WHERE SHOULD I NOT BUY?

Question

I see a lot of posts asking where someone SHOULD buy, for first or next property, or a certain type of return or property...I thought this might be a good place for people to tell others where they would suggest NOT to buy.  Towns that for whatever reason are not investor friendly or not a good return, lets see if we can help each other avoid mistakes others have made....I will start:

Clinton IA...I would NOT suggest buying in this town.  Mid sized city just north of Quad cities.  I own 20 rental doors in Fulton IL about 1/4 mile away and I have not had one issue with the city and tenants are pretty good, ROI has been great. In contract, in Clinton IA I have owned 16 doors for about the same amount of time, rental rates are similar and taxes are lower so it should be better...IT IS NOT... the city is very quick to fine any landlord or anything, while I have never received one violation or complaint from the city of Fulton I receive at least one a week from Clinton...in addition tenants are nowhere near as solid as in Fulton, lots of late payments and damage and so forth...if you look in this area do not be fooled by a better estimated ROI... I would invest more in Fulton IL any day of the week and I will NEVER invest in Clinton IA again...in fact I have a great available on a 14 unit building if anyone just needs to make a mistake

Nick Robinson · Answer

@Matt LyonsI personally do not invest in any blue states as most of them are more tenant friendly.  I also do not want to invest in places that do not have any job growth.  You need to be in an area that creates jobs for real estate to be successful.  There has to be something that is going to pull people to the area.

Jay Hinrichs · Answer

Yup i paid 4500 to get a cruddy tenant out of a portland property and felt lucky thats all it cost..

Jonathan Klemm · Answer

@Matt Lyons - I personally don't really think there is a "bad" place to invest with the BIG caveat that you know what you are getting yourself into.  People get wealthy investing in Chicago real estate no matter what the asset class or neighborhood.

The people who get screwed or lose money are the ones who didn't do proper due diligence and don't have the right team set up.

With that said I do not typically invest in Englewood, Auburn Gresham, or Chattam.

Jay Hinrichs · Answer

Now all of Oregon has rent control I wonder how that has affected the larger Oregon Landlords ???  some of my clients that own apartments ( taking away covid ) are still doing fine with the rent control issues..  IN Portland proper though its even worse I personally would not have a rental there with the 4500 bucks to move them out..  but the rest of the state seems to be OK ?

Nicholas Z. · Answer

@Matt Lyons thanks for sharing. As a new QC investor I would have assumed any city in Iowa would be preferable to Illinois.

Nick Robinson · Answer

@Matt Lyons2020 U.S. Moving Migration Patterns Report | North American Van Lines

Andrew Syrios · Answer

Yikes! That sucks. Oregon tenant/landlord laws are rough to say the least

Andrew Syrios · Answer

Oregon's rent control just sets maximum on rent increases, so it's not a huge problem if your rents are at market (like my father's, he's the one in Oregon, I'm out in KC). The ones who are hurt the most are small landlords who haven't kept up with the market. You can still give a no-cause notice (in most places at least) but I think you have to pay 3 months of rent to the tenant. Ouch.

It's getting tough for landlords. But this seems to be a trend. Whenever your property values go up a lot (yay!!!) anti-landlord legislation is right around the corner (boo!!!) because it gets harder and harder for people to afford rent. The fact it gets harder and harder for landlords to pay mortgages tends to be ignored.

Andrew Syrios · Answer

For the most part, I would say it's certain types of areas. Most notably war zones (unless you're a specialist) or rural (unless you're living there or a specialist). I would also avoid really expensive (and generally anti-landlord) markets like San Francisco, New York, etc., unless you can afford negative cashflow and want to speculate because they have shown great appreciation. And if they're really anti-landlord in general, I would definitely look to other similarly priced markets that aren't anti-landlord. Lastly, towns that have been hammered (i.e. Flint, MI) would also be places I would avoid.

Matt Lyons · Answer

@Nicholas Z.

So did I!  Taxes are far less but you also have lots of money for section 8 which by itself is not bad... but I have learned Clinton advertises this to the south side of chicago so the tenant base is the same as the south side of chicago and the city is truly a nightmare. I have talked to more and more landlords that have run from that town. Some literally just left the property and eventually the city took over and sold at auction for under $1000... that’s how bad it is at this point.

WHERE SHOULD I NOT BUY?

Most Popular Reply