Rental Property Investor · Boise, ID · Member since 2017 · 228 posts · 180 votes
I live in a (now) expensive market which is seeing significant appreciation and this in turn is making it increasingly harder to find cash flow. My goal is to be financially free, i.e. able to live solely off the cash flow from my properties within 8 years. While I don’t have debt other than the mortgage on my current primary residence, I don’t bring in a ton of money, either, so throwing down $100k down payments are out, at the moment! Due to current family situation, moving and house hacking isn’t possible, so that’s out.
For those much more experienced and wiser than I am, do you think it would be better to still focus on my local market (considering I know the area and local economy, can do some of the work myself to save cash on a rehab and can utilize local and existing relationships) and find a way to create cash-flowing deals to achieve my goal, or look for a cheaper market with a lower cost-barrier to entry where cash flow is already more prevalent? If you believe staying in my local market is the way to go, why, and if I should focus elsewhere, why do you suggest that as well?
Thanks in advance for anyone and everyone willing to share some knowledge, wisdom and advice with me, it’s much appreciated!
@Jason Bohling My area has seen great appreciation and huge rent increases. However, the overall CoC and cash flow have not quite kept up as well as they might have because of this.
I’m still choosing to invest in my area because of my proximity to larger metropolitan areas and a high quality of life. I’m particular about which properties I will purchase in that I make sure they are upscale by my standards (I would live in them), and I believe their rents will continue to be solid and enough to cover my bills even if there is a market downturn.
I think you can find good investments that will work towards your goal of retirement in a few years time because this is the same goal I myself am also working toward.
I have a fairly low earning hourly wage W-2 job but it does support mortgages that have units with leases in place which my bank counts towards my income.
I’ve added 7 doors this year already and have an offer in currently on a 2 unit that if I purchase, I will ultimately turn into a 3 unit because it will cash flow $600 more a month in exchange for about $10,000 worth of work.
So it’s up to you if you stay in your market and buy more expensive units or move out of state and buy less expensive. It can be done either way.
The overall cost of the house will determine the down payment and in turn affect how many you can buy (along with your borrowing limit), but there is more to it than that. You want a quality house and a good house that is more expensive can net you more in the end than two cheap homes. You already mentioned location for managing it on your own, but there are also turnover costs and the quality of the tenant to think about.
You said you don't bring in a ton of money and at the same time you want to be able to live off the cash flow within 8 years. The amount of cash flow from a single property isn't a lot (eg $100/door), so if moving and renting rooms isn't an option (that could let you live for free), then it might be tough. One of your best options is to find a duplex, live in half and rent the other half. Done right that should decrease your living expenses and allow you to save more quickly for your next place. You can also put less money down.
I would look at it this way. Why do people invest in the stock Market? Do you care more about what part of the country a stock is from or do you care more about the rate of return on that stock? That's the question you need to ask yourself. If you can answer that then you have your answer. I hope that helps and best of luck! BTW, KC is a great market to Cashflow if you like double digit cap rates and COC returns.
@Jason Bohling My area has seen great appreciation and huge rent increases. However, the overall CoC and cash flow have not quite kept up as well as they might have because of this.
I’m still choosing to invest in my area because of my proximity to larger metropolitan areas and a high quality of life. I’m particular about which properties I will purchase in that I make sure they are upscale by my standards (I would live in them), and I believe their rents will continue to be solid and enough to cover my bills even if there is a market downturn.
I think you can find good investments that will work towards your goal of retirement in a few years time because this is the same goal I myself am also working toward.
I have a fairly low earning hourly wage W-2 job but it does support mortgages that have units with leases in place which my bank counts towards my income.
I’ve added 7 doors this year already and have an offer in currently on a 2 unit that if I purchase, I will ultimately turn into a 3 unit because it will cash flow $600 more a month in exchange for about $10,000 worth of work.
So it’s up to you if you stay in your market and buy more expensive units or move out of state and buy less expensive. It can be done either way.