What would be the best State/City to buy rental properties

[Oleg Serdyuk]

Hello, I am new to real estate investing. 

I live in San Diego, CA. 

My friend and I are planning to acquire rental properties somewhere outside of California. 

My question is: How to find the best place (State, city) right now in order to find great deals ? 

What are the main criteria we should look for, like the economy, employment etc?

Would you recommend reliable source to find this information? I am sure the data is available somewhere, but I am not sure where. 

Thank you 

[Michael Lee]

Hello and welcome to this site Oleg!  That question involves a very basic question and has a very basic answer (at least to me).  This is a question of many answers from people that have been around and has memory to help you, I hope.  If you can easily get the funds to invest in real estate I would not recommend rental houses because I think they are too risky.  Probably they are pushed so much because they are more popular than they should be for that purpose.  People think that is the way to go but I've been listening to recommendations for about 4 years full time and I've heard good and bad stories about them about 50/50.

So you can maybe understand what a 61 year old is saying that spent about 30 years in construction management and real estate might know what he is talking about is worth remembering.  I do not work right now and spend about 12 hours a day, 7 days per week, on learning about real estate investing with a current dream of being able to walk again someday, work,  and to contribute to my family again.

I do not know why this happened but I will continue on.  Buying apartment complexes will help you to get where you are going much quicker.  I have done many listening sessions on YouTube with a gentleman who owns over 4,000 apartments and I have learned very much from him about apartment housing and believe his preaching that is negative about household rental units is fairly good and believable. .

I agree about the unoccupied units in SFH's is much more negative when a vacancy happens versus one unit in an apartment complex. I also like using the cap rate in apartment complexes versus the comps used in house value and adding value with a greater return on apartments. It also means more units at one address at apartments.

Of course, apartment complexes are not the perfect investment but much better financially.  Once you understand the power of a cap rate, owning apartments are better than homes (1 to 4 units).  "House Hacking" loans can help you get started because of its low down payment but it may or may not matter in your case.  

When you own a minimum of about 30 units you can afford Property Management companies take over the daily routine operation's at work and allows you to do whatever you want to and still make money without your having to be there.  That does not mean you have to start there (owning a minimum of 30 units).  You can start smaller (6 to 8 units)  and work your way up.

Screening in a strict but responsible process that will help you with your occupancy rate percentage when it's done correctly. Brandon Turner's book on managing would help you with whatever direction you go in.  There is also a man I've been listening to, uncovered some myths about owning apartment complexes.  The biggest one refers to your experience needed could keep you away from doing apartments.  He started off in real estate doing apartment deals part time at home while he had a W-2 job he hated, and not even seeing some of his deals before buying and reselling them as a wholesale (about 75 % of them but because of their profit amount he only had to do that about once a month).

Do not let emotion make any of your decisions.  Right now, is not necessarily finding a good deal anywhere because of the sellers market we are in right now.  You might think I am biased, but the best city's to buy in are anywhere you go in the southern United States, like Dallas or Houston, Texas.  It is not a surprise you want to get out of California.  One of the things we do not know is the valuation of real estate and which way its value will go after this part of the cycle is completed.

The more economic versatility there is, is a plus.  Population and job growth are two of the major factors.  Get use to hearing "no" and  do not take it personally.  Real estate investment is a quantity game.  Never give up on investing or continuing real estate courses that keeps you current.  Do not listen to anyone that has not done investing when you are talking about it.  Remember that most of what we were taught in grade school is pretty useless and not about making a living or making money.

Good luck to you!