This or THAT?! How to choose a market to begin!

26 Replies

I've been a silent lurker for quite some time now, as I got myself together financially. I finally decided to move ahead full speed with this real estate journey, especially after attending Brandon's 90-day webinar last month. So, I'm all gung-ho and ready to get going, BUT I have a problem. I cannot for THE LIFE of me figure out where on earth I want to begin doing MFH investing with Buy & Hold. And it's hindering me from acquiring funds because I want to begin under an LLC to acquire business lines of credit. But because I don't know which state I want to begin in, I haven't created my LLC yet, thus no funds. So if I happened to come across a good deal, I'm pretty much assed out bc I have no major funds as of yet. I'm from NY, but don't want to invest here in the city as it's not the price point I wish to begin with. I want to invest in a Sub200K area right now that will put me in about a B neighborhood with working class folks who care about their surroundings/block. I want to stay away from Section 8 for now.

As for NY, I've contemplated Poughkeepsie, but I'm not too fond of how the job market/population has been looking. I noticed there was a revitalization plan on their city website, but didn't see any timeline regarding it.

I'm absolutely terrified of Newburgh - I went to visit, and I didn't step one foot out of my car. I did a drive-by for all of my comps in Newburgh. I thought I could handle that city bc I went to college in Philly, and I couldn't possibly imagine anything being worse than the hoods around Temple, but boy was I wrong!!

And then I also have a list of B'more, Albany, ATL, Philly, Pittsburgh...I'm just CONFUSED!! Right now, I'm doing some in-depth research on each city - looking at their Comprehensive Annual Financial Report, checking out the population, job market, who's landlord-friendly, etc. BUT, has anyone gone through this when they were first starting out? If so, what helped you make a final decision?? I don't want to get sucked into analysis paralysis with this.

I don't want to pick any random state, but then end up starting in a different state and have to deal with being a foreign entity. Any tips would be greatly appreciated!! :) 

@Chantal Jones

First, take a deep breath, Wooohhhh-Shaaahh. Relaax...What I always ask people on the forum who ask these kind of questions is, What are your priorities when it comes to buy and hold? Is it cash-flow, appreciation, price point, distance from you, etc..

When you start listing things on order of priority then things start to fall in place. There are A,B,C, and D neighborhoods in every city. The true question is do you plan on self-managing or using a property manager? With a property manager, you can have houses in C or D-class neighborhoods let them take care of it while you are cash-flowing.

Most people will give you suggestions and opinions on what they know and are familiar with so if you truly want a suggestion I will give you a suggestion on what I know and am familiar with.

 B'more, and Philly, personally, I am not a fan of. Still have a long way to go economically. However, Pittsburgh has a lot of potential, its been listed as one of the most affordable cities in America.

I am a Brooklynite almost all my life and still work there but have made Allentown, PA my new hometown and truly, its an investors paradise. The job-market is booming, vacancy rates are at 5%, and housing is cheap. Its close enough to NYC where if you want to self-manage from Brooklyn, you can. Do your research on the Allentown-Bethlehem-Easton PA and tell me what you think.

This post has been removed.

I would get your capital situation in order. Its fine if you have no funds but if thats the case, you have to figure out where they are going to come from. Banks are being extremely cautious right now (prudent) and you are going to have to put 25% down at least unless you are going to live in the investment. Since this is the case, your money will not completely come from the bank. For a sub $200k market, sounds like you'll have to come up with $50,000. Continue your education journey and let family and friends know you are becoming an expert at this. Eventually, people will begin to trust you and you can ask family and friends to partner with you on your real estate deals so they will provide the money you need! There is no magic recipe.. Good luck!!

This post has been removed.

LOL Thanks for your reply Brian, my fellow Brooklynite!
Just yesterday, I raised this same question to someone and they told me the same thing.  That I should figure out my priorities on buy and hold.  I didn't look at it that way, so I will definitely take time to do that this weekend.  I didn't plan on self-managing - I'll go the property manager route.
I appreciate your suggestion - I'll do some research on that area as well!

So do you prefer to self-manage then?  How long have you been out in Allentown?

Originally posted by @Brian Adzadi :

@Chantal Jones

First, take a deep breath, Wooohhhh-Shaaahh. Relaax...What I always ask people on the forum who ask these kind of questions is, What are your priorities when it comes to buy and hold? Is it cash-flow, appreciation, price point, distance from you, etc..

