Identifying a market for rehab/rental properties - Long distance
Anaheim, CA · Member since 2019 · 12 posts · 8 votes
Identifying a market for rehab/rental properties - Long distance
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Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
7y@Ryan Carter I am an investor and work as a business developer for a property management company in Indianapolis. We have almost 150 clients and over 100 are out of state/country investors with the majority of them being from California. There are multiple markets that investors find that will meet their needs and goals. Personally, I think that building the right team is more important than finding the perfect market as the wrong team can kill a portfolio in the best of markets.
As mentioned above... Kansas City, Memphis, Columbus Ohio, Cleveland, Birmingham, and Jacksonville are very common alternatives as well. There's a lot of activity in NW Indiana right now as many people are migrating across the border from Chicago where they are still close enough to work in the big city, but live in a more affordable and less regulated environment. I've seen Pittsburgh, Grand Rapids, and some smaller Texas markets on some investors radar as well. Personally, while I love Indianapolis, I'm keeping my eye on some Michigan markets myself as I am seeing some changes in the landscape and already have several trusted contacts in the Detroit area myself. As I said... having a good team is everything.
Here are some recommendations to help your research.
- Business friendly laws. Many of you bigger city markets have become more tenant oriented than landlord oriented. Many of them also have excessive regulatory burdens (mandatory city inspections, extra taxes on investment properties, etc.) In Indy, we can usually get a tenant through the eviction process in 4-8 weeks. In CA and NY I've heard that it can take 6-12 months to regain possession of a property. As long as your PM has followed all of the steps and operated correctly, Indiana judges are very much of the mindset of "No Pay... No Stay."
- Understand how property tax works in your chosen markets. Some markets have exceptionally high taxes that can kill a deal that looks great otherwise.
- Growing population and employment base. Desire has the biggest impact on your ability to succeed and if everybody is moving out of your market your home will stay vacant longer, have a less desirable tenant pool to pick from, etc.
- Cost of living. The midwest tends to be considerably less expensive than the coastal areas. This creates better rent ratios (cost of the investment vs the ROI created by rent.) This is exactly why so many CA, CO, NY, WA investors are putting their money in these markets.
There are a lot of metrics that people will review, but I think that the above ones are some of the more important ones. I'm a big fan of understanding your risks... especially when managing out of state. Most people want to sell you the dream without educating you about all of the things that can go wrong and how to manage those potential liabilities. Just because you can pick up a home in Gary, Detroit, or Cleveland for $20k that will rent for $500/mo doesn't mean it's going to be a great deal. It's probably located between the local crack house and the abandoned home that all the squatters stay in. Probably not going to work out the way it looks on paper. It's important to build a team of knowledgeable professionals to help guide you in to the right areas and help you to understand what to expect.
Best of Luck! Feel free to reach out I can help with anything.
39 Replies
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes7y
@Ryan Carter I am also an engineer and urge you not to go into analysis mode. Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets are some of the most popular markets us out of state investors go to. At that point just pick two and start connecting people locally.
- Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes7y
@Ryan Carter fellow engineer here as well. I just started investing in the KC area (finally pushed myself through analysis paralysis for the past couple years)... @Lane Kawaoka listed some great areas, I wanted to dive in a bit more into the KC area for you. Before purchasing my first investment (buy and hold), I was looking in the following areas: Raytown, Grandview, Independence (some good areas and some bad), South KC, Belton, and Oak Grove. Lee's Summit, Raymore and Blue Springs were also on the list but it is a lot harder to get numbers to work in those areas. This thread is great for looking and good and bad zipcodes in the area: https://www.biggerpockets.com/forums/48/topics/276800-kansas-city-missouri-zip-codes
I ended up finding a deal in the Independence area. I live about 4 hours from KC and have a team I have been working with if you want more information (realtor and PM), feel free to send me a message.
Best of luck on your journey my friend!
- Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes7y
@Ryan Carter I am an investor and work as a business developer for a property management company in Indianapolis. We have almost 150 clients and over 100 are out of state/country investors with the majority of them being from California. There are multiple markets that investors find that will meet their needs and goals. Personally, I think that building the right team is more important than finding the perfect market as the wrong team can kill a portfolio in the best of markets.
