Best City to Buy a Cheap House in Cash and Rent Out?

[Marielle Walter]

I am thinking of refinancing one of my houses in Washington, DC, that I have a significant amount of equity in, and using the cash to buy a house in a cheaper market in cash. I am sick of paying interest to a bank! After I pay some other expenses i have prioritized, I'll have about 60,000 or 70,000, plus i could get a renovation loan to do some light renovations of about 10,000. I have heard there are cities in OH that could be a good bet, but would love to get some expert opinions here of where i may start to search! I want to do a buy and hold, fix it up a bit, and rent it for a while, so somewhere that will have a strong rental market and opportunity for appreciation would be great. 

[Ross Denman]

@Marielle Walter as Brian said above the above markets are good places to check. I'm also keeping my eyes on the Detroit suburbs and watching Oklahoma City as well. Here are some considerations when cash flow investing, your COC ROI isn't usually going to be as high as some people make it seem. Leveraging helps by reducing your out of pocket expense, but it seriously impedes your cash flow. The only way to really "guarantee" cash flow is by holding a home in cash. There are different things to take in to consideration in every market, but I believe that most of the markets mentioned so far are relatively similar.

• Retaining tenants is vital to consistent cash flow. If you are investing in Urban areas or smaller homes, they tend to turn over tenants more frequently. 3 bedroom, 2 bath homes in areas with decent schools and low crime. We tend to see 3-10 year tenancies in these types of homes (at least in Indianapolis)
• Understand that cash flow will go up and down. We take a proactive/preventative management approach to our homes and sometimes owner's complain about the 4 or 5 trips taken to the property for inspections, gutter cleanings, furnace PM's etc. We find that if the owner's tell us not to do those things, they end up with more service calls which cost as much or more than the proactive approach and they also tend to turnover tenants more frequently. To evaluate a home, you really have to look at the cash flow over a 3-5 year period. 
• Have plenty of reserves. Things happen and because of cash flow inconsistency, there will be times that your expenses will be higher than the income. Adequate reserves and replenishing them when they are used, will help a home "wash its own face" and maintain cash flow. Too many times, new investors think they just get to cash consistent checks each month and there's quite a bit to it.

There's a lot to consider, but I think the most important thing is to find the markets that are most appealing and put together a good team. Your bad team can break a good property and a good team can make a mediocre property perform consistently. Best of Luck!