Best states to invest for small multi family units

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Best states to invest for small multi family units

Kevin Kong
Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes

Hello BP Fam,

I looked through the search bar and was looking for the subject on this matter, but have not been successful on something current to date and even on the same topic. My question is for you big brothers and big sisters out there, where is a good place invest for multi family units outside of Chicago? I'm looking to invest in smaller multi family units (4 units or less) with great cash flow areas. As most people know Chicago is great for visiting and having fun, but if you're a home owner the taxes have you running. The rents here are high but compared to the cost for places with smaller fry such as myself you're not going to be able to get anywhere near 1%. I am looking for long term hold. By long term I hope to have my daughter interested in the game of real estate and take over the family business. I have heard places like Milwaukee,WI and Phoenix, AR are hot markets for cash flow and I also heard that Boise, ID randomly is booming as well. From personal experience where would you all recommend me to look to expand my portfolio? My price range is around 300-350k with either FHA (3.5% down) or with conventional (5% down) for worse looking places. I do prefer to remodel and renovate myself to save money and use that to get more property. I wouldn't also mind "living" there for a year so i may get a 95% refi so I may use that money to get more places. Any recommendations of city, town and state is always welcome and I thank you in advance.

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Brock Mogensen
Real Estate Syndicator 路 Milwaukee, WI 路 Member since 2018 路 1k+ posts 路 907 votes
4y

Milwaukee area is a solid cash flow market.  Definitely completely different than a market like Phoenix.  Generally speaking, you'll be able to find lower priced deals with better cashflow in Milwaukee.  That being said the natural appreciation won't be as high.  A market like Phoenix may be more expensive (less immediate cashflow) but provide better long-term natural appreciation. 

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  • Michael Dumler
    Real Estate Agent 路 Atlanta, GA 路 Member since 2020 路 1k+ posts 路 1k+ votes
    4y

    @Kevin Kong generally speaking, your midwest and south east states provide "affordable housing" where the price to rent ratio meets investor's demand. However, with current market conditions, meeting the 1% rule is doubtful for on market properties. Furthemore, financing a property either FHA or 5% down conventional will absolutely require you to live in the home for up to a year. Sounds like you are trying to go around this rule and commit mortgage fraud. This begs the question, were you planning on moving already? If not, you're going to have to bring a larger down payment for out of state investments. I've also never heard of a 95% LTV refi, not sure what the strategy is there, you have to have at least 20% equity in the property to qualify for any refinance product. Hope this helps!

    1Reply
  • Ryan Wallace
    Real Estate Agent 路 Eagle, ID 路 Member since 2019 路 45 posts 路 28 votes
    4y

    @Kevin Kong , I can't speak directly to the other metros, but you are correct in what you read about the Boise MSA. It has taken off in the last few years due to outside pressure from states like California, Washington, and Oregon. The outlook is still very bright with projected growth this year around 6-8%. Rents have grown upward of 15% in the last 16 months, but due to price appreciation, we are still a good way off the 1% rule. With this though, property tax and hazard insurance tend to be considerably cheaper than many of the metros that are "affordable", so cap rates land somewhere around 4.5%.  If you have any interest, send me a PM and I can send you a couple of properties that might fight your budget. 

    Thanks,

    Ryan 

    2Reply
  • Zach VanDeYacht
    Real Estate Agent 路 Sarasota 路 Member since 2019 路 10 posts 路 0 votes
    4y

    Hey Kevin- Starting out, Milwaukee is a great option since there are a large amount of 2-4 unit properties throughout the city, especially in your price range. Granted the returns have become much more competitive over the past couple years, there are still many great opportunities, especially if you are looking to owner occupy. The biggest downsides to investing in Milwaukee are the very high property taxes, and a lot of aged properties. If you become more serious about looking at Milwaukee, feel free to shoot me a PM