When you start listing things on order of priority then things start to fall in place. There are A,B,C, and D neighborhoods in every city. The true question is do you plan on self-managing or using a property manager? With a property manager, you can have houses in C or D-class neighborhoods let them take care of it while you are cash-flowing.

Most people will give you suggestions and opinions on what they know and are familiar with so if you truly want a suggestion I will give you a suggestion on what I know and am familiar with.

 B'more, and Philly, personally, I am not a fan of. Still have a long way to go economically. However, Pittsburgh has a lot of potential, its been listed as one of the most affordable cities in America.

I am a Brooklynite almost all my life and still work there but have made Allentown, PA my new hometown and truly, its an investors paradise. The job-market is booming, vacancy rates are at 5%, and housing is cheap. Its close enough to NYC where if you want to self-manage from Brooklyn, you can. Do your research on the Allentown-Bethlehem-Easton PA and tell me what you think.

@Chantal Jones

I have been living in the Allentown area for exactly 5 years since this past October and all I have ever seen is growth. I have 1 rental property now that I am self-managing. I will continue to self-manage as long as the property is in the Allentown-Bethlehem-Easton area.

I will switch to property manager when I decide to get a property in Pittsburgh or anywhere else that is out of state.

However, I hate to burst you bubbles but @Rob Beardsley and @Account Closed are right. You need to get your capital in order prior to pulling the trigger. Banks and mortgage companies standards are super stringent now, they require a minimum 25% down payment. That down payment may go even higher since you are thinking about buying the property under an LLC. I called an insurance broker and asked how much higher will a home owner's insurance be if its through an LLC and he said a minimum of 1K higher.

So moral of the story is, figure out how are you going to raise funds to acquire the property and be aware that costs go up tremendously when the property is bought through an LLC (down payment, insurance, interest rate)

@Chantal Jones So I think you're muddling a bunch of stuff together.  If I were in your shoes the first place I'd start is the "where" and work from there.  And the first place I'd start in the "where" is what others markets do you know?  Do you have friends in one?  Cousins in another?  Go to college somewhere else?  Just something to give yourself a little bit of a start beyond a Wikipedia page.  If you just stick with looking at 2-3 markets it's far easier to go deep into those markets.  If you don't you basically follow the bouncing ball for appreciation...then follow another when you look at population growth...then another...and so on...

That's how I started out...

Hmmmm ok - I appreciate the reality check @Rob Beardsley @Brian Adzadi .  Yes, like you mentioned Rob, the funds will not completely come from a bank.  I wanted to utilize banks as a last resort, if possible, and try to use other creative strategies before going to the banks.  But, I understand that I should figure out the capital situation first.  I am working a bit out of order I guess.

Thank you for that!

Househack if you can!

That’s a great way to get started and take advantage of some great financing options. While I’m sure it was easier for me in Minneapolis than it will be for you in Brooklyn there are still properties everywhere that work for a house hack when you add in airbnb. Just get creative and don’t shut your mind down to the possibility!

If you want to figure out where to buy, check out my blog post https://www.biggerpockets.com/blogs/10145/66160-how-to-identify-emerging-markets

I am from NY and lives in NJ now. We are looking at the Lehigh Valley area in PA which would be a 2 hour drive for you, give or take. So far the area looks promising. There is a lot of revitalization in the downtown areas of Allentown and Easton.

@Stephen Kunen

Thank you for promoting my hometown. However, does this mean you and I may be competing for the same rental properties? LOL.

May the best man win then.

@Brian Adzadi  

You should be able to find a company for less than $1000 a year under an LLC. I got quite a few clients in the Allentown area with LLC whose premium ranges from $500 to $800 for 1 to 2 units. What matters is the condition of the rental property, any vicious or prohibited pets, etc. The companies that likes rentals will do it with the LLC with no additional surcharges.

I would definitely say you are putting the cart before the horse. Worrying about an LLC and all that just to start a business line of credit will end up shooting you in the foot way more than not getting that business line of credit.

As mentioned in a post or two already, LLCs can make your life very difficult, especially from the financing perspective. And as it sounds, just the idea of one is clouding your entire experience and not letting you see the forest through the trees. 

Start easy. Just find a property. Just that alone will require you to learn numbers, understand market fundamentals, know what you are looking for when you shop for properties, etc. All of that will keep you busy enough, trust me. Then buy the property. Then, start shopping for another. Eventually down the road if a business line of credit is what you need, research what it will take to get that. If it's an LLC, research the repercussions of having one and figure out how you can work around those.

