Where should I invest

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Where should I invest

Harrison Haynes
Investor · San Diego · Member since 2022 · 2 posts · 7 votes

Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!

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Twana RasoulBusiness Member
Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
4y

@Harrison Haynes I used to have investments in the Midwest and now all my investments are local here in San Diego and all of them started out as "initially" cash flow negative..many would think I'm crazy but those are usually people who don't have any investments here in San Diego.

The best place to start for most is starting local, where ever that is, even if it is in the midwest.  Going long distance only adds more complexity and one can be successful in any market but you have to understand the local market and economics and having people you trust on the ground.  There is no inherent value in Real Estate, its value is derived from the surrounding economy.  (That's why the same exact home can be $100k in one part of the country and $1M in a different part)

There are some on here that invest out of state and do very well with 1000s of units but they are not the norm. 

Few items to consider as you decide what to do:

1. House Hacking - would you be better of house hacking vs continue renting? We all have to pay mortgage whether it is our own or someone else's.

2. When calculating your numbers in markets you don't know very well, your returns on paper can and likely will be different from realityl;

3. Markets that are lower cost and higher cap rates are generally perceived to have higher risk and lower appreciation in the long term and thus have to pay a higher cash flow.

4. Generally the higher the Cap Rate of a market the lower the appreciation...If Cap Rates are high enough in a market then the real estate is likely losing value each year.

5. Being cash flow negative initially in coastal markets like San Diego, Los Angeles, etc is not the end of the world if there is a plan in place to get it to break even and then to positive within a known period of time...

6. food for thought: investing in a 401k is a negative cashflow investment (for those that say they'd never invest in anything with negative cashflow  and have a 401k account ;)   )

7. Investing locally with owner occupied loan options can be less of initial $ investment than buying an investment out of state since you can buy owner occupied with 3.5% down payment and investments are generally 20%-25% down.  (i.e. local investment - 3.5% down payment of $800k = $28,000 and OOS - 25% of $200k = $50,000)

8. If you are adamant about investing out of state,  I'd connect with other successful locals here in San Diego who have shown success over a number of years investing in a particular out of state market and learn that market from them...it will be alot more helpful than reading a book on long distance investing.

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  • Landon Bleau
    Rental Property Investor · Toledo, OH · Member since 2018 · 309 posts · 264 votes
    4y

    Midwest!  Tons of different markets to choose from.  We have very high cash flow, which we often times sacrifice high appreciation for.  I invest in the market I live in and have my criteria at $200/month/door for multifamily and $500/month for single family.  Just have to find a solid team/PM/Partner/Agent to work with.  

    4Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    4y
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any

    I recommend all investors start local.  

    Do you currently own the house you live in? Do you know the LTV of owner occupied versus what you can get OOS? Do you know FHA gives income credit for the non-owner occupied unit of a duplex?

    I suspect you can afford more locally than you suspect. I suggest you hook up with a local RE agent that owns at least 3 local properties to understand your options. If they are good they will present average monthly appreciation for a property purchased 1, 3, 5, 10, 20, 25 years ago. It will make clear $500 cash flow on a SFR pales in comparison. Note at 96.5% LTV the historical average appreciation would exceed the investment by the end or year 1. I am not getting you rely on the historical appreciation in the near term, but I am confident our long term appreciation will exceed the inflation rate.

    Good luck

    0Reply
  • Lawrence Ng
    Member since 2021 · 27 posts · 6 votes
    4y
    Quote from @Landon Bleau:

    Midwest!  Tons of different markets to choose from.  We have very high cash flow, which we often times sacrifice high appreciation for.  I invest in the market I live in and have my criteria at $200/month/door for multifamily and $500/month for single family.  Just have to find a solid team/PM/Partner/Agent to work with.  


     Hi what is your Cash on cash return when investing in the midwest? Also do you suggest buying a rental with a tenant / buying a house that requires repairs?

    0Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    @Harrison Haynes Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.

    https://www.dispatch.com/story/business/2022/01/21/intel-ohio-building-computer-chip-factories-licking-county-jersey-township/9173472002/

    Here are a few more recent investments https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0

    https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus

    [email protected]614-502-5316Podcast Guest on Show From DoorDasher to $1.5 MILLION in Real Estate (All at 22 Years Old!)
    7Reply
  • Austin McClainBusiness Member
    Real Estate Agent · OH · Member since 2021 · 347 posts · 602 votes
    4y

    The Midwest, especially Columbus Ohio, is a great area to invest in. Prices are lower than in other markets and homes are appreciating as more companies like Intel move here to lower their operating costs. 

    [email protected]614-710-4827
    3Reply
  • Colton Hahn
    Specialist · Member since 2021 · 322 posts · 273 votes
    4y
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!


     Going to echo the sentiment of others on this thread. We invest exclusively in the midwest and have found an audited return of 31%+ over the last 12 years. If you know where to look then theres great deals to be found 

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!