As mentioned above... Kansas City, Memphis, Columbus Ohio, Cleveland, Birmingham, and Jacksonville are very common alternatives as well. There's a lot of activity in NW Indiana right now as many people are migrating across the border from Chicago where they are still close enough to work in the big city, but live in a more affordable and less regulated environment. I've seen Pittsburgh, Grand Rapids, and some smaller Texas markets on some investors radar as well. Personally, while I love Indianapolis, I'm keeping my eye on some Michigan markets myself as I am seeing some changes in the landscape and already have several trusted contacts in the Detroit area myself. As I said... having a good team is everything.
Here are some recommendations to help your research.
- Business friendly laws. Many of you bigger city markets have become more tenant oriented than landlord oriented. Many of them also have excessive regulatory burdens (mandatory city inspections, extra taxes on investment properties, etc.) In Indy, we can usually get a tenant through the eviction process in 4-8 weeks. In CA and NY I've heard that it can take 6-12 months to regain possession of a property. As long as your PM has followed all of the steps and operated correctly, Indiana judges are very much of the mindset of "No Pay... No Stay."
- Understand how property tax works in your chosen markets. Some markets have exceptionally high taxes that can kill a deal that looks great otherwise.
- Growing population and employment base. Desire has the biggest impact on your ability to succeed and if everybody is moving out of your market your home will stay vacant longer, have a less desirable tenant pool to pick from, etc.
- Cost of living. The midwest tends to be considerably less expensive than the coastal areas. This creates better rent ratios (cost of the investment vs the ROI created by rent.) This is exactly why so many CA, CO, NY, WA investors are putting their money in these markets.
There are a lot of metrics that people will review, but I think that the above ones are some of the more important ones. I'm a big fan of understanding your risks... especially when managing out of state. Most people want to sell you the dream without educating you about all of the things that can go wrong and how to manage those potential liabilities. Just because you can pick up a home in Gary, Detroit, or Cleveland for $20k that will rent for $500/mo doesn't mean it's going to be a great deal. It's probably located between the local crack house and the abandoned home that all the squatters stay in. Probably not going to work out the way it looks on paper. It's important to build a team of knowledgeable professionals to help guide you in to the right areas and help you to understand what to expect.
Best of Luck! Feel free to reach out I can help with anything.
- Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes7y
Originally posted by @Ryan Carter:
Hi everyone, my name is Ryan. I am a mechanical engineer in the product design business and am looking to begin my rental property investing business in the next 8-12 months. I plan to start with single family homes (ARV: >$80k) in need of $20k-30k rehabs. I will rehab, rent, and hold for long term. I also will be doing this from long distance as I live in southern California where housing prices are through the roof.
My question is: How do I identify a market to begin searching for properties in? Is there a successful strategy for this other than jumping on zillow and blindly throwing a dart on map?
I would look into the Midwest and find an agent that is familiar with investment properties.
- 7yRay J.Pro MemberGary, IN · Member since 2017 · 83 posts · 62 votes
Agreed. I would also not recommend investing long distance in Gary because I think you need to really know the neighborhoods and blocks. It's a little different than a lot of other cities that have a "good" side and a "bad" side. Here, good and bad parts are all over the place like a checkerboard, so you just have to know (or trust someone who does). Personally, I invest only in Gary so far because of the great cash flows, but I'm also FROM Gary and live in the area so I know it intimately. I don't know about the crack houses and squatters mentioned above because I've never come across that yet, but there are parts of town that would be more difficult to rent like in any city. Also, our $20k houses don't rent for $500, more like $750 - $950. But you do need to REALLY screen your tenants because we have a lot of people from Chicago and suburbs migrating to Indiana and a lot of them have the Illinois tenant laws mindset. If you get tenants from Indiana, they are usually already familiar with our laws. Bottom line, just screen, show firmness about your rules, and screen more. I've had zero problems other than rent being late by a few days once, and I collected my extra fee from that.
Long story short, find a trustworthy agent or LOCAL partner to work with, and you should be good.
