Picking a location for investment property
Whitewater, WI · Member since 2025 · 6 posts · 18 votes
Picking a location for investment property
Most Popular Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votesHow much do you know about Property Classes?
Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!
Why is Property Class so important for investors to understand and apply in their investing strategies?
Because the Property Class dictates the Class of the tenant pool that the property will attract.
The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.
Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.
The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.
Why is that important?
Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?
Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?
So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.
We use the following to rank Property Classes, in order of importance:
- Property Tenant Pool: closely linked to location, but not always.
- Property Location: closely linked to tenant pool, but not always.
- Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”
Key metrics for each Property Class:
Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.
Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.
Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.
Where did we get our FICO credit score information from?
Check out this chart:
|
FICO Score |
Pct of Population |
Default Probability |
|
800 or more |
13.00% |
1.00% |
|
750-799 |
27.00% |
1.00% |
|
700-749 |
18.00% |
4.40% |
|
650-699 |
15.00% |
8.90% |
|
600-649 |
12.00% |
15.80% |
|
550-599 |
8.00% |
22.50% |
|
500-549 |
5.00% |
28.40% |
|
Less than 499 |
2.00% |
41.00% |
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.
We can also share numerous examples of properties & portfolios we’ve assisted investors with!
DM us if you’d like to discuss this logical approach in greater detail!
Horror Stories:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9469 Reviews
30 Replies
- Investor · Member since 2025 · 17 posts · 4 votes11mo
@Evan Rekowski
Why North Carolina Beats Out the Others (and Why We Chose It)We prioritize states with growing populations (to keep vacancies low) and jobs in stable sectors like tech and healthcare, since that sustains rent increases. NC stood out because:
- Affordability for Starters: Median prices are reasonable, and you can snag duplexes in the $250k–$350k range in places like Fayetteville and Jacksonville (military-driven demand) or Greensboro. Compared to Arizona's higher prices ($442k median), this means easier entry and better cash flow from day one, rents often cover mortgages with $200–$500/unit positive after a reasonable down payment. Texas is affordable too ($339k), but its high property taxes (1.8% vs. NC's 0.9%) chip away at margins, making NC's net returns stronger for budget conscious beginners.
- Stronger Growth Metrics: Job growth ranks high nationally, with hubs like Charlotte (banking) and Raleigh-Durham (tech/research) drawing steady tenants, population up 1.81%/yr. This sustains appreciation (Raleigh homes up YoY) better than Wisconsin's stagnant 0.5% pop growth and flat jobs, which lead to higher vacancies. Arizona has solid pop growth (2.45%), but its moderate job gains and higher costs make it less ideal for pure cash flow vs. speculation.
- Better Landlord Perks: No rent control, short eviction periods, and moderate taxes make management easier than in tenant friendly Wisconsin (longer evictions, strict protections) or Arizona (some urban rent caps). Texas is very landlord friendly too, but NC offers similar benefits with less competition and more balanced policies.
We decided on NC over Texas (too crowded/expensive in hot spots, tax drag, over supply of new construction dragging values down), Arizona (overheated prices, tougher cash flow), and Wisconsin (weak growth) because it offers the best mix of low entry barriers, high cash flow, and upside without the risks of stagnant or overpriced markets. If NC clicks, check out areas like Cumberland County (Fayetteville with affordable duplexes, strong rental demand from Fort Bragg). Happy to help underwrite a deal if you share details.
- 11moCharles ClarkBusiness MemberReal Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
Evan, you’re already doing the right thing by researching early. When comparing markets, most investors focus on a few core metrics: rent-to-price ratio (aim for 0.8–1%+), job/population growth, landlord-friendly laws, and overall affordability.
Texas and North Carolina tend to offer strong growth and relatively landlord-friendly regulations. Arizona has solid appreciation but can be more competitive. Wisconsin is stable, familiar, and often has good cash-flowing duplexes at lower entry prices.
Most experienced investors end up choosing the market that balances cash flow + stability + affordability for their situation. If you’re open to moving, I’d visit each area, run sample deals, and see where the numbers actually work for you.
Good luck, and props to you for starting early!
Raise the Standard RE LLC55 Reviews - Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 432 votes10mo
None of those are bad options. I think Texas and Wisconsin are better bets based on the current political landscape. Wisconsin is fairly balanced between landlords and tenants, honestly. Texas I would anticipate falls more on the side of landlord friendly. Review the state statutes first for all states. What's the process for delinquent rent per the statutes? What does notice look like for either tenant or owner to end tenancy? What are their security deposit regulations like?
I believe it is generally a best practice to invest first where you live OR if that's not at all possible (i.e. living in CA), a geographic location you have a trusted family member or friend. Not that they would manage it for you, but having that set of eyes on the property until you become experienced.
I disagree that WI is weak growth state. Wisconsin evictions outside of Dane and Mke Co are 3-4 weeks. The average being 3 weeks. We are a very landlord friendly state with minimal restrictions beyond those two counties I mentioned. I teach landlords across the state on behalf of various sheriff's departments on landlord-tenant law, so I can firmly say the restrictions are minimal. I own 14 rental units, and the regulations almost allow too much freedom (to be abused by less than ethical landlords).
If you have any questions about WI let me know!
- Lender · Houston, TX · Member since 2025 · 35 posts · 24 votes10mo
Investing in your own city is a cheat code. Investing is risky enough, so there's no need to increase your risk by investing in places you have no knowledge of. So many things can go wrong even if you do everything by the book. Unless you have reserves over $50K just for contingencies, stay in your home market.
- Rental Property Investor · Allentown PA, United States · Member since 2016 · 567 posts · 442 votes10mo
The best market to invest in is one where you have a competitive advantage. If your current market can make sense from a cash flow standpoint I would highly recommend you start there before considering branching out long distance. Not to say that it can't be done, but likelihood of success is far lower in my opinion
Join the conversationCreate a free account to reply, vote on answers and follow this thread.