    It does not matter where you start as long as you develop your Core 4. The core 4 is David Greene’s strategy for long-distance and made up of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to confidently invest in any market.

    As for picking a specific market - I would go after one with an increasing job and population growth. I invest and work in Columbus, Ohio. I am also looking to invest in Cincinnati and Cleveland.




    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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    2Reply
  • Todd Rasmussen
    Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes
    4y
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!


     We started in the midwest and ended up in the south. There are people making money everywhere, it's mostly about finding a strategy that fits your situation.

    2Reply
  • Harrison Haynes
    OP
    Investor · San Diego · Member since 2022 · 2 posts · 7 votes
    4y
    Quote from @Dan H.:
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any

    I recommend all investors start local.  

    Do you currently own the house you live in? Do you know the LTV of owner occupied versus what you can get OOS? Do you know FHA gives income credit for the non-owner occupied unit of a duplex?

    I suspect you can afford more locally than you suspect. I suggest you hook up with a local RE agent that owns at least 3 local properties to understand your options. If they are good they will present average monthly appreciation for a property purchased 1, 3, 5, 10, 20, 25 years ago. It will make clear $500 cash flow on a SFR pales in comparison. Note at 96.5% LTV the historical average appreciation would exceed the investment by the end or year 1. I am not getting you rely on the historical appreciation in the near term, but I am confident our long term appreciation will exceed the inflation rate.

    Good luck

    Thank you! That is good to know, and I will haven’t to do a little more research locally. One more question: does anyone know how/ where I can find all this info like population and job projections and average rents and useful data like that?

    1Reply
  • Ann-Marie Vargas
    Realtor · San Diego · Member since 2017 · 32 posts · 10 votes
    4y

    Hello Harrison! I am in the San Diego area as well, I am happy to network! I personally invest out of state 

    0Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    4y

    @Harrison Haynes I used to have investments in the Midwest and now all my investments are local here in San Diego and all of them started out as "initially" cash flow negative..many would think I'm crazy but those are usually people who don't have any investments here in San Diego.

    The best place to start for most is starting local, where ever that is, even if it is in the midwest.  Going long distance only adds more complexity and one can be successful in any market but you have to understand the local market and economics and having people you trust on the ground.  There is no inherent value in Real Estate, its value is derived from the surrounding economy.  (That's why the same exact home can be $100k in one part of the country and $1M in a different part)

    There are some on here that invest out of state and do very well with 1000s of units but they are not the norm. 

    Few items to consider as you decide what to do:

    1. House Hacking - would you be better of house hacking vs continue renting? We all have to pay mortgage whether it is our own or someone else's.

    2. When calculating your numbers in markets you don't know very well, your returns on paper can and likely will be different from realityl;

    3. Markets that are lower cost and higher cap rates are generally perceived to have higher risk and lower appreciation in the long term and thus have to pay a higher cash flow.

    4. Generally the higher the Cap Rate of a market the lower the appreciation...If Cap Rates are high enough in a market then the real estate is likely losing value each year.

    5. Being cash flow negative initially in coastal markets like San Diego, Los Angeles, etc is not the end of the world if there is a plan in place to get it to break even and then to positive within a known period of time...

    6. food for thought: investing in a 401k is a negative cashflow investment (for those that say they'd never invest in anything with negative cashflow  and have a 401k account ;)   )

    7. Investing locally with owner occupied loan options can be less of initial $ investment than buying an investment out of state since you can buy owner occupied with 3.5% down payment and investments are generally 20%-25% down.  (i.e. local investment - 3.5% down payment of $800k = $28,000 and OOS - 25% of $200k = $50,000)

    8. If you are adamant about investing out of state,  I'd connect with other successful locals here in San Diego who have shown success over a number of years investing in a particular out of state market and learn that market from them...it will be alot more helpful than reading a book on long distance investing.

    Compass5122 Reviews
    WebsiteView Page
    8Reply
  • Zierry Eme Carl T. Tagbas
    Realtor · Spokane, WA · Member since 2020 · 138 posts · 87 votes
    4y
    Quote from @Harrison Haynes:

    Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!

     Hey @Harrison Haynes!

    Welcome to BP! Spokane, WA is really booming right now. There's definitely properties that are cash flowing!

    I would love to connect with you and see if there anything we can find here for you!

    2Reply
  • Reggie Powell
    Realtor · Woodland, CA · Member since 2020 · 33 posts · 43 votes
    4y

    @Harrison Haynes

    I am a big fan of investing locally. Local to

    me means anything within a 2 hour radius of where you live. I am certain you can find a deal within that criteria.

    Now, if you still feel you must invest out of state, make a list of where youve lived. Now make a list of where your closest friends and family live. I’d start looking at these areas. You need some kind of advantage. Some prior history of the area or current history from your list of friends and family.