- 7yBrandon SturgillBusiness MemberReal Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
@Ryan Carter Welcome and congrats getting started! I'm sure you will get lots of great advice here...and I think you'll end up in the Midwest with the price points and strategy you're looking at. Best of luck in your search and let me know of you need anything if central Ohio makes it on your list.
- Investor · Member since 2019 · 9 posts · 9 votes7y
Hi Everyone, thanks so much for all the great information. Me and my husband are looking for buy and hold properties, ideally 3-6 units to start in Cincinnati, Cleveland, Detroit areas to start.
We live in Essex County NJ, and I'm a real estate agent, and a landlord managing our 2 multi-families. Whats become clear to me is that everything is relative and not knowing an area well and not having a solid team in place isn't the best way to start off, as others know better than me that it can be costly.
We've found great resources here and through RWN and hearing what other investors are doing at local meetups. Many of the reputable and vetted sources we've found are in the turn key single family properties, and on the other end, we've found people with the apt syndications, both of which we are interested in.
However, after speaking with a few real estate tax accountants, we have come to understand that by buying turn key properties and getting into syndications, we personally lose out on significant tax deductions and property appreciation that we could have with buying rehab properties. Cash flow is great and what we are looking for, but we want to be able to maximize on tax deductions as well. From what I've learned so far, and I'm far from any expert, getting all three comes from add-value properties in decent and up & coming areas.
Since our biggest hurdle with pulling the trigger seems to be in knowing and understanding the areas and building/finding our own creditable contacts, we have decided that I'll take some trips to these areas and spend a little time looking around neighborhoods and seeing inventory and meeting as some realtors and contractors. Otherwise we might not push out of the analysis / paralysis mode that many others have also described.
I really enjoy having boots on the ground and getting to know people and areas. Traveling and being on the road is something I love and get to listen to a boat load of BP/TheRealEstateInvestHER and other great investment podcasts.
For some reason my husband has latched on to Cincinnati so it looks like we'll be starting there for my first visit. I'll do my best to try and meet up with at least some other investors, property managers, contractors that people have recommended. I'm open to recommendations and info on good local Cincinnati meet ups.
As I learn more, see more and find out more, I'll be happy to pass along information to all of you here on BP.
Thanks again for helpful information and hopefully I'll speak with some of you directly.
Best to All!!!
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Ryan Carter:
Hi everyone, my name is Ryan. I am a mechanical engineer in the product design business and am looking to begin my rental property investing business in the next 8-12 months. I plan to start with single family homes (ARV: >$80k) in need of $20k-30k rehabs. I will rehab, rent, and hold for long term. I also will be doing this from long distance as I live in southern California where housing prices are through the roof.
My question is: How do I identify a market to begin searching for properties in? Is there a successful strategy for this other than jumping on zillow and blindly throwing a dart on map?
Hey Ryan welcome to Bigger Pockets. There are tons of turnkey markets out there. Many are well represented by sellers & turnkey operators here on BiggerPockets. The most popular markets are
- Cleveland
- Toledo
- Memphis
- Birmingham
- KC
- Indy
- Detroit
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
- Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
- Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
- Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
- Make sure your property manager is a licensed real estate brokerage.
- Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Michelle Maran:
Hi Everyone, thanks so much for all the great information. Me and my husband are looking for buy and hold properties, ideally 3-6 units to start in Cincinnati, Cleveland, Detroit areas.
We live in Essex County NJ, and I'm a real estate agent, and a landlord managing our 2 multi-families. Whats become clear to me is that everything is relative and not knowing an area well and not having a solid team in place isn't the best way to start off, as others know better than me that it can be costly.
We've found great resources here and through RWN and hearing what other investors are doing at local meetups. Many of the reputable and vetted sources we've found are in the turn key single family properties, and on the other end, we've found people with the apt syndications, both of which we are interested in.
However, after speaking with a few real estate tax accountants, we have come to understand that by buying turn key properties and getting into syndications, we personally lose out on significant tax deductions and property appreciation that we could have with buying rehab properties. Cash flow is great and what we are looking for, but we want to be able to maximize on tax deductions as well. From what I've learned so far, and I'm far from any expert, getting all three comes from add-value properties in decent and up & coming areas.
