New Girl Looking to Invest, but where?!

[Kayde C.]

Hi there, I have never owned my own home before, but my income is 6 figures, my credit is great and my DTI is below 5%. My issue is that I live in SoCal and I do not wish to Invest here since property values are already way too high. I was thinking of places like FL, MN, OH, IN, but I do not have any connections to any of these other states, nor do I even know how to find/rehab in these places. I work remotely so I can pretty much drive to where ever I buy and stick around until the rehab is complete, but how, where do I find a way to start?

[Sarah Sass]

Hi Kay, I've been stalking the BiggerPockets forums for years and finally made an account to join in the conversation. I'm a fellow Californian, now Oregonian, that grappled with the same issue.

I recommend breaking it down market potential into a couple of categories:

1. City investment: What are the major attractions in this city? Ex: amusement parks, sports arenas, concert venue, nightlife, major parks, universities, festivals, races. How often will these draw people? Is there a convenient airport nearby? 

2. Shortterm Rental viability: What are the AirBnB/STR restrictions in the market? Can any of them play to your advantage? What are the booking rates? Are there shortages in available lodging?

3. Longterm Rental viability: Who are the major employers in the city and where are they located? Have any companies announced future campuses to be located in this city? How many major hospitals and colleges are nearby? How are the school zones?

4. Risks/Additional costs: Snow, tornados, flooding, sprinklers, high city taxes. All of these can cause extra damage or require hiring someone to take care of it. For extra credit, consider the impact of climate change on the area. I wouldn't touch California, cost aside, given all the wildfires and heat waves.

Using this framework, I ended up purchasing a place in Nashville for STR purposes. The STR permit structure provided me with an advantage over veteran investors (primary residence only). I discovered that even with hotels and AirBnBs, there's a shortage in STR due to extreme demand for the music scene, 3 sports arenas, the university, 3 nearby hospitals, and the fantastic nightlife, particularly by Bachelorette parties.

The weather means I don't need to run sprinklers or shovel snow. I only have to pay for my grass to be cut 6 months per year. Tornados are supposed to be a non-issue, though one came through a year ago. Longterm, Amazon announced a major investment in the city and recently, Oracle did the same. This means new tech professionals should drive property values up.

I selected my house in an area where supply is limited by geographic barriers, where the safety is starting to improve, and where things are walkable. This cost me $100k more than other homes but paid off in bookings. I paid on the higher side for my home, but got it fully furnished with no needed repairs. After tech-ing it up to automate the process, it took 6 months (pre-pandemic) to break even on all costs/mortgage payments aside from the initial down payment. 18 months in, it's t's already up $90k. I hope this helps!