Which city should I start my first out-of-state BRRRR

Question

Hi, I am from Rockville Maryland. I want to start out-of-state BRRRR. Does anyone have recommendation as to what city I should start? I am looking for places that has good potential to appreciate over time and good monthly return (~1%).

Drew Sygit · Answer

@Zeliang Zheng

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods:

https://www.biggerpockets.com/...

(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

Please send us any feedback via email, as we do not use the DM feature here.

Mackaylee Beach · Answer

You can never go wrong with Kansas City!  Lots of options and opportunities for what you are seeking.

Chad Kastel · Answer

Start with a city or area where you know people who could be boots on the ground for you. Or can make great recommendations locally.

Dustin Street · Answer

@Zeliang Zheng

Kansas City is one of the best places for buy and holds! Here you can hit the 1% rule, and be in neighborhoods with good appreciation. Not to mention our city is going through crazy growth! I'd be happy to talk with you about KC anytime

Melissa Nash · Answer

are you doing it alone? I just bought 2 in Memphis with a team that is doing all the BRRRR work for me. I am giving up some of my return - but I did nothing.

They find the property

They do the scope of work & rehab

They line up a hard money lender that approves everyone

Rehab takes 60 days or less

The lender does the refi immediately- no 6 mo waiting period and no tenant needed

My cashout pays back the HM lender and leaves equity in the property. I just pay for the lender closing costs. Done- in & out in under 90 days.

Spent less that I would have putting 20% down for a regular purchase and none of the headaches or stress of putting all together and wondering if it will work.

Dustin Street · Answer

@Zeliang Zheng ^^^^ It's been said but Kansas City. We are going to be one of the hottest ,markets this year! Lots of jobs coming, cash heavy investors with new laws, several new attractions being built. We have affordability, growth, and nice neighborhoods!

Wyatt Seidel · Answer

I would be happy to talk with you about the Kansas City market! My wife and I have 4 rentals and it wouldn't have been possible if it weren't for the affordability of Kansas City. Not to mention, rents aren't the highest nor the lowest so you get that sweet middle spot for rent. And no strict rentals laws!

Travis Biziorek · Answer

Hey Zeliang, we should talk. I started buying rentals in Detroit in 2019. My first was "turnkey" in a sense as it was a tenant occupied MLS deal. I still own it today and it still has the same tenant. It's been great to me and I've put little money into it.

I quickly realized I could find better deals off-market, so I moved into that.

Then I got BRRRR fever and started down that route. I've got some pretty strong insights into doing that and I'm happy to share.

Overall, I believe you can do better buying under market deals with a bit of equity in them and moving faster than the BRRRR method allows you to.

Russell Brazil · Answer

None of them.

Long distance rehabbing/brrrr is the riskiest thing you can do in real estate. It's not going to end well. So just skip it and dont do it

Which city should I start my first out-of-state BRRRR

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