Since our biggest hurdle with pulling the trigger seems to be in knowing and understanding the areas and building/finding our own creditable contacts, we have decided that I'll take some trips to these areas and spend a little time looking around neighborhoods and seeing inventory and meeting with realtors. Otherwise we might not push out of the analysis / paralysis mode that many others have also described.
I really enjoy having boots on the ground and getting to know people and areas. Traveling and being on the road is something I love and get to listen to a boat load of BP/TheRealEstateInvestHER and other great investment podcasts.
For some reason my husband has latched on to Cincinnati so it looks like we'll be starting there for my first visit. I'll do my best to try and meet up with at least some other investors, property managers, contractors that people have recommended. I'm open to recommendations and info on good local Cincinnati meet ups.
As I learn more, see more and find out more, I'll be happy to pass along information to all of you here on BP.
Thanks again for helpful information and hopefully I'll speak with some of you directly.
Best to All!!!
Michelle when looking into Cleveland you'll want to read The Ultimate Guide to Grading Cleveland Neighborhoods as a start. Some neighborhoods in Cleveland are so darn cheap investors look at them with their out of state eyes, almost like having blinders on. Some of these areas are truly dangerous for your bank account.
- Specialist · Cleveland, OH · Member since 2018 · 1k+ posts · 666 votes7y
@Ryan Carter find someone that is and has been providing double digit net caps for Ca investors and get involved. It seems you are a year away so......
Good luck
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@Lane Kawaoka Hi Lane, thank you very much for the advice. I am going to look into the cities you've mentioned and start looking for a local real estate agent soon.
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@JJ Buckner Hi JJ, thank you for the info on the KC areas. I thoroughly appreciate it and will begin looking into these further. Thank you for your response and best of luck to you as well!
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@Ray J. Ray thank you very much for the tips on Gary. I have a lot to learn, but I appreciate you helping me get started in the right direction.
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@Brandon Sturgill Thanks Brandon, will do!
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@James Wise Hey James, I really appreciate your response and thank you for the tips.
- Rental Property Investor · NJ (new jersey) · Member since 2019 · 113 posts · 16 votes7y
@Michelle Maran
Hey Michelle,
I’m also from Essex county , NJ and own to multi family houses. I been actively looking for another multi family here but right now it’s a sellers market and everything in Newark is sooo expensive. I was reading these post and I’m interested in possibly investing out of state. I’m very open to the idea and would like some more information on the cities that are good for these fix and flip or fix and hold. Let me know maybe we can even do business together
- Investor · Member since 2019 · 9 posts · 9 votes7y
@Anthony Liguori Hi Anthony, yes the prices in our area make it hard to find good deals and those that do work have a lot of competition. I'm still in the market for another 3+ family in the area and I'm keeping an eye out. Those finding off market properties to whole sale or flip are probably doing the best right now. I live in Montclair and have done a lot of looking in Newark and East Orange and there are deals that come up but need quite a bit of rehab. I really want to get into the BRRR method, whether locally or out of state. I'm definitely open to talking. Let's PM and find a time.
- Investor · Member since 2019 · 9 posts · 9 votes7y
@James Wise Thanks so much for the advice and recommendation! I'll definitely read up! I have watched you on You Tube so I'll be sure to tap into more of your shows and get educated!
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Ryan Carter:
@James Wise Hey James, I really appreciate your response and thank you for the tips.
👊🔥
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Michelle Maran:
@James Wise Thanks so much for the advice and recommendation! I'll definitely read up! I have watched you on You Tube so I'll be sure to tap into more of your shows and get educated!
Anytime. Glad you're finding value in the content.
- Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes7y
Originally posted by @Ross Denman:
@Ryan Carter I am an investor and work as a business developer for a property management company in Indianapolis. We have almost 150 clients and over 100 are out of state/country investors with the majority of them being from California. There are multiple markets that investors find that will meet their needs and goals. Personally, I think that building the right team is more important than finding the perfect market as the wrong team can kill a portfolio in the best of markets.
