WHAT IS THE BEST STATE TO BUY A THREE PLEX

Question

I'm looking to invest in a three plex which would be the best state in regards to  Job growth, landlord friendly, etc. Thanks

Randall Alan · Answer

@Veronica Mitchell

That's a really wide question.  My answer is going to be that if you are starting out, I would try and stay as close to home as possible.  As soon as you are out of reach of managing your property yourself, you just bought into Property Management.  Their 8-10% of gross - plus some portion of the first month's rent, will likely be more than 30% of your net profit each month that you lose to PM.

Managing a single property is really pretty easy.  To put it in perspective, we started 5 years ago and managed doors 1-20 while both my wife and I worked full time corporate jobs.  By the time we were at 20 doors, one of us could afford to quit, and we have now grown to just under 40 doors.

One of the keys to being successful starting out is to watch your expenses.  Do what's necessary, but not more.  Be it a repair, a renovation, or other property expenses.

The things you mention - like job grown - I would say are really not that important.  Theoretically I get where you are coming from... but the truth of the matter from a 'boots on the ground' perspective is that I have 20 renters  apply within 24 hours for ANY rental I have to list.  How much does job grown matter there?  There is something to be said for looking for appreciation - where rents are climbing.  Landlord friendly... this is mostly going to be about evicting tenants.  Some places make it harder.  Florida, where I am at is definitely landlord friendly.  I've heard states out west are less so (Washington state if I recall).  But I would put maximizing income over the other items you listed.  So if you can find local properties that cash-flow, you will come out way ahead versus having to go the PM route.

I can tell you right now that with the Fed rate hikes, there is little that is cash flowing if you are financing your deals.  Their mission is to bring down housing prices by making it painful to buy, and it's definitely working on the 'painful' side of that.  Sellers haven't quite figured it out yet, but almost every update I get on properties are 10 to 1 "price reduced" versus "sold".  So the market is in a state of adjustment right now, and will probably remain in one for the foreseeable future.  Once the Fed starts to lower rates - my guess at least next year before that happens - or sellers offer prices that the fed rates will allow to cash-flow, then it will be time to buy.  Until then, I would suggest many investment buyers are just side-lined and waiting.  Upside down on a payment with a 7 1/2% mortgage you paid $5,000 to get and will have to pay another $3,500 at least to refinance is pretty much a non-starter in my book unless the numbers say it can work.

Things some beginners miss:  the tax rate you look up for a property you want to buy will reset to the price you paid for it the next year taxes are calculated.  This can have a dramatic impact on your numbers.  If your seller paid $100,000 5 years ago for the property, and you are now buying it at $300,000 - you are talking a couple of thousand dollars more a year in taxes you will owe about 12 months after purchase.  That's a $166/ month hit to your cash flow.   Also, be sure to account for a repair and maintenance expense.  We put $100-150/property a month into a separate account.  So between those two items, the first $250-300/month in potential cash-flow probably doesn't exist in my example above.  Add property management to the mix and now you are at $400-450 in lost cash-flow.  Finding properties today that can absorb that, and still make maybe $300 / month to be worth buying is pretty tough in the current Fed rate environment.

All the best!

Randy

Manco Snead · Answer

The state you're in, and close to your house. Don't buy out of state; too many landmines if you're inexperienced. ...and even if you're experienced.

Scott Matthew C. · Answer

Hi @Veronica Mitchell. Thanks for your post.

There is no single "best" state to buy a three-plex, as the suitability of a particular state for real estate investment will depend on a variety of factors, including local housing market conditions, economic trends, tax laws, and zoning regulations.

If you are looking to buy a "TriPlex," your best source of information and advice will likely be commercial brokers, as TriPlexes are typically considered commercial properties. These brokers specialize in commercial real estate and have the knowledge and expertise to guide you through the process of buying a TriPlex and help you navigate any complexities that may arise.

I hope this helps. Best of luck!

Shawn Shawnell · Answer

It all depends on for your trying to do with it and strategy is for purchasing it and if it is going to be a short or long term hold

Drew Sygit · Answer

I'm sure you'll also ask variations of:

1) What's the best way to find a property?

2) Who's the best agent, PMC, lender, etc.y

3) How do I analyze this property?

All this info is already available here on BP. If you're not going to put any effort into your own research and learning, you're setting yourself up to get taken advantage of.

Eliott Elias · Answer

Texas.

WHAT IS THE BEST STATE TO BUY A THREE PLEX

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