Where to start buying property in America

Question

I am looking to invest in my first multi family home. I am aiming towards a 4 unit because I believe that would be the best for a first time investment.

I’m 25 and I’m anxious but I don’t want to invest in the wrong property so I’m looking for some help/guidance.

I’ve been at my job 6 month and have made a little over 20k so I estimate my YTD to be around 40k+ and I have very little debt. I am wondering if I would qualify for a FHA loan.

I’m interested in Texas, Washington, Los Angeles, Idaho and Oregon. Not sure how promising those markets are but I’m looking for the right help.

Thank you for taking time to ready this

Don Spafford · Answer

@Roemello Lee Unless you maybe do a house-hack in LA, that may not be a good market for the funds you have. You should talk with some lenders first and see if you can qualify and how much you qualify for. The FHA would only be for a house-hack as it has to be one you live in. Otherwise you would be looking at an investment property loan and depending on the area, you may be able to get for as little as 10% down and up to 25% down. If you qualify, most of the Western States markets you mentioned would qualify for a 10% down payment from at least one lender I know. But the bigger issue will be to find a good cash-flowing property for you to start with. Are you willing to move? Or will you stay in LA? A house hack in Idaho for example would be much different I assume than a house hack in LA due to the price and the property taxes and landlord/tenant laws.

If you haven't done so yet, start getting familiar with the BiggerPockets calculators. Run as many analysis as you can to know when you have a great deal. Getting the Pro membership is well worth the cost just to have unlimited access to the calculators. Unless you have your own calculators to use. The way the markets are now you will need to analyze many before you find one that may work. Don't just buy anything, make sure the numbers make sense and be conservative in your calculations. Assume costs will be higher than what is listed.

Tom Ott · Answer

Cleveland all the way! Prices are still so low.

Remington Lyman · Answer

@Roemello Lee 4 units are the best because they allow you to get a residential loan. I have 3 in Columbus, Ohio and am looking for more.

Zeke Liston · Answer

Hi @Roemello Lee, I would also check out Columbus, OH!

James Wise · Answer

I saw Cleveland was mentioned so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri.  & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides Cleveland. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

• Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
• Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
• Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
• Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
• Make sure your property manager is a licensed real estate brokerage.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

Matthew Irish-Jones · Answer

@Roemello Lee.  How did you decide on the markets listed?  What drew your interest?  Market data?

Do you have an investing plan?  I would take some time to set up a plan, and then see who and what is needed to execute the plan.  Your plan should somewhat dictate where you invest, why you invest, and what you are looking for.

I would not jump into a long distance investment with a lot of research, a solid plan, and a ton of vetting of potential vendors.

Where to start buying property in America

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