Local market (MA, NH, RI) or out of state for my 1st multifamily?

Question

Hello,

I am currently working through the initial diligence process for making my first multifamily (2-5 units) investment and am currently weighing the pros vs. cons of investing within my local market (MA, NH, or RI) vs. out of state - where there are likely higher growth (Orlando, Tampa, Dallas, Raleigh) or higher cash flow (Cincinnati, Cleveland, Columbus), but for which I would likely need to establish and rely much more heavily on partners in identifying opportunities and for ongoing management.

Any perspective folks may have on where I should focus my time would be much appreciated, as would any resources/contacts that folks can point me to as I consider my options here.

Thanks,

Rory

Remington Lyman · Answer

@Rory M.￼

I would recommend staying local. House hack if your current situation allows you to. This gives you great cash on cash return. Additionally you can do a lot of your own due diligence and repairs. You can even do your own property management which will save you roughly 10%.

If you do decide to do out of state investing then I would recommend taking a closer look at Columbus, OH.

Ryan Allison · Answer

@Rory M. , I think it depends on what you’re looking for.  If your going to live in one of the units, I would definitely house hack and invest in a multi locally.

If not, then theres other pockets of the country that have good returns, you highlighted a lot of those areas that seem to be popular & also a lot cheaper up front with downpayments.  For these reasons, I’ve spent a lot of time the past couple of months looking into the FL marketplace.

I don’t know much about NH either but I agree that Western Mass and parts of Rhode Island and CT have deals that cash flow.

Damian Bialonczyk · Answer

@Rory M.

I definitely would recommend staying at least semi-local (<1hr away) for your first investment property. Western MA and RI have some reasonable markets for investing - not sure about NH.

James Wise · Answer

Welcome to the forums Rory. Saw Cleveland's on your short list so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. 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
• Birmingham, Alabama
• Kansas City, Missouri
• 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 loose 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 adverse real estate, (especially out of state) is not for you.

Kerrel Gomes · Answer

Talking specifically for the Raleigh-Durham area it is definitely high growth. Some factors are the tech, education and healthcare industry. There's an article I posted below on the move-in rate and this has helped the area and home prices have appreciated at a rapid rate. We are getting a good amount of off-market deals but marketing costs have gone up with so much competition.

https://www.wbtv.com/2020/01/10/more-people-moving-nc-than-ever-before-report-says/?fbclid=IwAR1olT--W_QDJuS5LEM70yJqTJlj41YeEB7mj_xVhD8a6BNb3dhYYqOMais

Robert Speckert · Answer

@Rory M. I do agree with the others about staying semi-local.   If you ever questions about Cincinnati don't hesitate to reach out to me.   Thanks

Zeke Liston · Answer

@Rory M. I would also suggest staying local for at least your first deal. It'll teach you a lot by being able to be hands-on and see how the process works! Then, if you're still interested, I would take a look at some different cities!

Rory M. · Answer

Thanks Damian - any particular towns you’d point me to?  Also, I was a bit wary of how tenant friendly MA is and if it should be avoided as a result.

Local market (MA, NH, RI) or out of state for my 1st multifamily?

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