Investment property during Covid-19 - Advice for a first timer

[Priyaa Kalyanaraman]

Hi BP Community, 

This is my first post and have been reading a lot of older posts here to learn about RE investing. I appreciate the advice. I am based in the bay area and looking to purchase my first investment property. I have been looking into cities where tech jobs are moving. I still need to shortlist one city and would love to hear your thoughts on where I should look to generate positive cash flow. Any tips on areas to avoid/look at would be super helpful. I am exploring single family homes in - 

1) Atlanta 

2) Austin

3) Salt Lake City 

4) Denver - Colorado Springs - Boulder area ( Though there is room for a lot of opportunity and growth in this area, the prices are too high. I doubt I will have positive cash flow. Curious to know if this is a wrong assessment, and if I have not explored any pockets in the area that would make financial sense)

5) Idaho

Given that there is a global pandemic, I know it is going to be very challenging to hop on a plane, visit the properties and coordinate logistics. Should I wait until things cool down? 

I am doing my research online and going through listings on Zillow/Realtor. Any suggestions for a first timer investing out of state, virtual meet-ups you recommend, I would love to know. Thanks a lot in advance. 

[Sebastain Honorat]

What type of RE investing are you interested in?

[Priyaa Kalyanaraman]

Long term rentals for a single family residence. Looking at properties that don't require major renovations and can be immediately rented out.  Minor repairs are okay. @sebastian  

[Daniel Haberkost]

Originally posted by @Priyaa Kalyanaraman:

Hi BP Community, 

This is my first post and have been reading a lot of older posts here to learn about RE investing. I appreciate the advice. I am based in the bay area and looking to purchase my first investment property. I have been looking into cities where tech jobs are moving. I still need to shortlist one city and would love to hear your thoughts on where I should look to generate positive cash flow. Any tips on areas to avoid/look at would be super helpful. I am exploring single family homes in - 

1) Atlanta 

2) Austin

3) Salt Lake City 

4) Denver - Colorado Springs - Boulder area ( Though there is room for a lot of opportunity and growth in this area, the prices are too high. I doubt I will have positive cash flow. Curious to know if this is a wrong assessment, and if I have not explored any pockets in the area that would make financial sense)

5) Idaho

Given that there is a global pandemic, I know it is going to be very challenging to hop on a plane, visit the properties and coordinate logistics. Should I wait until things cool down? 

I am doing my research online and going through listings on Zillow/Realtor. Any suggestions for a first timer investing out of state, virtual meet-ups you recommend, I would love to know. Thanks a lot in advance. 

 Hi Priyaa, 

I can comment on CO Springs. Throughout the pandemic, prices continued to go up, even during the lock down as demand greatly outweighs supply here. 

Even wholesale deals go for ridiculous prices near market value. I made offers on several (off market) houses in the middle of the shutdown and was outbid by a substantial margin. 

People/businesses are moving here in droves (Amazon is building a huge facility by the airport, In & Out Burger is building their headquarters here and opening their first location in CO here, etc) so there's massive competition for residential real estate. 

Owning rentals here is great because the vacancy rate is next to nothing and once acquired you should have it rented in days, even if it's not in perfect condition. It's tough, but deals can be made (not found) here and I'm (in the long run) very bullish on CO Springs. 

Similar situations exist in Denver/Boulder although from what I've read it's most extreme here in The Springs.  

Hope that helps!

-Dan

[Linda S.]

@Priyaa Kalyanaraman,

Where ever you pick, make sure you compare tax rates, and also compare costs of flights/lodging expenses!

Also, don't forget about military bases,  where it's essentially a guaranteed inflow of potential tenants just wanting to rent for a few years!

[Josh Bakhshi]

Congrats on starting your adventure.  I am also from the Bay Area but now live in Atl.  Most of the places you mentioned are not really cheap.  Nothing like SF, but they have been going up for some time.  Now you know that all the Tech companies have closed their offices from the start.  I'm of the belief that more and more tech employees are going to keep working from home so location isn't very important.  

The other thing that you brought up is not being able to visit the property during these times.  My question is why would that matter?  I assume you are going to hire a PM to take care of everything anyway.  You should ask for multiple quotes for anything over $2500 to make sure you are not getting cheated, ask for pictures and try to get a third party (friend/family) to visit the property to make sure everything is on the up and up.  But visiting the property shouldn't make a difference.

Lastly, I would like to know what your goals are.  Are you looking for appreciation in 3-5 years when you can flip it into something bigger?  Are you looking for just 1-2 rentals to add to rental incomes?  Are you looking to buy 15 houses in the same area within 3 years?