    0Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y

    @Michael Dumler thanks for the response!  I'm not trying to commit fraud I actually do plan on moving to the state.  I'm looking for a sunbelt state because being born and raised in chicago I'm sick of snow and cold. I lived in San diego for 5 years so I want the warm embrace of the sun for as long as possible.  Yea I hear a lot that 1% is hard right now and I'm looking for just cash flow. 100$ per unit after all is said and done. But the prices here in chicago for 3-4 flats are hard to come by.  I am currently working on a house to a 2 flat with a in law unit in chicago. I'm also currently trying to get another place here and then I would like to move. Thanks for your response and wisdom!  It is always appreciated 

    0Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y

    @ryanwallace I have no idea how to tag people in this thing or I do but don't remember. Thanks for your input!  I guess there have been a lot of discussion with Boise and I'm late to the party hahaha. I might have to visit and see if that is somewhere I wouldn't mind living for a couple years and build my portfolio there. If I do decide I'll make sure took you up. Thank you. 

    0Reply
  • John Warren
    Real Estate Broker 路 3412 S. Harlem Avenue Riverside, IL 60546 路 Member since 2015 路 6k+ posts 路 5k+ votes
    4y

    @Kevin Kong all I can say is, the grass is not always greener on the other side. Yes, Chicago property taxes are a bit higher than some surrounding states. Yes, the state of Illinois has some pension issues. But you are literally sitting in a goldmine of incredible, brick construction 2-4 unit properties. If you were buying a 150 unit apartment complex, then I would totally get it moving outside of Chicago. I just don't see it though if you are looking at other markets for 2-4 units. It is too easy to build wealth and cash flow here. Plus, 1% deals do exist here. They are just as hard to find everywhere right now! 

    2Reply
  • Scott Swanson
    Griffith, IN 路 Member since 2019 路 114 posts 路 56 votes
    4y

    @Kevin Kong, I'm not sure why everyone keeps telling you that you can't meet the 1% rule. Yes, the market is tight and prices are up. But we just sold a 4 unit and the investors are getting 1.38 and that's after rehab costs. We've sold sfr's above 1% as well. Is it harder to find them? Absolutely. Prices are high right now, but they're still deals out there. It just takes a little bit longer to find them! Best of luck. 

    0Reply
  • Brock Mogensen
    Real Estate Syndicator 路 Milwaukee, WI 路 Member since 2018 路 1k+ posts 路 907 votes
    4y

    Milwaukee area is a solid cash flow market.  Definitely completely different than a market like Phoenix.  Generally speaking, you'll be able to find lower priced deals with better cashflow in Milwaukee.  That being said the natural appreciation won't be as high.  A market like Phoenix may be more expensive (less immediate cashflow) but provide better long-term natural appreciation. 

    2Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Originally posted by @Scott Swanson:

    @Kevin Kong, I'm not sure why everyone keeps telling you that you can't meet the 1% rule. Yes, the market is tight and prices are up. But we just sold a 4 unit and the investors are getting 1.38 and that's after rehab costs. We've sold sfr's above 1% as well. Is it harder to find them? Absolutely. Prices are high right now, but they're still deals out there. It just takes a little bit longer to find them! Best of luck. 

     Thanks!!!  I'm definitely still looking and hopefully I can find a great deal like that. 

    0Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Originally posted by @Brock Mogensen:

    Milwaukee area is a solid cash flow market.  Definitely completely different than a market like Phoenix.  Generally speaking, you'll be able to find lower priced deals with better cashflow in Milwaukee.  That being said the natural appreciation won't be as high.  A market like Phoenix may be more expensive (less immediate cashflow) but provide better long-term natural appreciation. 

     What areas in Milwaukee are best right now?

    0Reply
  • Brock Mogensen
    Real Estate Syndicator 路 Milwaukee, WI 路 Member since 2018 路 1k+ posts 路 907 votes
    4y

    @Kevin Kong I personally prefer some of the tertiary markets surrounding Milwaukee.  West Allis, Waukesha, Wauwatosa, Cudahy are a few we have bought in. 

