With $1mm credit to buy property: Where in the U.S do you do it?

Question

Greetings Everyone,

I currently own 2 condos in Boston that I rent out but am painfully aware of the low yields relative to other parts of the country. I work in sales and have been offered a position to work entirely remote which would allow me to move/work from anywhere in the country. I'd like to sell my properties and relocate somewhere with a more lucrative rental market to build a better income stream.

Current Situation:

• I currently manage 2 properties that are worth a combined $1,015,000 
• If I sell I will be left with around $300,000 in cash to start
• Since my mortgages started with 20% and 30% down I'm hoping I could leverage even further

Since I've read the best investments are in the least desirable places to live, the goal would be to buy as many high yield properties as I could in 1-3 years and then pay a management company to manage the portfolio.

If you were in this situation what markets in the U.S would you be looking at?

Matt Lefebvre · Answer

Hey @Dustin Robideau,

I think this also boils down to the style of investment you want to get involved with.  If for example, you want to acquire a large portfolio of small properties (say purchase 10 SFH rentals at $50K each), then you're better off looking in markets where SFH rentals are a viable option in terms of cash flow.  On the flip side, you could also invest most or all of your money into one larger property (say a 16-unit for $1M w/ financing) and work on that instead.  Obviously there are benefits to both and it mostly depends on what you're interested in getting involved with.

I've always preferred larger complexes with more units under one roof.  It consolidates a lot of your expenses because you're only dealing with one building rather than ten.  Usually the taxes end up being lower on a 10-unit, than ten single-families.  It also makes it easier for one property manager to deal with more efficiently and reduces your overall maintenance expense (now you only have to replace one somewhat larger roof, rather than needing to replace ten roofs).

Tim Ball · Answer

@Dustin Robideau come on down to Dallas, TX.  One of the hottest markets in the country.  Great place to invest.  And with $300k in liquid cash, your dollar can go pretty far especially if you leverage it with hard money financing.  Let me know if you are coming down.  I can get you hooked up.  Great people and food down here too :)

Jon Nelson · Answer

I am currently in a similar situation except for the job thing and I already have 12 properties. my plan is to purchase 8 homes $30,000 down on each they make roughly $500 a month which is $48,000 a year if I apply all of that to the loans they will be paid off in 8 or 9 years. I picked Chicago but looked at Florida, Texas and Cleveland they all were close to the same return.

Jay Hinrichs · Answer

well since you will get all the normal responses about invest in MY area its the best.

two I like are Portland Oregon  I live there its super solid.

Charleston SC is another one I really like.. for many reasons. research both of these.

I work in 15 states and all have their plus and minus.. but for A an B class I like those

Bruce Lynn · Answer

Lots of people moving to Texas...from NE ...Midwest...and California.

Nice prices, better yields...newer properties in many cases.

I'd say spend a bit more in areas that are growing and with good schools if you can.

In the bad neighborhoods you typically will get the least appreciation, but yield might be a little better on paper.

The very best school districts in some cases have seen both great rent increases as well as great appreciation.  It's always a balance though of growth, price, rent and some other factors.

Adolfo Cuellar · Answer

Sacramento might be emerging in some cool ways- It's close(ish) to Portland, where I am as well, and has a great culture with reasonable prices. It's where I see lots of people in the music scene leaving Portland going to..

Matt Lefebvre · Answer

@Dustin Robideau yes and no...

Look at it this way.  If you're trying to get financing for ten single families, traditionally, you would need to get 10 separate loans.  Say 25% down, conventional loan on a 30YR fixed term.  After a certain point (usually after 4 loans) it becomes increasingly difficult to qualify for additional loans.  Residential lenders will stop lending and you'll have to seek alternative financing.  Usually this can be achieved by talking to commercial lenders or portfolio lenders (who tend to have similar requirements in this situation) and they can finance you.  Of course, the rates won't be quite as attractive as a conventional 30YR fixed residential loan... but you work with what you get.

In the case of a 10 unit, you would completely bypass a residential lender and start talking immediately to a commercial lender.  One way or another, you'd need to end up talking to one anyway, and there usually is a little more legwork involved in putting together a commercial loan (bigger properties means the bank takes a little longer for due diligence).  I would say if you have the money, a plan, and are asking the lender about a cash-flowing asset, they're going to give you the money without too much trouble.  Of course, I'm not a commercial lender and can't promise they'll all be the same, but moving into the commercial space isn't too big of a deal when you were already prepared to start a large portfolio anyway.

Dustin Robideau · Answer

Would there be any additional requirements/challenges to getting financing for a 10 unit over 10 SFHs?

Roy Oliphant · Answer

@Dustin Robideau

If your best investment is in the least desirable place, you should probably look at East St. Louis, IL.

If you're looking for a truly investable area, almost anywhere along I-20 (Texas to Georgia) is a good place to start.

Pavel Redko · Answer

I'm very bullish on Atlanta :-) Lately, though, I've been evaluating property in East TN. I own a home and acreage there, and am pretty familiar with the area but had been so focused on Atlanta that I didn't do too much research in my 'old backyard'. Aside from the fires raging right now in the Gatlinburg area, there are some great multi-family deals to be found, along with excellent condo-reno opportunities using old buildings in the newly-trendy old downtown areas of towns in the region.

With $1mm credit to buy property: Where in the U.S do you do it?

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