I am a Canadian real estate investor who is looking to diversify by buying a few CF producing assets in the US. what states or cities should I look into buying first to get my feet in the water. Not looking to spend a lot to start probably $50k ( Downpayment) . My end goal is to have rental, mid term and short term rentals in the US. Your advice would be greatly appreciated. thanks
Real Estate Agent · Saint Paul, MN · Member since 2014 · 384 posts · 401 votes
3y
@Daniel Adebanjo First, if you haven't learned about FIRPTA, you should take a look at that. Second, 50k down payment for a non owner-occupant is going to narrow your criteria down quite a bit. The midwest is a good place to start, but most non owner-occupant loans require 25% down. It's possible to get a 4/2 single family on the east side of saint paul for that, but that's more likely to be a long-term rental play or inclusive of a strategy that includes some kind of rental assistance model. occasionally, you can find something in the west side or w 7th area of saint paul matching that criteria, but almost everything here in the twin cities is going to need some extra capital improvements to be rent-ready at 200k.
hope this helps, always happy to chat or extend my network.
I would look towards the midwest! Property values are some of the lowest- reducing barrier of entry and creating higher margin to produce cashflow. Property values are also steady but appreciable and rents are competitive. THEY CASH FLOW GREAT! I have had the privilege to grow up in the Kansas City market and the past 5 years have seen expansion like never before. Midwestern cities are the next opportunity to "Get in early", so don't miss out. I'd be happy to help you in the Kansas & Missouri areas!
Real Estate Agent · Saint Paul, MN · Member since 2014 · 384 posts · 401 votes
3y
@Daniel Adebanjo First, if you haven't learned about FIRPTA, you should take a look at that. Second, 50k down payment for a non owner-occupant is going to narrow your criteria down quite a bit. The midwest is a good place to start, but most non owner-occupant loans require 25% down. It's possible to get a 4/2 single family on the east side of saint paul for that, but that's more likely to be a long-term rental play or inclusive of a strategy that includes some kind of rental assistance model. occasionally, you can find something in the west side or w 7th area of saint paul matching that criteria, but almost everything here in the twin cities is going to need some extra capital improvements to be rent-ready at 200k.
hope this helps, always happy to chat or extend my network.
From personal experience in MN / WI, we've had great success with quality tenants and cash flow in an area that's within a drive to a main hub (in our case, St. Paul / Minneapolis), but far enough out (30-40 minutes) that it's lower in property prices with more space and breathability. Especially as folks are leaving the Cities (which also have increased regulations). A quaint town that has a good main-street (like Hudson, WI) is a charm pull for those looking to get out of the cities, but still have access to them. Families who need more safety, folks who have dogs and want a yard, a teacher looking for peace and quiet and a more affordable place to rent, etc. The applicants we've had apply (143 so far) have held "gold nugget" tenants, including hard-working blue collar folks, professors from nearby college towns, and young, reliable tenants who need something more affordable than in the hubbub of the cities. They also have seemed low-fuss. For context, we have a quad plex with 4x 1-bedrooms in a sunny little neighborhood. Can't speak to how it's going in the downtown areas, but within the last year, *many* of our applicants have cited that they're looking for something more affordable, and therefore, stepping out of the cities.
Columbus, OH · Member since 2023 · 427 posts · 254 votes
3y
Hi Daniel,
With $50k to invest, you will find a solid amount of options here in Ohio. I still come across 1% deals in Columbus and Cleveland, with more cashflow and slightly cheaper deals in Cleveland, while significant economic drivers (OSU, Nationwide, Intel, Nationwide Children's Hospital, etc.) make Columbus a very attractive destination for appreciation.
I am a Canadian real estate investor who is looking to diversify by buying a few CF producing assets in the US. what states or cities should I look into buying first to get my feet in the water. Not looking to spend a lot to start probably $50k ( Downpayment) . My end goal is to have rental, mid term and short term rentals in the US. Your advice would be greatly appreciated. thanks
I am a Canadian real estate investor who is looking to diversify by buying a few CF producing assets in the US. what states or cities should I look into buying first to get my feet in the water. Not looking to spend a lot to start probably $50k ( Downpayment) . My end goal is to have rental, mid term and short term rentals in the US. Your advice would be greatly appreciated. thanks
Hi Daniel, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. Just a few weeks ago, I helped a client close on a deal getting them 20% cash on cash return. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect
Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
3y
Hi Daniel, I have found value investing in Cleveland, OH because it is home to Cleveland Clinic, lot of good neighborhoods, landlord friendly laws, stable appreciation and good cash flowing properties. There are also abundant opportunities for small multi family and SFH. I have been able to scale up to 12 doors in 2 years so definitely recommend this area. Feel free to reach out and we can discuss.
I am a Canadian real estate investor who is looking to diversify by buying a few CF producing assets in the US. what states or cities should I look into buying first to get my feet in the water. Not looking to spend a lot to start probably $50k ( Downpayment) . My end goal is to have rental, mid term and short term rentals in the US. Your advice would be greatly appreciated. thanks
Invest in the wonderful town of Columbus, OH. Home to The Ohio State University with nearly 60,000 students, 5 fortune 500 companies, over +25% population change since 2000, 2016 smart city challenge award winner gaining 50 million dollars in funding from the government ( https://www.columbus.gov/smartcity/), Intel is spending 20 Billion dollars to build two semiconductor plants, and many many more great things presently and coming in the future. Needless to say Columbus will remain a strong real estate market for the foreseeable future.