Baaaaaaby steps. I worry that if you stay focused on what you are worried on here, you won't even know what makes for a good rental property once you're ready to buy! 

I tell people all the time... I've had 173 business ideas and only 1 of them worked. And the difference with that 1 business is that I never knew the end game for it ahead of time. I still don't know the end game. All of the rest of them, I decided on my final goal for it and tried to work backwards to make it happen. The 1 that worked, i just built it piece by piece and never knew where it was going to take me. 

Same idea.

@Chantal Jones Slowdown, reset.. Your 100% right, them towns you mentioned are dead. Not because I know so, but because public population growth says so.

Search for towns your interested in buying into, find one on a steep growth curve for at least 10 years: https://www.google.com/publicdata/explore?ds=kf7tg...

As you already figured out, don't buy in a bad hood. Buy in a decent area, then buy a ugly house and clean it up as that is baked in equity, or if your not ready for that, just buy one that's not ugly, or is turnkey and rented.


Best,

@Chantal Jones

It definitely seems like you are overanalyzing a bit here. I would focus in on one or two locations and really get to know the market or get to know someone local that knows the market. 

Then you can learn what to look for in each city. 

Then look for a good deal and analyze it. If it hits the numbers that you are looking for then pull the trigger. 

The numbers are the most important part, closely followed by the potential headache of the property. You can reference crime maps and other public data to determine what areas may cause more problems than others. 

niche.com has decent baseline data for free. 

Most local agents to wherever you are looking should be able to pull neighborhood reports for you as you hone in on neighborhoods to operate in within these cities. 

@Chantal Jones why are you looking at places so far away? Being from Brooklyn you have the entirety of Long Island to pick and choose from. The towns range from city-like to true suburbia, and best of all they are just a quick cruise down the BQE to get there. Start driving around the Jericho Tpke and get to know the areas right under your nose. Forget about Albany and Philly. 

Thank you so much for your input!

@Jordan Moorhead , yup you're absolutely right.  Brooklyn is definitely expensive!  I didn't really care to househack honestly, but if I do come across something that works financially, I'm definitely going to attempt to put that into play.  The only doable homes I've seen so far in BK are short sales, and I don't really think I want to go that route just yet.  

@Todd Dexheimer - thanks!  I listen to the podcast on my drive home from work, so I'll be sure to tune in to your BP podcast episode this week, and also check out your blog!

@Stephen Kunen - very nice! Yes, 2 hours isn't far at all.  I'm sure you're further along than me in your journey, so I'll be following along to see how it works out!

@Ali Boone - thanks!  I saw your name and said wait a second, this name looks familiar!! LOL I realize I follow you on Twitter and have been on your site.

Yup, everyone's responses is making me realize I'm doing things a bit backwards, and even in researching LLCs further and going deeper, I realize it's not as easy as I initially thought it would be.  So, I'm glad I posed the question.  It's definitely opened my eyes!  So you're absolutely right, I'm going to start to analyze more.

@Levi T. , yes I'm definitely going to reset and begin to analyze more deals.

@Anthony Angotti , I am the QUEEN of overanalyzing smh - it's CRAZY!!  I do it for wayyyyy too many things, but am getting better.  That's why I told myself I should just post to get out of my own way.  And I'm glad I did - it's been a great help and relief honestly.

I didn't think to ask local agents about neighborhood reports actually!  Thanks for that tip.  I see you're in Pittsburgh...hopefully, I can reach out to you if I do decide to head into that city.

@Kevin Schaefer , the taxes in LI are crazy high.  If I can get a deal that'll incorporate it and it'll work in my favor than maybe.  But, I took one look at those taxes and said whoa - no thank you!  Have you invested in LI before though?

@Chantal Jones no I've not invested in Long Island I'm still looking for my first investment here in NJ. But I do know the area pretty well. I'd rather deal with some higher taxes (I live in Bergen County NJ) than be more than 40 minutes away from something I own ... If you are house hacking someone is helping you pay those taxes, and if you are flipping, it's not like people don't live there and aren't paying those high taxes anyway .... but that's just me. I understand where you are coming from .... we've all got our thing. 

Awesome! Good luck and don't hesitate to reach out anytime any of us can be of help!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.