Best, most profitable region for rentals?

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Best, most profitable region for rentals?

Christopher Monsour
Investor · San Diego, CA · Member since 2015 · 20 posts · 2 votes

Hi- 

Living in San Diego, I've decided that I want to pursue a portfolio of rentals out of state.  I'm mainly seeking supplemental cash flow so multi-unit properties seem the most obvious to me, but open to other suggestions. What are areas of the country that others have had success with and positive cash flow deals are easily attained? Given that I want to purchase several sub 100k properties in the same area, finding one "super" deal isn't as important as finding an area that offers many "good" deals. 

I'd appreciate any recommendations, or if anyone has info on a portfolio for sale I'd be interested in information. Thanks.

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Mike Makkar
Investor · Plano, TX · Member since 2014 · 188 posts · 149 votes
10y

Welcome to the forums, @Christopher Monsour

1. pick a couple of cities in the US, with a healthy economy and where you have connections

2. Start reviewing home prices. Any place where you can get 3BR, 2BA houses for under 150k usually is a good market to start building a rental portfolio

3. Compare rental rates in the interested cities. Any area where the monthly rental rate is above 1% of the sale price (i.e. 1500 per month for a 150k home), then most likely you'll cash flow positively

Cities that are doing well are, parts of Denver, CO, Kansas City, MO/KS, Dallas, Houston, San Antonio, TX Upstate NY, further parts of Seattle - Olympia etc, parts of Indiana, certain parts of Arizona.

Here's the thing about high rent-ratio states. You have a certain window to act on high rent-ratio states. Pretty soon every investor is on it and you lose the advantage.  

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  • Mike Makkar
    Investor · Plano, TX · Member since 2014 · 188 posts · 149 votes
    10y

    Welcome to the forums, @Christopher Monsour

    1. pick a couple of cities in the US, with a healthy economy and where you have connections

    2. Start reviewing home prices. Any place where you can get 3BR, 2BA houses for under 150k usually is a good market to start building a rental portfolio

    3. Compare rental rates in the interested cities. Any area where the monthly rental rate is above 1% of the sale price (i.e. 1500 per month for a 150k home), then most likely you'll cash flow positively

    Cities that are doing well are, parts of Denver, CO, Kansas City, MO/KS, Dallas, Houston, San Antonio, TX Upstate NY, further parts of Seattle - Olympia etc, parts of Indiana, certain parts of Arizona.

    Here's the thing about high rent-ratio states. You have a certain window to act on high rent-ratio states. Pretty soon every investor is on it and you lose the advantage.  

    10Reply
  • Kevin Grinstead
    Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    10y

    Nice response Mike. Very Informative. Here in Colorado there are several hot rental neighborhoods. In Denver it is hard to find sub 100k properties to purchase for rentals. There are some houses in the 150's in Colorado Springs and you can find some high 100's or low 200's properties in Aurora. There are also some duplexes and triplexes available. Let me know if you have any other questions or would like to discuss some of the available properties.

    Kevin

    0Reply
  • Adam Kroll
    Real Estate Agent · Boulder, CO · Member since 2014 · 87 posts · 24 votes
    10y

    It really depends on what your important metrics are. Are you focused on cash on cash ROI, total ROI, equity build, etc.? This would give you a more targeted question to get a better answer on locations to look into.

    3Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
    10y

    @Christopher MonsourSt Louis , Kansas City, Columbus and Toledo OH. have the best price to rent ratios. There are many more cities where you can get 1.5% to 2.0% rent to price ratios like these Midwest cities and states. The hard part sometimes is finding an honest and competent property manager.

    3Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    10y
    Originally posted by @Gordon Cuffe:

    @Christopher MonsourSt Louis , Kansas City, Columbus and Toledo OH. have the best price to rent ratios. There are many more cities where you can get 1.5% to 2.0% rent to price ratios like these Midwest cities and states. The hard part sometimes is finding an honest and competent property manager.

    Lets go Gordon,

    I need some deals here in Toledo.

    Need to buy 6 in 10 days hehe

    Send some mailers out. I have covered 43612, 43613 and 43623.

    Hit 43615 hard ;)

    Thanks mate

    Podcast Guest on Show #89
    Oz Realty4.5367 Reviews
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    2Reply
  • Angela Harding
    Real Estate Broker · Toledo, OH · Member since 2016 · 58 posts · 38 votes
    10y

    Christopher,

    We are coming out to California in April. Fresno to be exact. But meeting with several of our clients out there that can't make it here. If you are interested in Michigan or Toledo I would love to meet up with you when I'm there. 

    Angela

    0Reply
  • Christopher Monsour
    OP
    Investor · San Diego, CA · Member since 2015 · 20 posts · 2 votes
    10y

    Thank you for the replies. Some of these areas suggested has been where my initial research has led me, specifically areas of Ohio and Indiana. Looks like I need to look into KC and St. Louis as well.  

