Rental Property Investor · Boulder Creek, CA · Member since 2018 · 19 posts · 20 votes
Hello BP community!
My wife and I are excited to start our first deal; however, I am having analysis paralysis with choosing a market. I just had many of my limited believes around needing to invest locally removed by reading Long Distance Real Estate Investing by David Greene. My next most important step is to start getting leads to analyze but I'm having trouble deciding on a market. The United States is just so BIG!
We want to use the BRRRR strategy and are looking for single family residences or small multi-family residences that will have an ARV around $100K-$150K as we have around $20K-$30K that we are willing to bring to the deal.
What cities/neighborhoods have you had success with the BRRRR strategy around that price?
I am hoping to get at least 5 locations from this discussion that I can start looking for deals in.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
8y
@Benjamin Bleasdale, hard to say since it depends on several variables. First, let me state (this is my opinion only - not be confused as fact) that I don't think we'll see a market drop in price like we did during the last recession when the next one comes around the bend. I think the problems lie in other sectors this go around-not housing. That said, it's never a bad idea to have a healthy amount of cash on hand. Banks love it for a number of reasons, and it can potentially help you negotiate a better deal since there are less moving parts in a cash purchase.
That said, there are always buying opportunities in all market segments and paying all cash in what is still a historically low interest rate environment overall doesn't make the most sense to me either. If you are smart on how you leverage your properties (term, rate, maturity, etc) you can make that same amount of money go much further and take much better advantage of inflation over the long term.
I think its very hard to start out at a distance. I did that way but I had the benefit of a trusted local partner. So If I were you I'd focus on finding and making connections. It might also be sensible to handle at least a few deals nearish to you. as @Brandon Turner always says on the podcast there are great markets within a couple hours of everywhere. (that is a paraphrase).
I think once you have done a few deals its easier to understand what you are looking for. All that being said if I were forced to pick a market for BRRRR I'd say Chattanooga TN mainly because it has worked well for me here and because it happens to be in the price range you are suggesting.
Rental Property Investor · Boulder Creek, CA · Member since 2018 · 19 posts · 20 votes
8y
@Derrick E. That's not a bad way to start, but with my dart skills, I'll likely end up investing in the middle of the Atlantic or Pacific ocean, lol!
@Jeffrey Holst Thanks for your thoughtful response. One of the reasons I want to invest further away is that it will push me beyond my comfort zone and force me to develop systems. If I pick someplace only a couple of hours away, then no doubt I will end up driving there and trying to do things myself instead of developing a system (For example, I'll end up attempting to install new flooring myself instead of hiring a contractor, which could save me money but cost me time). I will totally consider Chattanooga, TN. Thanks!
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
8y
There have been a number of threads by people who just read that book and were ready for long distance BRRR or flipping. 'All you have to do is get your team in place'. I have a hunch if we could do a follow up it would be a very low percentage who made a go of it. My recommendation is work locally or move to an appropriate market if you want to do BRRR.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
8y
I think the problem you run into right now is that finding deals is very difficult. The majority of inventory you'll find listed is probably not worth the trouble. For example many houses in decent sub areas of Chattanooga are going for around the 1% rule, even in the hood. With 50% expenses those are 6 caps, which on houses is not a good price. I think those chiming in with advice (I would second Chattanooga, but I've been here 5.5 years and investing here for 9) are already established in their respective markets and have the network in place. It may be fairly difficult for you to tap into that. Not saying you can't, but be prepared for some strong headwinds.
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
8y
@Benjamin Bleasdale, hard to say since it depends on several variables. First, let me state (this is my opinion only - not be confused as fact) that I don't think we'll see a market drop in price like we did during the last recession when the next one comes around the bend. I think the problems lie in other sectors this go around-not housing. That said, it's never a bad idea to have a healthy amount of cash on hand. Banks love it for a number of reasons, and it can potentially help you negotiate a better deal since there are less moving parts in a cash purchase.
That said, there are always buying opportunities in all market segments and paying all cash in what is still a historically low interest rate environment overall doesn't make the most sense to me either. If you are smart on how you leverage your properties (term, rate, maturity, etc) you can make that same amount of money go much further and take much better advantage of inflation over the long term.