    0Reply
  • Charles ClarkBusiness Member
    Real Estate Broker 路 Milwaukee, WI 路 Member since 2020 路 307 posts 路 209 votes
    4y

    @Kevin Kong I hope all is well with you. To be short and sweet, there are multiple four units on the market in Milwaukee right now that are below $300k. Most are two bed rooms and 1 bath. Rents are between $700-$800 for quality apartments in B-C neighborhoods. I hope this help you with your decision. If you would like to talk so more, please feel free to contact me.

    Beleza,

    Charles Anthony

    [email protected]414-719-6090
    Raise the Standard RE LLC55 Reviews
    View Page
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  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Quote from @Charles Clark:

    @Kevin Kong I hope all is well with you. To be short and sweet, there are multiple four units on the market in Milwaukee right now that are below $300k. Most are two bed rooms and 1 bath. Rents are between $700-$800 for quality apartments in B-C neighborhoods. I hope this help you with your decision. If you would like to talk so more, please feel free to contact me.

    Beleza,

    Charles Anthony

    That sounds amazing actually Thank you for this info I really appreciate it.  I'll send you a DM 
    0Reply
  • Mark Frattini
    Real Estate Agent 路 San Diego, CA 路 Member since 2014 路 338 posts 路 176 votes
    4y
    Quote from @Kevin Kong:

    @Michael Dumler thanks for the response!  I'm not trying to commit fraud I actually do plan on moving to the state.  I'm looking for a sunbelt state because being born and raised in chicago I'm sick of snow and cold. I lived in San diego for 5 years so I want the warm embrace of the sun for as long as possible.  Yea I hear a lot that 1% is hard right now and I'm looking for just cash flow. 100$ per unit after all is said and done. But the prices here in chicago for 3-4 flats are hard to come by.  I am currently working on a house to a 2 flat with a in law unit in chicago. I'm also currently trying to get another place here and then I would like to move. Thanks for your response and wisdom!  It is always appreciated 

    @Kevin Kong

    Move back to SoCal and visit Chicago in the summers 馃榿 We have the best weather in the country!

    0Reply
  • Eudith Vacio
    Real Estate Agent 路 Chicago & NWI 路 Member since 2015 路 860 posts 路 521 votes
    4y

    Hey @Kevin Kong - I will keep it short but the DEALS are out there, ESPECIALLY if you are willing to do work on the property. You might also want to consider an FHA 203k loan if you're going to be living there, I've done a few myself and for others :)

    I trust you will find what works best for YOU!

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor 路 Chicago, IL 路 Member since 2016 路 4k+ posts 路 2k+ votes
    4y

    @Kevin Kong - My opinion is almost always the same.  I believe you can build wealth through real estate in any market, but the most important part of real estate investing is having a rock-solid team.  

    I am obviously biased towards Chicago, mainly because we have an amazing team set up here.  Nevertheless,  Chicago has an endless amount of old small multifamily buildings that are in need of renovation, plus it offers purchase prices across the board.

    Outsiders will (or insiders for that matter) will complain about taxes and crime, but there are + and - in every market.  

    Build a solid team and you will build wealth through real estate in any market!!

    [email protected]
    Quality Builders4.970 Reviews
    WebsiteView Page
    2Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Quote from @Mark Frattini:
    Quote from @Kevin Kong:

    @Michael Dumler thanks for the response!  I'm not trying to commit fraud I actually do plan on moving to the state.  I'm looking for a sunbelt state because being born and raised in chicago I'm sick of snow and cold. I lived in San diego for 5 years so I want the warm embrace of the sun for as long as possible.  Yea I hear a lot that 1% is hard right now and I'm looking for just cash flow. 100$ per unit after all is said and done. But the prices here in chicago for 3-4 flats are hard to come by.  I am currently working on a house to a 2 flat with a in law unit in chicago. I'm also currently trying to get another place here and then I would like to move. Thanks for your response and wisdom!  It is always appreciated 

    @Kevin Kong

    Move back to SoCal and visit Chicago in the summers 馃榿 We have the best weather in the country!


     That is my end game haha.  I want to move back to San Diego.  I was born and raised in Chicago and I've had enough!!  

