Willing to move anywhere to start investing in Multiunit rentals? That's us!
My husband and I are serious about starting BRRRR and researching now where to live. So serious we decided it is best to leave the beautiful San Diego area for a better market.
We noticed Ohio cities have really high rent ratio (we downloaded data from Zillow on rent ratio by city in the USA). Is the economy doing OK and is Ohio a good option?
Any advice on which state or cities are good to live and invest? We hope to acquire many multi-unit apartments in an area with cheap houses so we can get things rolling quickly.
Thanks for any tips!!!
My view is you are living in one of the best areas for BRRRR. I say this even though I have not successfully gotten all of my purchase expenses and rehab expenses out of a refinance. I typically get all of my purchase expense out and part of my rehab expenses out with the refinance. This is in part due to low appraisals often associated with refinance and in part due to the relatively low LTV on investor refinances.
Here is why San Diego is a great BRRRR location:
- The rehabs have a high rate of return. We do not consider a rehab unless we are expecting grater than 100% return on the rehab cost. We have achieved our projected return on each of our rehabs. In low cost areas the return on a rehab is less because the overall value of the property is less.
- After the refinance you now have a rental. The ROI for San Diego buy n hold is verifiably one of the best in the nation. This is due to appreciation. Historically there has been outstanding property and rent appreciation. Going forward I am very confident of continued rent appreciation for at least the next few years.
- Low price markets are low price because historically their appreciation has been poor. This is both the property and rent appreciation. So after you rehab a unit, the unit is aging or the rehab lifespan is in motion. This is true in all markets but in the low appreciation market at the rehab ages it is losing value. In a high appreciation area, typically the market appreciation is greater than the depreciation of the rehab aging.
In San Diego, the rehab returns are great and historically the ROI on financed buy n hold is near the best in the nation.
In your plan, you will move from San Diego (at a financial cost as well as likely a lifestyle cost) to do BRRRR in an area that historically has not produced the ROI for buy n hold that San Diego has produced (verifiable fact) and is unlikely to have as great a return on the value add rehab as you could achieve in San Diego.
I suggest before you move, you attend some San Diego RE meetups. Network with long time San Diego RE investors. Discuss their level of success and compare it to the best you can expect from the low cost areas (i.e. mostly Midwest areas).
Very helpful @Dan Heuschele , thanks for the info and insights about SD being a high ROI area and high rate of return. Great perspective!