Looking for guidance as a new Out of state investor
Hi Bigger pockets community,
I would like to get some wisdom from active investors, property managers, real estate agents about your recommendations, word of caution and advice. I'm anxious about making costly mistakes, I was reading posts from forum here about CT has high tax rate and safety issues. I'm trying to mitigate by risk by looking in the West Hartford or west end of Hartford.
1. What is the cap rate that I should expect with investments in Hartford
2. What areas should I consider for best long term equity growth
3. What areas should I consider for best cash flow for rentals
4. What are other risks that I should consider when looking at a rental multifamily duplex, tri-plex or quad.
5. Would you recommend me other areas/states for a new investor? I'm from Seattle, Washington and dont see lot of opportunities in our backyard.
In Single-family or multifamily investment look for the return on investment $ vs caprate. Caprate is made to determine the value for 5+ multifamilies.
When looking at any properties, utilize the calculators offer on this website and please include capital expenditures. Finding a trustworthy contractor and the property manager is key in out-of-state investing.
Find as many experts in the Hartford area as you can, who can guide you.
Good luck
I’m an investor in the central Connecticut area, and a realtor myself as well. From an investor point of view, I like to focus more on the cash flow aspect. The market has been crazy but still great investment opportunities and definitely more affordable investments compared to Seattle. It’s quite easy to find renters but to prevent headaches down the road, it’s important to do due diligence when vetting renters. Often times a multi family may already have existing tenants that’s fully occupied all units or one vacant unit that you need to fill after closing on the property. For an out of state investor, you’ll need to rely on local connections that you trust (realtor, property manager, etc). Hope this helps!
Thank you folks for the insights, I really appreciate this. I think the only missing piece for me right now is local connections that I can trust. Can you suggest property managers and contractors that you have experience working with?
1. What is the cap rate that I should expect with investments in Hartford
4-12 historically
2. What areas should I consider for best long term equity growth
West Hartford, Avon, Farmington, Simsbury, Glastonbury, Rock Hill
3. What areas should I consider for best cash flow for rentals
controversial opinion here- NOT New Britain NOT Hartford
4. What are other risks that I should consider when looking at a rental multifamily duplex, tri-plex or quad.
Skip the duplex- look at tri and quad.
5. Would you recommend me other areas/states for a new investor? I'm from Seattle, Washington and dont see lot of opportunities in our backyard.
New York and Mass are even more pro tenant than CT.
@Venkateswaran Venkatasubramanian if you're from Seattle, why on earth are you considering Hartford CT? You'd already be investing out of state so you might as well pick a market that will give you maximum returns. Ct has some of the highest properties taxes in the country and it is not a landlord friendly state. As an out of state investor, I see no upside to it. Personally, I would recommend Midwest markets like Indianapolis and Kansas City that cash flow much better and are landlord friendly. CAP rate isn't a meaningful metric if you are financing and it say's nothing about time value. You should really be looking at returns from income and equity for several years out.
@Mike D'Arrigo Thanks for honest and great feedback, I was initially paying too much attention to the caprate and cash flow. Appreciate the suggestion for looking into midwest markets. What are the sources you consider to decide which market is best for long term returns and equity growth
Quote from @Venkateswaran Venkatasubramanian:
@Mike D'Arrigo Thanks for honest and great feedback, I was initially paying too much attention to the caprate and cash flow. Appreciate the suggestion for looking into midwest markets. What are the sources you consider to decide which market is best for long term returns and equity growth
CAP rate is actually a metric used to value commercial properties and is meaningless unless you are paying cash. Cash flow is an important metric but it is just one component of total return. There are actually 4 sources of returns in real estate. They are 1. rental income, 2. equity through paydown of the mortgage, 3. appreciation and 4. depreciation. Rather than looking at returns as a snapshot of time, you need to evaluate returns over a longer window of time. If you finance using a 30 year fixed rate mortgage, the majority of your expenses will never change over the life of the investment. Mortgage payment is typically the largest expense of rental property ownership---usually around 60-70% of expenses. That means that as your rental income goes up through rent increases and you gain equity through mortgage paydown and even modest appreciation, returns increase exponentially. Real estate ownership is not a get rich quick scheme and returns should be evaluated over the life of the investment. Once you change your mindset to evaluating returns based on all sources and over a longer period of time, things like CAP rates and cash on cash returns a lone become less significant.
