Looking for New Cities to purchase SFH for about 125K

[Jonathan MacMillan]

Hello all, 

I've been reading this site on and off for a couple of years. 

Seven years ago I purchased a SFH in Aurora, CO for 110K. It rented for about 900 as I slowly paid off the mortgage. I now own the property outright, Zillow has it listed for about $260,000 and I'm renting it for $1600. For many years I've had this property on auto-pilot with my manager taking care of most things while I live overseas.

However, it dawned on me recently that a $1600/month rent is nowhere near achieving the 1% rule on a $260,000 property and so I've been contemplating selling it, and 1031ing it into two new properties that add up to $260,000. I also thought it would be a good opportunity to diversify my investment by buying two properties in different locations.  I plan on paying cash for both because my employment is very uncertain and so I struggle to get loans. I also have a bit saved so I could go a little over a total amount of $260,000 for the right places. 

Currently I've been thinking about Orlando and/or Houston. I would also consider Cleveland (I have some friends there who dabble in REI). I'm always a bit overwhelmed when it comes to choosing cities to buy in. I grew up in Los Angeles and don't think I can afford anywhere there. But I live in Australia, (also can't afford anywhere there) and so I don't really have the ability to do tons of boots on the ground research in different cities. I've looked at turn-key companies in the likes of Chicago, Philly, KC, Indy, etc., but haven't found one that I fully trust yet.

The goal would be to pick up two SFHs that combine to rent for about $2600. 

Any advice would be much appreciated!!!

[Jon Q.]

Originally posted by @Jonathan MacMillan:

Hello all, 

I've been reading this site on and off for a couple of years. 

Seven years ago I purchased a SFH in Aurora, CO for 110K. It rented for about 900 as I slowly paid off the mortgage. I now own the property outright, Zillow has it listed for about $260,000 and I'm renting it for $1600. For many years I've had this property on auto-pilot with my manager taking care of most things while I live overseas.

However, it dawned on me recently that a $1600/month rent is nowhere near achieving the 1% rule on a $260,000 property and so I've been contemplating selling it, and 1031ing it into two new properties that add up to $260,000. I also thought it would be a good opportunity to diversify my investment by buying two properties in different locations.  I plan on paying cash for both because my employment is very uncertain and so I struggle to get loans. I also have a bit saved so I could go a little over a total amount of $260,000 for the right places. 

Currently I've been thinking about Orlando and/or Houston. I would also consider Cleveland (I have some friends there who dabble in REI). I'm always a bit overwhelmed when it comes to choosing cities to buy in. I grew up in Los Angeles and don't think I can afford anywhere there. But I live in Australia, (also can't afford anywhere there) and so I don't really have the ability to do tons of boots on the ground research in different cities. I've looked at turn-key companies in the likes of Chicago, Philly, KC, Indy, etc., but haven't found one that I fully trust yet.

The goal would be to pick up two SFHs that combine to rent for about $2600. 

Any advice would be much appreciated!!!

Jonathan,

With all due respect, it doesn't appear that you know what you're doing.  I think you're lucky that you've experience investing in real estate has been positive...

I suggest that you put in the time and effort to learn the fundamentals of real estate investing.  Initially, to begin selecting a market, you should start by learning about what contributes to demand of real estate...namely population growth forecasts and job growth forecasts.  Then there are numerous other state, MSA, and local variables that you should be examining to identify what market to invest in.

Even before you get to this, you should spend much more time specifically definining your investment goal, which will provide guidance on what to consider when conducting market research... for example, if you're looking for cash flow, you BETTER conduct an analysis of price-to-rent ratios and average cost of housing.

1. Investment Goals: EVERYTHING you do as an invest should tie back to your specific goals.  If they don't you are wasting your time!

2. Market Research (Region: Population Growth Forecasts, Job Growth Forecasts)

3. Market Research (State: pop / job)

4. Market Research (MSA/City) (pop/job forecasts, price-to-rent ratios, city masterplan, path of growth, vacancy rates, average cost of housing, crime rates, demographics, etc...)

Next... What customers are your looking to serve? Why? Where do they work? Where do they spend free time?  How much income do they make?  What are their living preferences?  Can you acquire properties at a good price that rent high enough to generate your return (cash flow/appreciation)?

There are lots of other questions that I don't think you even know to ask...but this should give you a start.

I wish you the best.

jon