    I'm not so concerned with building equity so long as the monthly cash flow is lucrative. 

    Thanks Angela, I'd be interested in hearing what you have but Fresno is a ways away from me. If you have opportunities feel free to send them my way.  

    0Reply
  • Benjamin Timmins
    Landlord · Utica, MI · Member since 2015 · 190 posts · 99 votes
    10y
    Originally posted by @Gordon Cuffe:

    @Christopher MonsourSt Louis , Kansas City, Columbus and Toledo OH. have the best price to rent ratios. There are many more cities where you can get 1.5% to 2.0% rent to price ratios like these Midwest cities and states. The hard part sometimes is finding an honest and competent property manager.

     I have family that live around Toledo Ohio, including an uncle thats a sheriff. The gang problem is getting really bad there.

    1Reply
  • Gino BarbaroPro Member
    Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes
    10y

    @Christopher Monsour

    Hi Christopher,

    I feel your pain.  I live an hour north on NYC and the returns here can be pretty abysmal, factoring in taxes, insurance and high per unit costs.  I followed my partner to TN, a right to work state, no state income tax, good job growth and quality of life.  We chose these parameters to begin with.  Always choose an are that has at least 2% job growth for at least two years, a community that is business friendly and one that does not have prohibitive taxes.  You also want the number of households to be growing, your tenant base and future customers.  Use bless.gov to gather info on a specific market and google the city name to get more info on a specific city

    Good Luck

    Gino

    Podcast Guest on Show The “Conveyor Belt” System That’ll Build You a BIG Rental Portfolio Quickly
    4Reply
  • Dale Stevens
    Investor · Downers Grove, IL · Member since 2015 · 353 posts · 213 votes
    10y

    I am torn if I want to answer. Because obviously I like where I am investing, but if I share that, then, I am increasing the competition for myself. This has been a moral debate I have been having within myself for quite some time. I enjoy helping others, sharing, etc, but some on here, have basically taken deals out from under me (some intentionally, others just because we are competitors now).

    So do I help my fellow investor despite that adding to the number of competitors I have? The internal battle continues.

    2Reply
  • Valerie Couch
    Turnkey Provider/Agent · Cleveland, OH · Member since 2015 · 167 posts · 37 votes
    10y
    Originally posted by @Christopher Monsour:

    Hi- 

    Living in San Diego, I've decided that I want to pursue a portfolio of rentals out of state.  I'm mainly seeking supplemental cash flow so multi-unit properties seem the most obvious to me, but open to other suggestions. What are areas of the country that others have had success with and positive cash flow deals are easily attained? Given that I want to purchase several sub 100k properties in the same area, finding one "super" deal isn't as important as finding an area that offers many "good" deals. 

    I'd appreciate any recommendations, or if anyone has info on a portfolio for sale I'd be interested in information. Thanks.

     Hi Christopher,

    I'm certainly biased but I do work with several CA investors who appreciate how great the Cleveland market is and how attainable good cash flowing properties are.  If you haven't done so I would highly recommend taking a look.

    All the best,

    Val

    0Reply
  • Peter MacKercherBusiness Member
    Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
    10y

    @Christopher Monsour Saw you mentioned St. Louis and would like to reiterate that point. It's been my primary market and I'd be happy to talk to you further if you'd like more info. There are a lot of cash flow deals and a lot of areas are seeing heavy development as well. 

    Feel free to reach out anytime.

    Cheers!

    [email protected]
    1Reply
  • Nate T.Pro Member
    Investor · Tempe, AZ · Member since 2014 · 142 posts · 73 votes
    10y

    Make sure to check out how "landlord friendly" a state is before investing there. Some states make evictions very difficult.

    3Reply
  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    10y

    Before coming to Bigger Pockets, I didn't realize that people invested out of their area. To my family, investing in the local area was the one important factor. Being involved with the community and the makeup of the neighborhood is what make real estate investing extra special. We know our tenants, and are more than just the owner. My dad has given people rides to work, grocery store gift cards for the holidays, and more. As being a local investor, he invests in his own community. With that being said, we have to think about investing differently being the in greater Seattle area, the return isn't the same as the midwest.

    I don't know much about real estate investing out of my own area, but I can tell your that Seattle is a great market and areas about 1 hour from the Seattle core are profitable for the rental market you might be looking for.

    Welcome to Bigger Pockets, glad you reached out because there are so many people graciously willing to help others!

    2Reply
  • Jeff R.
    Investor · Saint Louis, MO · Member since 2015 · 58 posts · 6 votes
    10y

    I puchased my first rental in the STL area. Total investment approximately $30k.... The rent is over $900.... 

