New Investor in USA question

[Julien Payne]

Hello BP forum, I am interested in investing in the US generally and would like to build a medium to large rental portfolio, are there any key areas I should be looking at or should stay away from? I know there are many great tax breaks too from my listening to the BP podcast so I presume that owning property in a company is the best way forward in the USA, much like it is in Europe, is this true and if so, what company structure is best please? I am based in London England but have good mates in Newport Beach and Oakland. I am at the early stage of research at the moment so just putting feelers out as it doesn't matter to me where I invest, I just want to start out somewhere. I guess a stupid opening question would be, what strategy is the best for a long distance investor to get started? my strategy in the UK is rental but I also do BRRR from time to time and have dabbled in multiple occupancy too, we call them HMOS in the UK (Houses of Multiple Occupancy) but I realise our terminology is very different. Anyway, I wanted to introduce myself and say hi in the first instance. And finally, is there a more tax efficient state to base the company-i.e. Delaware or Texas or does it make no difference whatsoever? Thank you, Jules

[Becca F.]

Hi Julien. I'm guessing that since you mentioned Newport Beach and Oakland and maybe considering those areas that you have significant capital. California has historically appreciated over many years and continues to appreciate specifically with coastal areas where there are land constraints. I don't know much about Southern California (Newport Beach) but there are areas in the San Francisco Bay Area that continue to do well and are in high demand. If you choose Oakland, I would research landlord tenant laws here and have access to an attorney here - it has heavily pro-tenant laws and the lower priced homes are in high crime areas. Is your friend in Oakland an investor here or involved in anyway with real estate (contractor, etc)? 

My choices would be if prices are no issue as in you can spend $1.2 million+ on a single family home: San Jose (10% appreciation historically, 44% in the last 3 years, link below), Santa Clara (both near Silicon Valley with major tech companies), San Mateo. In the East Bay prices are a little lower, can maybe find $600,000 (this is rare) to $1 million: Walnut Creek, Concord, Dublin, Pleasanton. Brentwood and Oakley are great suburbs that are growing fast.

https://www.movoto.com/guide/san-jose-ca/san-jose-real-estat...

If you do a search on Zillow, look at the school rankings no matter what city you're looking at and a Google map search (may not always be current). If the neighborhood looks run down and you wouldn't live there, I would pass on it. You can also see the school rankings. Also look at their property tax rates and how much they go up each year. 

Other states I would consider: Nevada, Texas (high property taxes but my friends make the numbers work), Tennessee (Nashville area), North Carolina, possibly Arizona, possibly Florida (I had considered the Panhandle area Fort Walton Beach, West Panama City) but their insurance costs are high with hurricanes. You may be able to find deals in Florida now if you're an investor that takes risks.

I also invest in Indiana (the Midwest). My higher quality property Class A is doing well but the lower quality ones, Class C are not. You also have to deal with winter weather in the northern states and possibility of pipes freezing and higher heat costs (which would be paid by the tenant once rented out). Other winter weather states I like: Colorado, Utah, Idaho (research this one, many Californians moved there and drove up values, not sure what industries are there to support economic growth).

I would be cautious about doing a BRRRR from another country. Maybe a finding property that's move in ready or needs some light renovation work (paint, flooring). Just curious as to why you wouldn't invest in Europe which is much closer to London. Feel free to message me if you have more questions :)