Vegas, Bakersfield or Phoenix for Buy & Hold?

[Daniel Smilansky]

Hi Everyone,

I am new to BiggerPockets, and like many others, I have fallen in love with the lively community and wealth of information. Everyone seems to be very helpful and I hope I can pay it forward! After paying off lots of debt and establishing myself financially, I began exploring the stock market last year, and I quickly found out that the stock market enables the rich to get richer, yet does not service those looking to build wealth nearly as well as I thought.

Aside from my own tech entrepreneurial adventures (I am a web developer), I wanted to give real estate a shot and see what it was all about. A month ago, I stumbled upon the Vegas AirBnB article that went viral and I became even more intrigued (http://mashable.com/2013/11/04/bought-apartment-rent-airbnb/).

I ended up finding bigger pockets through google and I immediately read the beginner's guide to real estate investing. From there, I created a plan, and my goal is to purchase rental properties in order to implement a buy & hold strategy in secondary and tertiary cities that are rapidly growing.

Being from Los Angeles, there are not many great buy & hold properties in my immediate area, and I am open to doing heavy research on out-of-area properties. Although I am not opposed to areas like Charlotte, Dallas, Houston or Memphis, I would prefer somewhere closer, if possible, such Phoenix, Las Vegas or Bakersfield.

Not sure if it is inappropriate to share finances here, but I have 40k saved up and another 15k in retirement accounts at my disposal. I also have 780+ credit. Can anyone suggest markets to explore? My research has been limited to Zillow thus far since I don't have access to the MLS. Also, can anyone suggest ways for discovering properties? I believe I will start contacting real estate agents in a few markets to see what is out there, but any referrals to reputable ones would be more than welcomed!

Also, I would be happy to exchange expertise as I am heavily involved in the tech space and can offer quite a bit of advice in that area. Thanks in advance!

Cheers,

Daniel

[Mike McKinzie]

Daniel

There is lots of good advice on here and lots of good information.  BUT, before you write that first Deposit Money check along with an offer, you really need to think through, AND WRITE DOWN, what you want.  I own 25 rental doors (23 houses and 1 duplex) in six different states.  I have also owned rentals in Orange County, LA County and Riverside County during my investment career.

When I say write down what you want, I am talking about potential income, potential appreciation, types of properties you feel comfortable owning, areas you would want to own in, and on and on.  For instance, would you take a 6% return on a house that has a 90% chance of good appreciation or do you want a 12% return on a house that has a 25% chance of good appreciation?  Some investors on BP want a 20-25% return BUT they know there is ZERO percent chance of appreciation.  (They also carry a sidearm to collect rent and make repairs)  There are others on BP that accept a 2-3% return but are banking on extensive appreciation (also known as rolling the dice).  But most investors on BP find a middle ground that they enjoy.  The middle being 6-15% return with a 70-80 percent chance of good appreciation.

I am not sure why Ali and Philip are having words, they are both successful in their niche.  But doing any research and you will find that Las Vegas can be a complicated market.  Sure there are deals, but I have known investors who also lost their shirt in the market crash in 08-09.  I looked into Las Vegas and even talked with Philip about it and decided to wait it out.  One of the problems with Las Vegas is that the entire economy is not very well diversified.  It is heavily reliant on tourism.

When you look at markets like Phoenix, Dallas, Memphis, Oklahoma City and others, you will find a much more diversified economy.  And just like stocks, look at a 10 and 20 years "Average Cost of Home" for each market.  Compare that to a chart of New Businesses and a Chart of Number of Employees added.  You don't like to see wild swings as that means you are in for one heck of a roller coaster ride!  Warren Buffet did not get rich investing in Microsoft, Apple and Google.  He got rich investing in Coca Cola, Wells Fargo, American Express and BNSF Railroad.  How boring can you get!!!!

If I were in the buying frame of mind today, I would be looking at Atlanta, Kansas City, Indianapolis or Oklahoma City.  But I bought several houses last year so I am letting the dust settle before charging ahead again!

You asked about Bakersfield.  I do not own in Bakersfield but I do own in Visalia, Tulare and Fresno.  You can do OK there, buying for 75,000 to 100,000 and get $795 to $995 for rent.  But they would most likely be class B properties and might require more repair work than a class A property.

But remember, the most important thing is to decide what YOU want.  You need to have a very strong opinion on what will work best for YOU.  After that, then you do your research to find the BEST fit for your parameters.  There is an old saying, "If you do not STAND for something, you will FALL for anything!"  There are a lot of "snake oil" real estate sales people out there, they talk a good talk, but are just full of hot air.  Talk to the successful investors, research, research, RESEARCH and take those baby steps.  You will be glad you did!