Looking to buy rental property in Tucson, AZ or Stockton, CA

[Yvonne Ng]

Hello everyone, 

I'm new to investing and interested in the buy and hold strategy. I am currently looking for multifamily homes in the Stockton, CA near University of the Pacific or in Tucson, AZ near University of Arizona. I'm interested in renting to college students. I choose Stockton, CA because it is close to where I live and I may be able to find a property with better cash flow compared to other parts of Northern California. 

However, properties in Tucson, AZ may have a higher cash flow. I'm not too confident with out-of-state investing since I am new to investing. I choose Tucson, AZ because I am familiar with the area since I lived there for 8 years as an undergraduate and graduate student. I think I will want to make sure I have a strong team before investing in Tucson, AZ.

Any insight is greatly appreciated, thank you!

[Tuan Tran]

Hi Yvonne,

I have multifamilies in Stockton that are cash flowing but I also got them several years ago and the most recent which was a year ago was at a very good price.

If you're renting to college towns, traditionally, you can rent per bed or bedroom especially if the location is walking distance from the college.  I've seen very successful college rentals specifically near Berkeley that have amazing cash flow.  However, keep in mind that college students can be very destructive if they are the "party" types.  You should target graduate students that are more educational focused.  You will have to furnish these units and this more considered seasonal or short-term rentals so you'll be competing against airbnb models.  However, the pandemic probably has greatly diminished this business model or you'll have to add more private space.  I cannot say for certain.

If you're a new investor then I suggest to rent near you unless you're planning to use property management.  You have to pick a very good management and ask them if they have investment properties of their own.  Otherwise, for newbies, all it takes is the first tenant to be a professional tenant to kill your dreams.  You absolutely have to cashflow on your first investments and have a cash savings to pull you through, in case your tenant stops paying.  You'll need overhead for appliance repairs, eviction costs and so on...  The biggest hump is surviving your first tenants to be in the green.  A tenant turnover is also very costly so you have to have a good first tenant.   You can pay a PM to screen the initial tenant and then take over the monthly to save on costs.

Good luck.