As mentioned above... Kansas City, Memphis, Columbus Ohio, Cleveland, Birmingham, and Jacksonville are very common alternatives as well. There's a lot of activity in NW Indiana right now as many people are migrating across the border from Chicago where they are still close enough to work in the big city, but live in a more affordable and less regulated environment. I've seen Pittsburgh, Grand Rapids, and some smaller Texas markets on some investors radar as well. Personally, while I love Indianapolis, I'm keeping my eye on some Michigan markets myself as I am seeing some changes in the landscape and already have several trusted contacts in the Detroit area myself. As I said... having a good team is everything.
Here are some recommendations to help your research.
- Business friendly laws. Many of you bigger city markets have become more tenant oriented than landlord oriented. Many of them also have excessive regulatory burdens (mandatory city inspections, extra taxes on investment properties, etc.) In Indy, we can usually get a tenant through the eviction process in 4-8 weeks. In CA and NY I've heard that it can take 6-12 months to regain possession of a property. As long as your PM has followed all of the steps and operated correctly, Indiana judges are very much of the mindset of "No Pay... No Stay."
- Understand how property tax works in your chosen markets. Some markets have exceptionally high taxes that can kill a deal that looks great otherwise.
- Growing population and employment base. Desire has the biggest impact on your ability to succeed and if everybody is moving out of your market your home will stay vacant longer, have a less desirable tenant pool to pick from, etc.
- Cost of living. The midwest tends to be considerably less expensive than the coastal areas. This creates better rent ratios (cost of the investment vs the ROI created by rent.) This is exactly why so many CA, CO, NY, WA investors are putting their money in these markets.
There are a lot of metrics that people will review, but I think that the above ones are some of the more important ones. I'm a big fan of understanding your risks... especially when managing out of state. Most people want to sell you the dream without educating you about all of the things that can go wrong and how to manage those potential liabilities. Just because you can pick up a home in Gary, Detroit, or Cleveland for $20k that will rent for $500/mo doesn't mean it's going to be a great deal. It's probably located between the local crack house and the abandoned home that all the squatters stay in. Probably not going to work out the way it looks on paper. It's important to build a team of knowledgeable professionals to help guide you in to the right areas and help you to understand what to expect.
Best of Luck! Feel free to reach out I can help with anything.
In NY, it took me 8 months to evict a tenant! NY is absolutely NOT Landlord friendly.
- Fort Collins, CO · Member since 2019 · 185 posts · 61 votes7y
@Ryan Carter Doing lots of research and selecting a location that, even if it's far, you know is a good area is always in everyone's best interest. For example, college towns are a great area to invest because there will always be a need for tenants due to students and employees of universities - single family homes definitely work for students, but sometimes they are a little rougher on the house. Before jumping on Zillow and such, I would do as much research you can about markets throughout the country. Maybe even talk to a real estate agent or other property investors before delving right in! It is honestly up to you. Best of luck!
- Anaheim, CA · Member since 2019 · 12 posts · 8 votes7y
@Taylor Roeling Hey Taylor, thank you for the tips! I'll definitely check out some college town markets.
- Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes7y
Originally posted by @Ryan Carter:
Hi everyone, my name is Ryan. I am a mechanical engineer in the product design business and am looking to begin my rental property investing business in the next 8-12 months. I plan to start with single family homes (ARV: >$80k) in need of $20k-30k rehabs. I will rehab, rent, and hold for long term. I also will be doing this from long distance as I live in southern California where housing prices are through the roof.
My question is: How do I identify a market to begin searching for properties in? Is there a successful strategy for this other than jumping on zillow and blindly throwing a dart on map?
I am in Long Beach. CA. I invest out of state. I invest for cashflow vs growth. I think strategy is the first and most important thing--every investor invests for their own reasons/comfort and strategy. Don't get caught up in the HYPE of what other investors are doing. I am more than happy to discuss deeper.
- Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes7y
@Ryan Carter, I would think your biggest challenge would be rehabbing from long distance. OOS landlording is pretty easy. Worst case scenario is hire someone.
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