How to select location for first rental purchase?

Question

Ready to purchase first rental property. Please give advice on what things to consider, i.e.; Crime, jobs? Does living near first property matter or it doesn't? Ready for the leap, just not sure where to purchase. Currently living in Northern California. Considering purchasing in less expensive parts of California or Tucson, AZ. Any advice would be greatly appreciated. Thank you.

Bill S. · Answer

One's too many and a 1,000 not enough.

Andrew Emery · Answer

@James Sestito thank you! It was here in Colorado Springs. Right in the middle of the market catching fire here, up and down the I-25 corridor. I am glad you asked because this gives me a chance to put one of my goals down in black and white. Right now the market is hot, and I am going to continue to invest locally because I figure if I am able to conquer a market like this then I'll be able to invest anywhere.

Andrew Emery · Answer

@Emma Nunez, I bought my first place last Feb after looking for almost a year. What I used to make that leap was trust in my realtor. He is from this area and an investor himself. I didn't want a townhouse, I wanted to go SFR, but after he explained to me what the benefits would be to me as a first time investor, I went with the town house.

The advice is as follows: He said go townhouse because it provides more security when it comes to dwelling damage to the outside of the property. The reason is because the monthly HOA dues cover things like exterior maintenance, landscaping, snow removal and trash pickup.

Secondly he gave me the same advice I hear repeatedly on BP, have an exit strategy. God forbid you lose your job or something happens, you should be able to unload your place as quickly as possible. Also try to get it at a price point where you won't lose your shirt on it.

I am sure he said other things too, however; these are the two biggest points I remember and here is why:

The first piece of advice proved to be correct not once but twice with in the first 6 months of owning the place: When the thaw came last year, I bought the place in February and the ground was still frozen, I heard water running and running, for over a month. I told the HOA and nothing was done about it. Well fast forward six weeks and I had an emergency shut off call put in the water company and they shut off the water to the place. Then I had to leave to Africa for work, and what was supposed to be 2 weeks turned out to be 2 months. Well while I was gone the HOA finally found the source of the leak. It was 6 feet below my rear patio where the pipe had burst. Since it was outside of the townhouse they had to cover the whole bill. That even included a brand new concrete patio out back. I would have hated to see the total cost of that bill.

Then in July or August last year we had soul shattering hail. When this occurred I was still in Africa. It destroyed cars, trees and homes. The roof needed to be replaced on the whole complex. This only cost me an extra 500 out of pocket through the HOA above and beyond the monthly dues. Now we have a new roof.

I can't imagine what the totals would be if I would have had an SFR.

The second bit of advice was correct as well, even though I might have just lucked into this bit of it. I bought the place on his recommendation at asking price of $87,000 and seller paid closing. Here I am a bit over a year later and the place has jumped in value to over $121,000. The reason I say this is because even though I don't need to sell, if I had to I would get all of the cash I put into it back out, cover the realtor fees and still profit on the place.

So I will leave you with what I started with, trust, find someone who you trust and who puts your best interests first.

Good Luck

P.S. This same realtor is currently helping us buy our new place for us to live in so we can turn our current place in to a rental.

Ari T. · Answer

@Emma Nunez With University of Arizona as an anchor, Students Housing in Tucson is an excellent and secure source of income. Most of owners are out of state and hardly have to visit the properties.  Without a doubt location is an important factor as always. Another great source is the medical professional who travel in for job relocation. Send me a PM and I would be more than happy to assist you further when you are ready.

Andrew Emery · Answer

@Emma Nunez you are welcome! Good luck. Just a warning, this is contagious. Once you purchase your first place you will want more and more.

Jim Sestito · Answer

@Andrew Emery Great insight..... Was your first investment in Col Springs or elsewhere?

Emma Nunez · Answer

Thank you for the perspective Andrew. I had not considered the benefits of townhouse as you've mentioned. Much appreciated!