Quote from @Venkateswaran Venkatasubramanian:The main criteria I use when evaluating a market in addition to whether the market cash flow well are the overall economic and demographic fundamentals. There are several markets in the U.S. that can cash flow well today but that doesn't mean they are good investment markets long term. The factors that I personally feel are most important are:
@Mike D'Arrigo Thanks for honest and great feedback, I was initially paying too much attention to the caprate and cash flow. Appreciate the suggestion for looking into midwest markets. What are the sources you consider to decide which market is best for long term returns and equity growth
1. Population growth
2. Job growth
3. Modern/diverse economies & industries
4. Business investment in the market---companies either expanding or moving in to the area
5. Low to moderate property taxes
6. Landlord friendly laws
The markets that I like that check all of these boxes are Indianapolis, Kansas City and the Quad Cities (Davenport, IA specifically) We're active in all 3.
Hello Fellow investor,
I am a local Connecticut investor. I'll do my best to answer your questions about investing in the Hartford and West Hartford real estate markets in Connecticut.
- 1) How is the current real estate market in Hartford and West Hartford?
The current real estate market in Hartford and West Hartford is strong. According to Zillow, the median home value in Hartford is $135,800, and it has increased by 16.2% over the past year. In West Hartford, the median home value is $320,500, and it has increased by 10.9% over the past year. The low inventory of homes for sale has contributed to a seller's market in the area, with homes selling quickly and often above the asking price.
- 2) What are some factors that make Hartford and West Hartford attractive for real estate investing?
Hartford and West Hartford are attractive for real estate investing due to several factors. Firstly, the proximity to major cities like Boston and New York City makes it a convenient location for commuters. Secondly, the area has a diverse economy with strong job growth in industries such as healthcare, education, and financial services. Thirdly, the area has several top-rated colleges and universities, which attracts a large student population and provides a steady demand for rental properties. Finally, the low cost of living compared to nearby major cities and the desirable suburban lifestyle makes it an attractive option for families.
- 3) What are some potential risks or challenges of investing in the Hartford and West Hartford real estate markets?
As with any investment, there are potential risks and challenges to investing in the Hartford and West Hartford real estate markets. Firstly, the low inventory of homes for sale may make it difficult to find properties at a reasonable price. Secondly, the high property taxes in the area can eat into potential profits for landlords. Thirdly, as with any market, there is always the risk of a downturn in the economy or a housing market crash, which could negatively impact real estate investments. It's important to do thorough research and work with a knowledgeable real estate agent or financial advisor to mitigate these risks and make informed investment decisions.
I hope that my humble answers will help you in your journey. Wish you well!
Sincerely,
Hamlet
6+ unit investor in CT
I have a friend down in KC and thought about investing there before. Thanks for mentioning it again. Are you investing on the Kansas or Missouri side? Or are laws similar enough that you invest on both sides?
What are labor rates down there?
For example, up in Boston for high quality maintenance personal you pay around $35/hour, electricians are $100/h and plumbers are $175/h.
Kind regards,
Colin
Quote from @Colin Kelly-Rand:
I have a friend down in KC and thought about investing there before. Thanks for mentioning it again. Are you investing on the Kansas or Missouri side? Or are laws similar enough that you invest on both sides?
What are labor rates down there?
For example, up in Boston for high quality maintenance personal you pay around $35/hour, electricians are $100/h and plumbers are $175/h.
Kind regards,
Colin
Colin, we operate primarily on the MO side but that's primarily due to the availability of rental type properties. We do some on the KS side. Both can sides can perform well in the right neighborhoods. MO may be a little more landlord friendly but not significantly more.
Thank you.
Any chance you can share some labor costs?
I'm trying to expand my comfort level beyond boston.
Any surprise costs in KC vs Boston? Boston surprised might be related to winter such as frozen pipes, snow shoveling, slip and falls and the strong tenant rights (slow eviction process).
Cheers
Colin