Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7y
Cheap properties are not the path to success. At best cheap properties are a stepping stone to get into the game and then quickly get out and into quality. I like how you put your questions @Nancy Mascorro - $200k get's you a quality duplex in Milwaukee proper and is more than enough for a quality single family home.
You can reasonably expect $200-ish per door in cash flow; your net worth engine (de-leveraging your loan, forced and natural appreciation, tax-write offs) depends a little on property type and location, but usually surpasses cashflow quite a bit.
The best city for you is the one that you know and invest. If you have to rule out your back yard, pick a city you know, you travel to (family?) or at least that is easy to get to. Car beats plane, and direct flight beats layover.
Investor · Vacaville, CA · Member since 2016 · 433 posts · 249 votes
7y
You need to look at more than just cost per door. When generalizing markets I would look at:
Cost per door
Anticipated rent
Property taxes
Insurance
You need those basic facts as one city might have a .6% property tax and another might have 3%. When tax is that much it greatly changes your return.
Then, above all that, there is a subjective factor for how often you will have vacancies, evictions, other costs (HVAC, water heater, etc). Stereotypically higher end properties have less evictions and low end has people leaving in the middle of the night.
There are a ton of cities, in a ton of states, that will produce SIMILAR net returns on average. KC, Indy, Memphis, Cleveland, and the list goes on.
Find some trusted boots on the ground in one or two cities and buy something!
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@Nancy Mascorro if I were in your shoes, I would focus more on the property manager than on the price point. As others have stated, there are multiple options in the midwest where you can pick up cheap properties, but you want to be in a larger area so you have better PM options. Small towns tend to not have a lot of vendor options either.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
7y
Cheap properties are not the path to success. At best cheap properties are a stepping stone to get into the game and then quickly get out and into quality. I like how you put your questions @Nancy Mascorro - $200k get's you a quality duplex in Milwaukee proper and is more than enough for a quality single family home.
You can reasonably expect $200-ish per door in cash flow; your net worth engine (de-leveraging your loan, forced and natural appreciation, tax-write offs) depends a little on property type and location, but usually surpasses cashflow quite a bit.
The best city for you is the one that you know and invest. If you have to rule out your back yard, pick a city you know, you travel to (family?) or at least that is easy to get to. Car beats plane, and direct flight beats layover.
Hello all, I am a newbie investor and wanted to know what are your favorite places to invest in cash flow properties that are worth under $200k.
Would love to hear from you all 👇🏼👇🏼👇🏼
Hey Nancy welcome to the site. Seeing as you are from California I imagine you're looking for this info as you are priced out of your local rental market. Many people are in the same boat as you and most of them turn to what we call the turnkey markets. There are tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
Cleveland, Ohio
Dayton, Ohio
Toledo, Ohio
Youngstown, Ohio
Cincinnati, Ohio
Memphis, Tennessee
Birmingham, Alabama
Kansas City, Missouri
Saint Louis, Missouri
Indianapolis, Indiana
Detroit, Michigan
Erie, Pennsylvania
Louisville, Kentucky
Milwaukee, Wisconsin
Jackson, Mississippi
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 Agent · Los Angeles, CA · Member since 2019 · 58 posts · 11 votes
7y
@James Wise this was so helpful! Thank you so much for your time and sharing your knowledge. Wishing you continuous success in your real estate journey 👍🏻