    0Reply
  • Kevin Prentice
    Residential Real Estate Broker · Beaufort, SC · Member since 2016 · 53 posts · 41 votes
    10y

    Find areas where there are military bases located nearby. Those areas offer many advantages such as:

    ***You'll find a High Demand / Low Supply ratio = higher rents and less vacancy time

    ***Military families are usually looking for multi-year leases (usually 2-3 years)

    ***By renting to military families you'll hit the win/win/win lottery for Landlords. Which is:

    1. The military provides a housing allowance.....therefore you know you're going to get paid

    2. Because of the housing allowance they receive...you're going to get paid on time.

    3. And in most all cases, they're going to take care of the property. They can get in a lot of hot water at the military base should they fail to do so. The ideal is to rent to an officer. Then you know 100% that they will take care of the property = Landlord Peace of Mind

    ***And if you have any problems related to items 1,2, and 3........you can contact their CO (commanding officer) and usually get the problem fixed quickly.

    7Reply
  • George Wines
    Investor · Denver, CO · Member since 2015 · 61 posts · 23 votes
    10y

    @Angela Harding what cities in Michigan do you invest in? Do you outsource PM or do you perform that in house?

    0Reply
  • Jon W.
    Flip and Buy/Hold Investor · Rochester Hills, MI · Member since 2013 · 245 posts · 105 votes
    10y

    @George Wines the band of suburbs bordering Detroit are all great for rentals. 

    Jon

    1Reply
  • Chris L.
    Lender · Hunt Valley, MD · Member since 2016 · 83 posts · 30 votes
    10y

    My only suggestion is if your going out of state still keep the portfolio within driving distance. Its much cheaper and more flexible to be able to jump in a car to go check out your assets then spend a $1,000 on airfare hotels, etc...  No matter what property management company you employ you must have very tight oversight on the properties or they will bleed you to death. Many of our borrowers who have out of state properties are in a constant battle for the cash flow of the property with the management companies. If you ever decide to invest in the southeast to invest look me up! That is our wheelhouse! 

    Best of luck!

    0Reply
  • Jett Rao
    Flipper · Calgary, Alberta · Member since 2015 · 99 posts · 15 votes
    10y

    Awesome thread and some very informative responses. Thank you everyone for your inputs!

    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    10y
    Originally posted by @Christopher Monsour:

    Thank you for the replies. Some of these areas suggested has been where my initial research has led me, specifically areas of Ohio and Indiana. Looks like I need to look into KC and St. Louis as well.  

    I'm not so concerned with building equity so long as the monthly cash flow is lucrative. 

    Thanks Angela, I'd be interested in hearing what you have but Fresno is a ways away from me. If you have opportunities feel free to send them my way.  

     Hey Christopher,

    I agree with the Kansas City recommendation, but be sure you account for the higher taxes in Ohio and Texas when evaluating cash flow - ie: price to rent ratios do not a final formula make.  Also in Indiana, take a look at the NW corner, which are suburbs to Chicago but have the lower taxes and investor friendly environment of Indiana.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    10y

    @Christopher Monsoursince you said that cash flow is your primary objective, I would suggest the Midwest. There's a lot of good cash flow markets in the Midwest but not are all equal. Look for markets with growing populations, growing number of jobs and good incomes. I like Kansas City and Indianapolis in particular because I think that they offer the best combination of strong economic/demographic fundamentals with affordability and strong rents. A lot's been said in this thread about price to rent ratio's but as @Larry Friedpointed out, that's just a starting point. You want to look at what the property taxes and insurance are on the market. They can vary dramatically. You can find a lot of information on my website about Indy and KC. You might want to check it out and listen to some of the podcasts also.

    1Reply
  • Sam Smith
    Investor · Phoenix, AZ · Member since 2015 · 30 posts · 6 votes
    10y

    With everyone recommending Kansas City, the competition must be fierce and I hear the price are going up. Not sure if KC has the numbers it used to have. How are people sourcing good deals off the MLS?

    1Reply
  • George Wines
    Investor · Denver, CO · Member since 2015 · 61 posts · 23 votes
    10y

    @Jon W.Thanks for responding. I grew up in the Detroit area and my family still lives there, so I was interested in hearing more about the areas people are investing in. I am currently living in Denver and the market IMHO is irrational. The rental rates are really far out of whack with the purchase prices (at least compared to the MidWest). Anyway, I was considering investing in property back in Michigan for those reasons.

    0Reply
  • Jon W.
    Flip and Buy/Hold Investor · Rochester Hills, MI · Member since 2013 · 245 posts · 105 votes
    10y

    @George Winesseems like a no brainier to invest here if you are looking for an out of state location. You already know the area and you have family here.  You could write off any trips to see the family as business trips. Take a look at areas like Ferndale, Oak Park, Hazel Park, Madison Heights...even Royal Oak (which is relatively expensive) will seem like a great investment compared to Denver. Good luck. If you want some help let me know. 

    Jon

    0Reply
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