OOS investing -- cities with appreciation & low real estate taxes

[Joe Lee]

Hello! 

I would like to get into my first real estate investment and have been doing some research. It seems finding cash flow deals is slim-to-none, unless I'm looking at war zone areas where entry price is low but rents are high, and so I've pivoted to focusing on appreciation with the expectation that rent would cover all expenses + a little extra. With my focus shifted, I'm trying to find cities/towns that fit certain criteria. 

1. high growth and appreciation

2. max spend of around 200k

3. low, or at least u.s. average, property taxes

I'm looking for turnkey but prefer not to buy someone's flip

I've seen cities like Boise, Chattanooga, Jacksonville thrown around but I'd like to know if there are any specific neighborhoods within cities that I should be looking at. Please let me know if anyone has any suggestions! I am literally open to anywhere in the u.s. 

Also appreciate any general advice for a first time investor.

Warm regards,

Joe

[Josh Ledbetter]

Hey Joe - My wife and I bought 4 single family rentals in and around Chattanooga within the past 6 months and have several future AirBnBs under contract. We have noticed that the more expensive rentals are in HIGH demand and perform better for us, so our focus might be a touch different than yours. 

If you want to be at or around $200k, I'd look at Cleveland, TN or Flintstone, GA. Great rental markets and should keep you out of the war zones. 

Happy to help walk through your strategy and how we have helped others here in Chattanooga. Good luck with your search!

[Michael Dumler]

@Joe Lee if your main priority is for the asset to appreciate, ideally you should be targeting submarkets 30 to 45 mins away from major metropolitan areas. Many experienced investors will use the hockey analogy that you should, "skate to where the puck is going to be, not where it has been." Simply meaning, you need to buy where things are "up and coming." This points to the importance of performing your due diligence, specifically by researching key indicators such as population growth, job growth, major company relocations/establishments, local policy, etc. Above all else, when it comes to investing out of state, you must work with vendors that know what they're doing. You could be in one of the hottest performing investment markets, but that doesn't mean much if your team is lacking in skill, knowledge, and work ethic. Hope this helps! 

[Ethan Peacock]

Athens, Sweetwater and Madisonville, TN areas are growing now and are expecting major growth within the next two years. It would be a great(and cheaper) market to get into.

[Chris Davidson]

@Joe Lee with a max spend of 200k Boise is going to be out of the picture (median sales over 500k). For max 200k purchase and rehab you are going to be midwest or SE. Take the time and hop on redfin, zillow or your choosing search engine and see what properties are going for and go from there. It's been awhile since I have been in Chatt, but you probably wont be in an area you want to be in Chattanooga, but instead will have to go to surrounding more rural areas for 200k. 

Best of luck but save yourself some time and spend 5 mins seeing if there are houses in the cities you can afford, if not move to the next market or work on increasing the budget if you want to be in that market.

[Joe Lee]

Quote from @Josh Ledbetter:

Hey Joe - My wife and I bought 4 single family rentals in and around Chattanooga within the past 6 months and have several future AirBnBs under contract. We have noticed that the more expensive rentals are in HIGH demand and perform better for us, so our focus might be a touch different than yours. 

If you want to be at or around $200k, I'd look at Cleveland, TN or Flintstone, GA. Great rental markets and should keep you out of the war zones. 

Happy to help walk through your strategy and how we have helped others here in Chattanooga. Good luck with your search!

Thanks! I'll definitely do some research on the neighborhoods you mentioned. Will also DM you so we can connect!

[Joe Lee]

Quote from @Michael Dumler:

@Joe Lee if your main priority is for the asset to appreciate, ideally you should be targeting submarkets 30 to 45 mins away from major metropolitan areas. Many experienced investors will use the hockey analogy that you should, "skate to where the puck is going to be, not where it has been." Simply meaning, you need to buy where things are "up and coming." This points to the importance of performing your due diligence, specifically by researching key indicators such as population growth, job growth, major company relocations/establishments, local policy, etc. Above all else, when it comes to investing out of state, you must work with vendors that know what they're doing. You could be in one of the hottest performing investment markets, but that doesn't mean much if your team is lacking in skill, knowledge, and work ethic. Hope this helps! 

That's a good point! Definitely will look into tertiary markets and do my due diligence. 

[Joe Lee]

Quote from @Ethan Peacock:

Athens, Sweetwater and Madisonville, TN areas are growing now and are expecting major growth within the next two years. It would be a great(and cheaper) market to get into.

 Thanks, Ethan!

[Joe Lee]

Quote from @Chris Davidson:

@Joe Lee with a max spend of 200k Boise is going to be out of the picture (median sales over 500k). For max 200k purchase and rehab you are going to be midwest or SE. Take the time and hop on redfin, zillow or your choosing search engine and see what properties are going for and go from there. It's been awhile since I have been in Chatt, but you probably wont be in an area you want to be in Chattanooga, but instead will have to go to surrounding more rural areas for 200k. 

Best of luck but save yourself some time and spend 5 mins seeing if there are houses in the cities you can afford, if not move to the next market or work on increasing the budget if you want to be in that market.

Thanks for the advice, Chris! Yeah, I just threw those cities out as examples - totally understand that they may probably already be well saturated at this point. I'll certainly have to expand my search. 

[Lane Kawaoka]

Birmingham, Atlanta, Indianapolis, Gary (IN), St Louis, Huntsville, Phoenix/Tempe/Mesa, Kansas City, Memphis, Little Rock, Indianapolis, Harrisburg (PA), Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

[Samad Javed]

Check out towns in north west Indiana! They may fit your criteria...low taxes, rent ready homes under $200K, and rental demand.

