Out-of-state investors: my honest case for Louisville this winter (and the catch)

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Out-of-state investors: my honest case for Louisville this winter (and the catch)

Rob Bergeron
Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes

Hi all, Rob here, a Louisville agent who works mostly with investors. I see a lot of "which market should I pick" threads, so here's my case for Louisville right now, with the numbers and the downsides.

I think this market is undervalued by 20-30% relative to peer cities. We do not score well on momentum rankings and we never have. That is the discount. The metros at the top of those lists get priced like metros at the top of those lists.

The numbers, Jefferson County single-family, September: median sale price $285,000, still up from last year, with about 2.9 months of supply. Homes priced right still sell in under a month at about 98% of list.

What's different this fall: rates. Freddie Mac had the 30-year at 7.28% at the start of October, and pendings fell to their lowest month of the year. The cheapest homes slowed the most: under $200K, sales are down 22% from last year and there's almost four months of supply. I found 84 homes in that range that have been sitting more than 90 days and have already cut their price. That's not a list of bad houses. It's a list of people who are ready to talk.

Small multifamily is where it's really loosening up. Months of supply on Louisville multifamily went from 5 in March to about 10 now, and September sales closed at 90.6% of asking, down from 97.3% in May. A lot of those owners have 2021 loans resetting near 7%.

The catch, because there is always a catch. That is usually why it is cheap:

Under $200K, the numbers are harder to make work at 7%. Run it with real rehab numbers, not the listing photos.

Kentucky foreclosure is judicial only. If you're doing seller financing or land contracts here, a forfeiture clause won't save you (Sebastian v. Floyd, 1979; Slone v. Calhoun, 2012). Your remedy is a court sale, same as a bank.

Louisville is two cities right now. Homes over $600K sold more than last year. Under $200K is a buyer's market. Know which one your buy box is in.

Real comps, real rehab numbers, and the catch stated out loud. I would rather hand you three real deals than five with two duds in it.

If you're weighing Louisville against another Midwest metro, drop your buy box below (price range, strategy, target return) and I'll tell you honestly whether Louisville fits.

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  • James JonesPro Member
    Investor · Collierville, TN 38017 · Member since 2017 · 830 posts · 603 votes
    1w

    Memphis investor here — 236 doors — and your "catch" section is the whole game. Under $200K at 7% only works if the rent carries it. In Memphis I buy single-family all-in under $100K, rehab (I convert a lot of 2/1s to 3/1s and 3/1s to 4/2s), and rent 3BR+ at $1,395–$1,950 on Section 8. ARV lands $180K–$265K and I refi on DSCR at 70–80% LTV. The rent-to-price ratio is what makes cheap markets survive high rates — at $285K median with market rents, the math gets thin. Your judicial foreclosure point matters too. Every cheap market has a reason it's cheap; the question is whether you can underwrite around it. In Memphis the reason is the rehab — and I built my whole operation around it.

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  • Rob Bergeron
    OP
    Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes
    1w

    James, thanks for putting real numbers on it. Rent-to-price is the test, and you're right that at a $285K median the single-family math gets thin at 7%. That's the reason I point people at small multifamily here instead. There are 53 two-to-four unit buildings for sale in Jefferson County under $300,000 right now, and those get priced off the rent rather than off what the house next door sold for.

    Curious how you'd look at it. Do you have a minimum rent-to-price ratio you won't go under at today's rates, and would you ever trade your rehab spread for a market where the problem is the entry price instead?

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    • James JonesPro Member
      Investor · Collierville, TN 38017 · Member since 2017 · 830 posts · 603 votes
      1w

      Rob — good question. My hard floor is the 1% rule: monthly rent has to be at least 1% of all-in cost. On a $100K buy with a $40K rehab, that's $1,400 a month. I won't go under it, 7% rates or otherwise.

      In Memphis it works because my 3BR+ Section 8 rents run $1,395–$1,950, so the all-in math clears even at today's DSCR pricing. I buy under $100K, ARV lands $180K–$265K, and I refi at 70–80% LTV — that rent-to-price spread is the whole business.

      The part most people miss: the ratio has to survive the refi, not just the purchase. If the appraised rent doesn't cover the DSCR payment at 70% LTV with real reserves, the deal dies on my desk. Numbers first, feelings never.

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  • Noah WrightBusiness Member
    USA, Nationwide · Member since 2024 · 257 posts · 110 votes
    4d

    Putting the catch in the same post as the pitch is what makes this worth reading, Rob. One thing for the out-of-state folks eyeing those 2 to 4 units that have been sitting. A seller with a 2021 loan resetting is often also a tired landlord with leases under market, and a lot of DSCR lenders size the loan on the lower of the lease in place and the appraiser's market rent. So the ratio at closing runs on today's tenants, not the rent after turnover. Most DSCR ratios also count only principal, interest, taxes, insurance and HOA. Management, vacancy and capex aren't in it, and an out-of-state owner pays a manager on every door. The lender's ratio tells you whether the loan closes, not whether the building pays you.

    [email protected]737-773-3717
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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3d

    Can make the same claim about Detroit!

    [email protected]248-209-6824
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  • Rob Bergeron
    OP
    Real Estate Agent · Louisville, KY · Member since 2017 · 1k+ posts · 1k+ votes
    1d

    @James Jones That's a clear floor, and "the ratio has to survive the refi, not just the purchase" is the line most buyers miss. A 1% rule on all-in cost at 7% is one I'd respect. It's the same discipline behind why I point people at small multifamily here instead of single-family under $200K.

    @Noah Wright Good catch, and it matters most for out-of-state buyers. A tired landlord with under-market leases means the lender sizes you on the in-place rent, which can be well under what the building does after turnover. And you're right that the lender's ratio leaves out management, vacancy and capex. I'd underwrite with a manager on every door, a vacancy factor and a capex reserve before trusting the lender's number.

    @Drew Sygit Fair. Every cheap market has a story, and Detroit is a good example. What I'd look at is whether the deal still works after a manager, vacancy and a reserve, and whether you can get real comps and real rehab numbers. If you're willing to share it, what's the Detroit version of the catch?

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