Professional · Jersey City, NJ · Member since 2014 · 154 posts · 87 votes
8y
The Chicago Fed offers an interesting mapping tool that may help some.
The tool allows one to enter a city known to work for BRRRR, say Grey’s Harbor or Kansas City, and it will share with you comparable cities nationwide by relevant economic statistics (e.g., growth, income, population, housing cost, etc).
Not all cities are included in the tool, but there are plenty to explore.
Should be more accurate than your darts.
Lender · Knoxville, Tennessee (TN) · Member since 2016 · 422 posts · 667 votes
8y
@Bryan Venable when I was first getting started, I did a few deals and then got bold and bought a property out of state. It ended up being one of the worst headaches and biggest learning lessons that I’ve experienced to date.
Soon I realized that A good property manager is the single most important person on your team when doing deals at a distance. If you are brave enough to take the plunge, look no further than @Brian Levredge if you end up liking Chattanooga.
Rental Property Investor · Boulder Creek, CA · Member since 2018 · 19 posts · 20 votes
8y
You have all given me some great information to chew on. I'll likely start out in a location that doesn't cost much time or money to fly to if I need to, perhaps Phoenix, AZ. I'll also need to focus heavily on networking and getting a good property manager. It's easy to get caught up in the information from whatever latest book I just finished and want to try it out. Thank you actual people of BP for some real life knowledge!
Sacramento, CA · Member since 2017 · 54 posts · 19 votes
8y
@Bryan Venable
If you're considering AZ, check out the Verde Valley. It's an hour and a half north of Phoenix, and the valley has about three or four up-and-coming towns with, if I remember correctly, are in your price range. The Verde Valley, and more specifically Cottonwood, AZ, is my home area. I wouldn't invest there, but that's a very personal choice, having nothing to do with numbers and everything having to do with me growing up there. I have no interest in going back other than family. The other upside to buying in Cottonwood is it's right next to Sedona, AZ. Popular vacation spot with beautiful red rocks.
Sedona, AZ · Member since 2008 · 6 posts · 4 votes
8y
Hey guys, i live in Cottonwood, AZ and work in Sedona. There are a few different agents i could recommend, hit me up. The rent to price ratio in the Verde Valley makes it tough on the surface for a BRRRR strategy, but would be interested in talking more and seeing if we cant help and/or partner in some way. Im always open to people looking in my areas.
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
8y
@Bryan
@Bryan Venable basically you're trying to achieve 2 goals. You're want good cash flow as a buy and hold but you also need built in equity. I would start by identifying good cash flow markets which is generally going to be in the Midwest. I like Indianapolis and Kansas City for cash flow myself. Of the cash flow markets that you identify, you have to find markets that have enough distressed inventory that you can be all in for 75% of ARV after acquisition and renovation. The second part of that equation is getting harder as inventory is getting tight in the good markets. Buying right going in and knowing the ARV are key to making it work.
@Mike D'Arrigo very well said. That is indeed exactly what I am looking for.
@Bo Kim Thanks for your input, Indianapolis does keep coming up in my research.
Thank you everyone for your input. I now have several markets that I am going to research deeper, begin making connections, and start analyzing deals in.
Rental Property Investor · Aurora, CO · Member since 2018 · 288 posts · 117 votes
8y
Do you have any connections/friends/family in a market you are interested in? I would start there and go visit them for a weekend and meet w real estate and property managers. Doing a BRRRR is a fantastic deal but if you think about it it’s basically two deals in one (a flip, to yourself via refi, and then a long term) and on top of that you’re doing your first deal long distance in a new market. That’s a lot of variables, just be cautious with so many moving parts.
Rental Property Investor · Boulder Creek, CA · Member since 2018 · 19 posts · 20 votes
8y
@Mark Hughes unfortunately we don't have any friends or family in investor friendly markets. There are a lot of moving parts in what we want to do, but our primary goal with this first deal is to learn and hopefully we still end up making money so we aren't afraid of complexity.
Thank you everyone for your input. After spending what is probably far too long looking at markets, we have decided to start in Indianapolis. We feel like we will spend our time more effectively by getting to know a specific market rather than spending more time analyzing markets. So if anyone knows any good real estate investor friendly agents, property managers and/or contractors we would love to get their contact info. Thanks BP nation!