[Amy Kendall]

@Priyaa Kalyanaraman The market in Salt Lake City continues to be hot with a lot of demand for single family homes.  Cash flow is not is strong as it was a few years ago, but you can still acquire a property that does produce some positive cash flow and there are a lot of positives to the market here.  A lot of realtors would do a walkthrough video of potential properties for you.  Are you familiar with any of these areas you mentioned?  I have had investors from out of state come into the area and tour around to become familiar with the area first and then feel comfortable enough to not come back once they have a property under contract.  If you have a team that you trust, then I think that would be possible.  Also, when I have invested out of state, I have always found talking with property managers has been helpful because they can offer you advise as to potential rents and the quality of the area and the property without being connected to the deal.

[Tony Tai]

@Priyaa Kalyanaraman, I relocated from SF Bay Area to SLC last year; I have two SFH investment prosperities in the Bay Area and I just purchased my first rental property in the SLC area earlier this year so I can give you my perspective of the rental/investment market here in SLC.

It's going to be very difficult to buy a turnkey ready investment property in the SLC area and expect a good cap rate, same thing goes to multi-family units in this area. Houses priced reasonable (turnkey and/or require renovation) are snatched up within a few days and there are quite a bit of cash buyers. I agree with Amy Kendall, there are a lot of positives to the market here. My goal is to get one more investment property here this year (I am in the process of refinancing my recent purchase here), and 1031 one of my high-maintenance rentals in the Bay Area for 2 SFHs here next year.  

Feel free to PM me if you want to talk more about the rental market here with someone that came from the Bay Area. 

[Priyaa Kalyanaraman]

Thanks everyone for the responses. 

@Daniel Haberkost - Which areas do you recommend I look in CO springs? 

@Linda S. - Fair point, thanks for the tip. 

@Josh Bakhshi - I am just starting out. So, looking at 1 - 2 rentals with positive cash flow/additional income. I know given most of us are WFH through the end of the year, location might not be that important in the short term. But, I know folks in tech who have moved temporarily to states like Goergia, Florida, Texas etc. And, I also think there is a lot of tech investments in these areas that could bring job growth in the long term. I shortlisted the above cities based on research I did. But, open to other suggestions on markets I can look into as well. 

@Amy Kendall - I don't have familiarity with any of the above mentioned markets except Austin. That's one of the reasons why I expressed concerns over not being able to visit any of these places. I used to work in Austin for a bit. I haven't reached out to any property managers, yet. But I think that is a great idea. I will. Are there any property managers/property management companies you recommend ?

@Tony Tai - That is awesome. DM-ing you ! 

[Daniel Haberkost]

@Priyaa Kalyanaraman there really aren’t any bad areas in town but the zip codes I like (for many different reasons) are 80917/80918/80909/80907/80915.

A lot of people will talk about the desirability & future potential of 80903/80904/80905 (and there’s a lot going on in those areas) but I really don’t like the tenant base and the older houses. Too many issues that I don’t want to deal with however, there’s lots of potential there as well.

[Craig Curelop]

@Priyaa Kalyanaraman - I moved from San Francisco to Denver in 2017, started investing in real estate and never looked back! Three years and (almost) four properties later in Denver and I am financially independent. 

The process isn't as hard as you think as long as you have the right team of people and are willing to make some sacrifices over the next couple of years. 

[Danny Webber]

find some good agents in the areas you want, get financing ready and pull the trigger when you find a deal

[Jordan Moorhead]

@Priyaa Kalyanaraman I am having some people come and visit Austin right now with no issues. You're just required to wear a mask pretty much everywhere but I'm closing on a duplex this week here.

[James Carlson]

@Priyaa Kalyanaraman

Forget buying an investment in Denver or Colorado Springs. Just move out here and work remotely. Weather's better, nature's amazing, and you can afford so much more than you can in the Bay Area. 

You're right about Denver being a tough market to cash flow in. Same with Colorado Springs, but like @Daniel Haberkost, we're investing in both markets for the long run. The dynamics -- job growth, low unemployment, diverse economy, quality of life, low inventory -- point to continued increases in home values, so we like that. 

I am one of those people that Dan mentioned that like those older areas (80903, 80904, 80905) in Colorado Springs. Yes, older homes, but look at the older homes in some Denver areas close to downtown -- the Highlands, Sloan's Lake, Five Points. If you bought there seven years ago, you're seeing hundreds of thousands in appreciation by now. Is that in store for these areas of Colorado Springs? There's a lot of development going on around there, and that's where I want to be. I think the areas Dan's talking about are good too. But I worry about newer build areas out east with so much land out there to continue to build. There's not a limit on areas to construct. Whereas on the west side and downtown, you're buying into a limited quantity. 

Anyway, more details than you wanted. Good luck!