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
3y
Of course I am parital to KC. $50k would get you around $200,000 in KC and you can get a good duplex for this amount that will appreciate really well and cash flow nicely. If you go for a class B- or better area, it is a solid "base hit" that will build wealth for you over time and you can always 1031 exchange out of it into a bigger property.
Hi Daniel, 50k the perfect amount to have to start out. It will cover 20% on a 200k loan, with CC, and in case anything happens to the property within a few months. Cincinnati is great for this before you can find SMF for around that price, perfectly fitting what you have to invest!
Let me know and I can educate you a little more on it to see if Cincy is a good fit
Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
3y
And here come the real estate agents who all say their market is best.
The reality is with $50K you are looking at a $200K purchase.
Many of the markets that are considered "hot" is based on past data and therefore likely are going to be difficult to cash flow.
What I have been doing is looking at desirable markets, and investing just outside of it. As the main market gets overpriced, buyers and tenants have to go somewhere.
I am a Canadian real estate investor who is looking to diversify by buying a few CF producing assets in the US. what states or cities should I look into buying first to get my feet in the water. Not looking to spend a lot to start probably $50k ( Downpayment) . My end goal is to have rental, mid term and short term rentals in the US. Your advice would be greatly appreciated. thanks
Upstate NY (1000 Islands Region) has a stable rental market due to the military base, Fort Drum being located here. It's also an area that has several markets that support short term rentals such as Clayton, Cape Vincent, Sackets Harbor, Alexandria Bay and others.
Working with a budget of around $200,000, there are definitely multi family and single family opportunities here both on and off market.
Reach out if you want to chat more, I'm always up for discussion.
Rather than selecting locations based on how much you can spend and other people's opinions, choose a location based on your financial objectives. If your objective is financial independence, you need a reliable passive income. A reliable passive income meets three requirements:
✅ Inflation-compensating - Rental income increases faster than inflation, compensating for rising prices.
✅ Persistent income - Your income will last; you and your spouse won't outlive it.
✅ Reliable income - Your income continues even in difficult economic times.
The level of inflation compensation and income persistence varies depending on the location. The reliability of income is determined by the availability of jobs and the tenant segment that your property attracts.
Inflation Compensation
In order to have the additional dollars you will need to pay inflated prices, rents must keep pace with inflation. Demand is what determines both prices and rent. Where there is low demand, prices are low, and there will be little if any appreciation or rent growth. Every day that goes by, the buying power of the rent you receive will decline. Prices in some locations are higher because there is strong demand. Where there is strong demand, prices and rents increase. It's simple supply and demand.
Below are two indicators of a high-demand city:
The population is greater than 1 million. Smaller cities often rely too heavily on a single market segment or major employer. In Canada, the minimum threshold would, of course, be lower.
State and city populations are both increasing. If the population of a state or city is static or decreasing, do not invest in that location. When people leave a location or the population is static, demand for housing falls and rents either remain static or increase very slowly. This results in you being forced back onto the daily worker treadmill.
Income Persistence
Income persistence, or the duration of rental income, is dependent on jobs. It's not just the current jobs of your tenants that matter. Non-government jobs are short-lived, with the average lifespan of a company being 10 years. Even a Fortune 500 company has an average lifespan of only 18 years. This means that every job your tenants have today will disappear in the future. Unless new companies move into the area and create replacement jobs that pay similar wages and require similar skills, the only jobs that will remain will be lower-paying service sector jobs. This causes the average city income to decline and property prices (and property taxes) to decline or rise so slowly that they do not keep pace with inflation.
Cities depend on property taxes and sales taxes. When average incomes decline, city revenues also decline. This leaves the city with no choice but to cut back on services, including those related to police and schools. As a result, crime rates increase and people with sufficient income leave the area. This further reduces the average income, leading to a financial death spiral from which few cities have escaped.
The key metrics are:
Crime - Employers looking for a location to set up new operations will not choose high-crime cities. Never invest in a city on Neighborhood Scout’s list of the 100 most dangerous US cities.
Anti-employer states - Some states make it very expensive and difficult to operate, causing companies to migrate to more business-friendly states. And, companies looking to set up operations will avoid these states. Do not invest in any location where employers are fleeing or there is rent control.
Income Reliability
The only way to have a reliable rental income is if a reliable tenant continuously occupies your property. A reliable tenant is someone who stays many years, always pays the rent on schedule, and takes care of the property. Reliable tenants are the exception, not the norm. Also, because you will likely hold the property for many years, you will need multiple reliable tenants over time.
Start by identifying a segment with a high concentration of reliable tenants through property manager interviews. Once you identify such a segment, determine what and where they are renting today. Then, buy similar properties.
This process is highly reliable and works anywhere. No guesswork or gurus is required.
Summary
The location is the most important investment decision you will make, as it determines all long-term income characteristics. The second most important decision is the tenant segment. To have a reliable income, your property needs to be continuously occupied by a reliable tenant. This requires buying properties that match the housing requirements of a tenant segment with a high concentration of reliable tenants.
Daniel, if you do not have sufficient funds to invest in a suitable location, it is better to wait than to invest in a location that is guaranteed to fail in the long-term.
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