    0Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Quote from @Eudith Vacio:

    Hey @Kevin Kong - I will keep it short but the DEALS are out there, ESPECIALLY if you are willing to do work on the property. You might also want to consider an FHA 203k loan if you're going to be living there, I've done a few myself and for others :)

    I trust you will find what works best for YOU!


     Thank You!!  We actually found a 3 flat (tri-plex) which we're hopefully going to be closing on in the next few days!.  Thanks for your comment and help!

    2Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y
    Quote from @Jonathan Klemm:

    @Kevin Kong - My opinion is almost always the same.  I believe you can build wealth through real estate in any market, but the most important part of real estate investing is having a rock-solid team.  

    I am obviously biased towards Chicago, mainly because we have an amazing team set up here.  Nevertheless,  Chicago has an endless amount of old small multifamily buildings that are in need of renovation, plus it offers purchase prices across the board.

    Outsiders will (or insiders for that matter) will complain about taxes and crime, but there are + and - in every market.  

    Build a solid team and you will build wealth through real estate in any market!!


     Having grown up in Chicago I know there is always going to be a market here.  I just hate the politics in Chicago.  I'm sure there are difficulties everywhere I just wanted to get out of the cold! haha  

    1Reply
  • Michael K.
    Investor 路 Chicago, IL 路 Member since 2018 路 352 posts 路 176 votes
    4y

    @Kevin Kong I find that there are still cash flow healthy deals to be had here in Chicago. These are typically found when you look further south and west. Also, consider your personal knowledge an asset. You might be able to make a better decision about where to invest in Chicago than a location you know less about.

    That said, I think buying in your own backyard is the best idea. So, if you are planning a move across the country then maybe look in the area you plan to move to. Best of luck!

    1Reply
  • David Avery
    Flipper/Rehabber 路 Phoenix Arizona 路 Member since 2020 路 1k+ posts 路 686 votes
    4y

    Phoenix all the way,  4 plex's are going up 30-40% per year.  Appreciation is King.  Who cares if your rents are not making you big money.  If a 4 plex goes up $6000 to $15,000 per month.

    Who cares about  rent!

    Get a fixer upper , put $75,000-$100,000 in it and watch it grow.

    Get a great Real Estate savvy General Contractor and make it happen.

    There are 2 Four plex's i am aware of that are just sitting collecting dust and someone needs to approach the owners and make a deal!!!

    Here in Phoenix.!!!!

    Kevin  consider a great Real Estate agent here, or two and tie one down!

    0Reply
  • Scott E.
    Contractor 路 Scottsdale, AZ 路 Member since 2010 路 2k+ posts 路 3k+ votes
    4y
    Quote from @David Avery:

    Phoenix all the way,  4 plex's are going up 30-40% per year.  Appreciation is King.  Who cares if your rents are not making you big money.  If a 4 plex goes up $6000 to $15,000 per month.

    Who cares about  rent!

    Get a fixer upper , put $75,000-$100,000 in it and watch it grow.

    Get a great Real Estate savvy General Contractor and make it happen.

    There are 2 Four plex's i am aware of that are just sitting collecting dust and someone needs to approach the owners and make a deal!!!

    Here in Phoenix.!!!!

    Kevin  consider a great Real Estate agent here, or two and tie one down!


     30-40% appreciation rates will not happen forever. They may not ever happen again in a single year in our lifetime actually.

    I'm seeing 4 plex's around the good parts of Phoenix trade for ~$300k+ per door at a 4% cap rate. Not a good place to park cash right now, in my opinion.

    2Reply
  • Kevin Kong
    OP
    Chicago, IL 路 Member since 2017 路 38 posts 路 11 votes
    4y

    Thanks everyone for your posts and comments.  All the inputs on this thread is very useful information. For now I think I will invest in my back yard and then move on from there.  If ebrrything goes well I'm about to close on my 3rd unit soon in less that 1 year!!!.  I'll keep everyone updated on my BRRRRS on a different thread!  

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