Where to invest - near where I live or another state?

Question

Hi All - So, although this may sound simple, it's actually not that simple of a question due to a variety of variables.

Objective: I am interested in single family homes as investment properties, and have a 10 year horizon.

Here's the background: I moved from Connecticut to New York recently, and I have one rental in Connecticut, which is about 2.5 hours away from my previous home. The area where this home is located is relatively stable, and does not fluctuate at all, no matter how the economy is doing! My new home is in Long Island, but the real estate values in this area are much higher, and tend to fluctuate a lot, mostly following the trends of other economic indicators. There aren't too many renters, or even people, in the Connecticut area where my previous home is located, and this is not a problem at all in Long Island, as it seems to be bursting at the seams with people! In addition, since the values are higher in Long Island, cash flow potential is also higher than Connecticut. However, the big downside with Long Island is that prices are high and the big downside with Connecticut is finding renters in a timely manner.

All of this being said, would it be better to buy in Connecticut or Long Island, given my objective?

Thanks in advance!

Asim Sheikh · Answer

@Julie N. - I lived in South Windsor for 15 years, and Shelton for about 5 years.  Most of our circle of friends moved out, and I noticed that many of my co-workers also moved away while I was working in CT.  That combined with companies moving out of the Hartford area and other parts of the state (GE in Fairfield), along with the migration data showing a net migration out, would make anyone nervous.  Being the "land of steady habits", the political picture hasn't changed much over the years, most companies do not look to CT as a place to do business, and there aren't any recreational activities in most parts of the state.  All of this being said, why would you believe that it's still a good place to invest?  Sure, the numbers (cash flow) may look good, but that doesn't really matter if the property sits vacant for long periods of time.

Julie N. · Answer

@Asim Sheikh. CT is a good place to invest and my units never sit vacant. As a state Employee- I work and have worked for various large agencies with a gigantic Employee base who aren’t going anywhere at least until retirement.   State benefits/pay/retirement plans almost guarantee this. Not everyone is employed so beneficially though. There are lots of CT residents who don’t have jobs in big business or professional areas who need to live in Ct and provide for their families. Moving out of state isn’t an option.

This year that has actually been an influx of out-of-state residents entering the market and establishing residency.

CT is a great place to invest. However, I wouldn’t be able to manage my own properties the way I need to living from afar unless I went with a management company.  With that eating into profits- is it worth it?

You’ll have to decide what works best for you. As Someone who grew up in Long Island, I know RE prices are crazy. CT is more affordable which meant I can get in the game years ago. I guess it depends on how much cash you have to invest and what the returns would be.

Aaron K. · Answer

@Asim Sheikh the other option is a different location that gives you both, however if it is just between the two options, one where you are having major problems finding tenants and the other with lower returns, I'd take lower returns.  If population is declining in the area where your current rental is you are essentially trying to catch a falling knife because you don't know when or if the population loss will stop.

Rick Santasiere · Answer

@Asim Sheikh, I have a property in South Windsor as well!  On Ellington Road. I am a broker and Property Manager in Hartford County. Having a rental in a Class A town in CT is a home run. It's the B and C areas in CT that are hard to rent. While the doom and gloom from CT is all we seem to hear about, I am on the optimistic side. To your point, you can actually cash flow here, where you can't in LI. Reach out sometime if you want to connect and share some dialogue.

Julie N. · Answer

@Asim Sheikh I live in CT now and am from Long Island. I can’t possibly imagine too many properties cash flowing on LI unless it’s in a lower area. House prices and and taxes are crazy down there.

I have 10 doors in CT and I’d never be able to purchase on LI with 20/25% down. I can afford CT though. Of course our financial situations may be a completely different story and then it’s apples to oranges....

Asim Sheikh · Answer

@Rick Santasiere - I have heard that renting in Manchester is fairly easy, as there are many tenants in IT that work in the Hartford area who are willing to move to the area due to the shopping, ease of access to the highway, and the ease of finding folks with similar backgrounds.  However, the school system is not as good as South Windsor.  Any thoughts in buying multi-family homes in places like Manchester?

Asim Sheikh · Answer

@Craig Bellot Thanks Craig, and I have doing exactly that, but the numbers do not work for the vast majority of properties right now, as the market is too high, and everyone believes that they can get close to asking price!  My strategy is to continue to look in class A neighborhoods without the need for property management or class B and C neighborhoods, with a property manager.  As mentioned originally in this post, many people are leaving CT from my own personal experience, at least in the Hartford area (where I lived for about 15 years), which I know fairly well, and I'm a bit reluctant to invest in that area.  I lived in the Shelton area for about 5 years, and so, also know the Bridgeport area well, but not sure how the cash flow looks, as I have read that Class C areas come with their own set of headaches, and require active management.  Thoughts?

Craig Bellot · Answer

@Asim Sheikh you will need to run the numbers and the numbers will tell you what to do.  The BiggerPockets calculator can help, or there are many spreadsheets online which can help with that.

Take the average appreciation in LI + cash flow and do a projection of your total IRR after 10 years.

Do the same for a property in Bridgeport or town in CT with more than 100,000 in population.

I believe you will get your answer there.

How much do you have for down payment?

Asim Sheikh · Answer

Don't know the turnover rate, and thanks for sharing the other information!

Dave Grimson · Answer

I read an article recently that said the population in CT is dropping by 1% per year - but those that are leaving are not the renters they are in the A and B neighborhoods and the people who are replacing them are renters - So i'm optimistic in for the next couple of years to be a landlord.

What's your turnover rate in South windsor?  I have a property in the town over - manchester - and dont have a problem, lots of commuters into Hartford from the area

I hold my RE license so I dont have to deal with any agents - sorry dont have any referrals for you!

Where to invest - near where I live or another state?

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