    This is a great forum and people are willing to share their wisdom. I would not go invest in Columbus, OH just because I read it’s a good place to invest. You need to know the market. You need some kind of local knowledge advantage to compete. Also, 3 out of 12 people who’ve responded to this post have mentioned it as a great place. Maybe it is, but just looking at this one post, 25% of everyone here are investing in that area. Figure out exactly what you want in a deal. Then look locally. Then go through your list of people. Find the best markets within your parameters and build your team. I live and invest in California as well. Appreciation and cash flow are wonderful as a pair. If the deal doesn’t fit your criteria, don’t buy it. Move on.

    1Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    @Reggie Powell If 3/12 people are saying the same market, do you think it is somewhere you should avoid?

    [email protected]614-502-5316Podcast Guest on Show From DoorDasher to $1.5 MILLION in Real Estate (All at 22 Years Old!)
    0Reply
  • Reggie Powell
    Realtor · Woodland, CA · Member since 2020 · 33 posts · 43 votes
    4y

    @Joshua Janus

    No. Not at all. But there will be competition in that market. You should invest in a market you know and understand. There will always be hotspots that people are investing in. I would advise you to not follow the crowd. Learn the market and make decisions based on what works for you.

    0Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    @Reggie Powell I appreciate this response! Good advice

    [email protected]614-502-5316Podcast Guest on Show From DoorDasher to $1.5 MILLION in Real Estate (All at 22 Years Old!)
    0Reply
  • Michael W. McCord
    Rental Property Investor · El Paso, TX · Member since 2018 · 82 posts · 49 votes
    4y

    I would consider the inland empire as it's kinda local for you, more affordable and fast growing. Only downside is that prices don't hold up as well as coastal markets. I like Ontario myself.

    1Reply
  • Jack Oved
    Investor · Member since 2021 · 9 posts · 3 votes
    4y

    I always like to look for areas which have population growth year after year.

    0Reply
  • Tim McGarvey
    Rental Property Investor · Napa, CA · Member since 2016 · 68 posts · 57 votes
    4y

    @Harrison Haynes I'm located in CA as well (Napa) and have been investing out of state in North Carolina for several years. We initially selected the Raleigh-Durham market due to population growth, high paying job growth, landlord/development friendliness. We've also found there are opportunities for all types of investors whether seeking cash flow or higher appreciation areas. We've been doing a lot of textbook BRRRR deals lately within an hour of Raleigh

    2Reply
  • James Wenzel
    Investor · TX · Member since 2020 · 57 posts · 60 votes
    4y

    I have invested in the single family market short term and long term rentals in Texas. You can still pick up properties for under $250k that yield for $400-800/month after PITI/bills for long term rentals and short term rentals for $1500 - $4000/month after PITI/bills, of course if you pick the right areas. If you have large chunks of money and are busy with work can't travel, you can also invest in passive commercial real estate syndications anywhere in the US. I typically focus on growing metros and landlord friendly states like AZ, FL, SC, NC, GA, and my favorite TX. I have had really great success in the passive CRE investing world, last year 5 deals went full cycle and all returned over 30% ARR.

    1Reply
  • Mac Elaina
    Real Estate Agent · Memphis, TN · Member since 2020 · 9 posts · 2 votes
    4y

    @Harrison Haynes Memphis!

    1Reply
  • Mark Frattini
    Real Estate Agent · San Diego, CA · Member since 2014 · 338 posts · 176 votes
    4y

    @Harrison Haynes

    Have you exhausted all options in trying to find a place locally? Investors/owners are still finding creative ways to make deals happen in San Diego. It's a lot harder to find a good deal here which is one big reason people start looking into other areas. Find someone who can dedicate time into finding a deal that makes sense for you.

    0Reply
  • William Spekhardt
    Investor · San Diego, CA · Member since 2021 · 28 posts · 11 votes
    4y

    @Harrison Haynes I understand it's tough in San Diego.  I'm currently invest in both San Diego and Tampa markets.  Both are tough but being local has its advantages.  There are also a lot of creative financing options you can take advantage of.  Feel free to reach out with any questions.  

    0Reply
  • Teisha Hinton
    Member since 2022 · 4 posts · 2 votes
    4y

    Wherever you are going to invest you want to make sure that the population is growing (at least double the nation's average) and look at the median income in the area to make sure people can pay the kind of rent that you want to get. I would look into places like Idaho, Arizona and Utah since they have been growing at such rapid rates and the income in those areas are pretty stable.

    1Reply
  • Zachary Elliott
    Real Estate Agent · Burlington, KY · Member since 2018 · 206 posts · 232 votes
    4y

    @Harrison Haynes i'll go ahead and put in a vote for greater Cincinnati. There are still places on both sides of the river in Cincinnati where you can find deals that work. Just like everywhere else recently, we've seen a lot of appreciation but still have pretty solid cash flow as well. Feel free to DM me if you have any other questions.

    0Reply
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