[Adrienne Green]

@Joe Lee Congrats on getting into the real estate investing game!  I specialize in the Chattanooga market.  It's getting competitive in the sub $200k market here for rent ready houses.  I'd suggest focusing in the North Georgia portion if that's your limit, as prices tend to be a little lower there.  Rents drop proportionally, so overall your returns should be the same.

As a new investor, I'd caution you to keep in the mind the big picture. This is something David Greene touches on in a lot of his recent podcasts- the REI market is changing, that doesn't mean it's getting bad. Just keep the long game in mind, and don't get fixated on home run returns in the first year!

Best of luck in your REI journey!

[Bonnie Low]

You won't find anything in Boise for a max price of $200k, unless you mean that's your max down payment as opposed to max purchase price. Even mobile homes in trailer parks are going for near or above that in Boise. Cash flow can be tough at today's prices and cities that have very low buy in often have surprisingly high property taxes as a percentage of overall operating expense, which eats into your cashflow pretty substantially (Toledo OH, for example). You may need to work with a wholesaler to find you off market deals in order to hit all of your criteria or search for those off market deals yourself. You might also start with house hacking. It could potentially tick off most if not all of your criteria.

[Manco Snead]

Just a side note. Don't know your RE history, but I would highly recommend not buying a rental out of state as your first property. Your first one is complicated enough when it's right down the street. Out of state always has the potential (on the worst case end of the spectrum) to be a nightmare. And the nightmare will be the result of poor property management, if you're planning on hiring it out. You'll get a ton of vital experience if you can buy and manage your first rental when it's in your home town.

Also notice that many area recommendations on these forums are from realtors who are from these same areas...

[Dan H.]

Quote from @Joe Lee:

Hello! 

I would like to get into my first real estate investment and have been doing some research. It seems finding cash flow deals is slim-to-none, unless I'm looking at war zone areas where entry price is low but rents are high, and so I've pivoted to focusing on appreciation with the expectation that rent would cover all expenses + a little extra. With my focus shifted, I'm trying to find cities/towns that fit certain criteria. 

1. high growth and appreciation

2. max spend of around 200k

3. low, or at least u.s. average, property taxes

I'm looking for turnkey but prefer not to buy someone's flip

I've seen cities like Boise, Chattanooga, Jacksonville thrown around but I'd like to know if there are any specific neighborhoods within cities that I should be looking at. Please let me know if anyone has any suggestions! I am literally open to anywhere in the u.s. 

Also appreciate any general advice for a first time investor.

Warm regards,

Joe

 Entry price of $200K implies that it has not had high appreciation and growth.  To meet your criteria you need to identify an area that has not had high appreciation/growth but is expected to in the future.  

These are speculative, but here is somethings to search for: 1) A new national park/monument that takes most of a day to experience (something like smokey mountains, Yellowstone, yosemite, Joshua Tree, Bryce, Zion, grand canyon, etc, but new) 2) a newer university in the area that has large funding allocation (UC Merced: By far cheapest area with a UC university) 3) new tourist attraction such as presidential library, amusement park, etc. 4) a tourist attraction that may not have hit its peak (Havasupai popularity has grown at stupid pace, Antelope canyon is crazy popular but Buckskin is not and is in many ways superior, etc.).  5) A city that for some reason has depressed values.  In my area depressed values are still far in excess of $200K but the two I would reference for my area are Imperial Beach (cheapest beach homes for a few hundred miles) and Chula Vista.  Chula Vista is the only city I can think of were the homes further from the coast cost more than the ones closer to the cost.  This is because homes near coast are old and small.  You can do something about old and small, but you cannot do anything about location.  Chula Vista already has approved budget for improving the coastal area.  Look for these types of cities in the price range you seek (Imperial Beach and Chula Vista are not that price range).  6) an area that transport situation has improved such as having a new or improved freeway leading to large metro area that used to take 1 to 1.5 hours to get to but now will take half as long.

Good luck

[Drew Sygit]

You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/...

[Austin McClain]

Look in Ohio, specifically Columbus. A lot of new companies are moving their headquarters here to bring new jobs and appreciation. Plus, you can find deals under $200k. 

[Nick Giulioni]

Hi Joe, welcome to the real estate industry! I had my first turnkey in Indianapolis. Now, I have more than a hundred doors. I would love to help/share my experiences and chat with you more if you're interested.

[Ethan Peacock]

Quote from @Joe Lee:

Quote from @Ethan Peacock:

Athens, Sweetwater and Madisonville, TN areas are growing now and are expecting major growth within the next two years. It would be a great(and cheaper) market to get into.

 Thanks, Ethan!

 Anytime!

[Gloria N Gear]

Research the Indianapolis area -- it checks the boxes for what you are looking for.  Turnkey is harder in this market nationwide because it is so competitive for homeowners as well.  Think about the ugly houses - you can build a team that will help you with cosmetic or minor fixes and have a better chance of making the numbers work.

[Addison Watson]

Population trends indicate that people are more interested in moving to states with warmer year-round climates. You see this most notably with explosions in Texas, Florida, and Arizona. The appreciation in the main markets of those states looks strong, however, your buy-in amount is likely too low. Consider other southern states with lower entry prices: Alabama and Mississippi for example. You'd be shocked at what you can buy for $200,000, plus, the lower taxes will be a large benefit in the future. The other obvious choice is a midwest city: Indy, Cleveland, Cinci, etc. 

You've got to be the one to do the leg work on a particular market. Not many investors will tell you which submarket of a market to look--it would only increase competition (assuming you are in the same asset class). Realtors will put you onto a certain submarket but it might not be investable. My best advice, find a place you are familiar with or have solid contacts. Explore that market and visit. You'll walk away with a great idea of where to invest in that market.