have to first figure out what you want to invest in, then figure out where that strategy is possible. Personally, I think it is best to invest where you know, but if you're willing to put in the effort or gamble you can invest anywhere.
Well this is the same mind set that those who have never been to CA OR WA.. they only hear of super expensive areas and dont realize that the majority of these states land wise is quite rural and not a whole heck of a lot more expensive than nicer areas of many mid western states. you cant compare a low end C D class duplex in Memphis to nice rural areas of TN>
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes6y
Originally posted by @Jay Hinrichs:
Originally posted by @JD Martin:
Originally posted by @Ebi Amiri:
As a San Digan, I should say I agree that investment in CA needs more capital but the long term reward is much bigger. You can get a crappy cheap duplex in TN with a cash flow of $100 and small appreciation OR get a CA single unit apartment with $200 cash flow (and rent appreciation) and very solid appreciation. CA is the best place someone can dream of living in, but what about TN? Have you ever seen someone saying they dream of living in TN or Idaho?!!
and Yes, a lot of people move out of CA but they are usually very low-income people whose move-out does not really affect the real estate or business market. They can't afford to paying rent, let alone buying a house.
Wow. That's one of the dumbest things I've read in a long time. Yes, I have heard people say they dream of living in TN or Idaho. I'm one of them.
As for the OP's question, "what state" is way too broad a question. You have to first figure out what you want to invest in, then figure out where that strategy is possible. Personally, I think it is best to invest where you know, but if you're willing to put in the effort or gamble you can invest anywhere.
Well this is the same mind set that those who have never been to CA OR WA.. they only hear of super expensive areas and dont realize that the majority of these states land wise is quite rural and not a whole heck of a lot more expensive than nicer areas of many mid western states. you cant compare a low end C D class duplex in Memphis to nice rural areas of TN>
Exactly. I totally get it why people would want to invest in California - consistent population growth, fantastic climate, job climate, etc. I also get it why some people wouldn't want to invest - higher RE prices, "tenant-friendly", etc. One of the nice things about having 50 states is that you can tailor your investment strategy to the areas *you* want to invest. That's also one of the reasons I think most people should invest where they live; unless you live somewhere by force, there are reasons you live where you live. That should automatically play to your strengths. I wouldn't be a good investor in the more well-known areas of California because my frame of mind doesn't mesh well with those areas. I could learn, but that takes a lot of time and effort which doesn't make sense to me personally when there are plenty of opportunities in the place I already am.
Skyline Properties - Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes6y
@Lynnette E. How’s Chattanooga doing as a rental market? My father was born and raised there.
- Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes6y
@David Bell Well, define ”hot” because I see many investors especially on BP following the crowd. So.hot to them is ”where everyone is going”. Try to find the best kept secret then reveal when you intend to be selling. For instance, I am from Los Angeles and started investing in Chattanooga in 2009. Everyone thought I.was crazy. Now I'm happy to be selling when all these investors are just discovering it. This is not bragging. Teaching. I have a new market now, but can't reveal - yet...
- Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes6y
The Lone Star State: Texas. Specifically Austin Texas. Its hot literally and economically. Every week or so I open up the newspaper and I see another company moving here hoping to utilize the very educated young workforce at a fraction of the costs of the west coast. Why do folks like to live here? Jobs, Lake Austin, Barton Springs, Music scene, the lifestyle, cheap housing relatively speaking, opportunities, the beer and BBQ..(maybe but that was a factor for me :-) ) The city is booming and has been booming for a very long time. The tech push was probably started around the time that IBM created their research facility on Braker lane back in 1995 but I am not a historian.
- Real Estate Broker · Kansas City · Member since 2019 · 86 posts · 43 votes6y
As others have mentioned I would always recommend doing deals in your backyard (especially if you're a new investor).
If that's not an option you need to match your investment style (risk aversion) with the region you want to invest in. Midwest (cheap) cities tend to cash flow w/ little appreciation, coastal cities (expensive) tend to appreciate more rapidly, etc.. Another factor to consider heavily is the markets supply constraints. Demand means a lot less when supply is growing at the same rate.
- Investor · Chattanooga, TN · Member since 2016 · 676 posts · 543 votes6y
@David Bell Chattanooga has been on fire rents are up 50 to 75% in last few years.
- Investor · Chattanooga, TN · Member since 2016 · 676 posts · 543 votes6y
@Jay Hinrichs Midwest people love moving to TN. I hear people all the time telling me man I wish I could move to TN.
Chattanooga where I live currently (by choice) has a constant influx of out-of-state people. Heck most of my friends are Southern California people that have moved here because they like the cost of living they like the weather they like the mountains they like the opportunity etc
Also you're wrong about appreciation. Duplexes for example in Chattanooga were 90-100k three years ago and now sell for close to 200k. Rents are skyrocketing.
- Developer · Boise, ID · Member since 2020 · 173 posts · 198 votes6y
Lets face it Idaho is a great market for people to invest in who have great incomes from other states for its relative affordability. For example you can purchase a newer 3 bed 2 bath 2 car garage within 10 min of downtown for $280ish and rent it for $1650+ and since we are dealing with record low (less than 1 month supply of for sale product and 3% rental vacancy) inventories we are seeing near double digit rent growth. SO it kind of checks 3 boxes down payments are smaller at that price point. It will be real close to break even or maybe cash flow a tiny bit the first year and it sin a highly appreciating market. But don't take my word for it as a 40 year resident, come take a look at it and other great opportunities in Idaho.
Happy to help you on your journey when your ready.
- Member since 2019 · 111 posts · 130 votes6y
@David Bell
Alaska has some hot pockets. Specifically Palmer and Wasilla and other parts of the Matsu Valley. Not too crowded, little paranoia over Covid 19, beautiful scenery, access to good paying jobs, world-class recreation. Realtors, title companies, home inspectors, and appraisers are booked solid. Loans take at least 60 days because of backlog.
- Member since 2019 · 21 posts · 12 votes6y
@Ebi Amiri - I think you should look into the stats, they differ greatly from your understanding.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Jeffrey Holst:
@Jay Hinrichs Midwest people love moving to TN. I hear people all the time telling me man I wish I could move to TN.
Chattanooga where I live currently (by choice) has a constant influx of out-of-state people. Heck most of my friends are Southern California people that have moved here because they like the cost of living they like the weather they like the mountains they like the opportunity etc
Also you're wrong about appreciation. Duplexes for example in Chattanooga were 90-100k three years ago and now sell for close to 200k. Rents are skyrocketing.
I specifically said C/D inner city Memphis duplex's not other areas.. I know that prices vary widely from city to city in TN.
- Real Estate Investor · Dallas, TX · Member since 2015 · 50 posts · 11 votes6y
There are several great spots in Arizona, Kentucky is also getting some traction and am noticing increased dealflow. I am looking in the MF space predominantly though
- Investor · Chattanooga, TN · Member since 2016 · 676 posts · 543 votes6y
@Jay Hinrichs fair enough
- Investor · Lahaina, HI · Member since 2012 · 47 posts · 35 votes6y
The numbers have to work. Positive cash flow is a challenge on leveraged properties, so if you are going for total return you have to buy value. That means either timing the RE cycle, or adding value some other way. Few uninformed sellers exist these days. As a rule of thumb you need $800-$1,000 in rental for every $100k invested to produce a 5% cap rate. The recession means we are now in the early stages of a bear market following a very protracted bull market. Values across the board are showing signs of being overbought. This is because RE has been behaving like bonds. It has an inverse relationship to interest rates. When rates are very low for extended periods home values rise and even become disconnected from the fundamentals. The easiest way to see that is by cash flow analysis. You choose your required rate of return, plug in the estimated income and expenses, and adjust the price until you find the yield you want. In the current market, expectations have been lowered since interest rates have affected all asset classes. So, you either accept a lower return, find alternatives, or wait for oppurtunities down the line. One of the main barriers to investing across state lines is fixed costs. When homes are cheaper it may be for a good reason such as high property taxes and insurance. Let the numbers guide you.
- Investor · Wichita Falls, TX · Member since 2014 · 382 posts · 123 votes6y
I moved to TX from CA. My daughter and her family did as well. I feel it’s more opportunity to gather your investments and put the cash from them together for other higher investment areas such as CA or Coastal Fl. Owner financing around in here in TX more so I’ve seen than CA.
- Flipper/Rehabber · Jersey City, NJ · Member since 2016 · 158 posts · 86 votes6y
It is difficult to say which state as a whole is hot for rental property right now also depends on whether you are looking for all Cash Flow (CF) or all Appreciation. Let's say the average or newbie investor needs a balance of both.
I have listed out a few cities for myself that we are monitoring, each city lets us achieve a different goal.
Columbus,OH - balance of CF and Appreciation
Austin,TX - more appreciation - I think of this as my kids 529 plan (be being funny and real at the same time :-) )
Charlotte,NC- and its suburbs, balance of CF and Appreciation but more appreciation, could be a 529 equivalent
There are many other markets good for constant cash flow investments like, Cleveland OH, Rocky Mount NC, Fayetteville NC, Philadelphia PA, South NJ etc..comments, feedback, criticism.. from other investors are definitely welcomed.
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