Which geographies to invest in for buy-and-hold

Question

I am from the San Francisco bay area, where prices make buy-and-hold investing very challenging.  I am interested in investing out of state, in locations where it is more practical to find stuff that can become cash flow positive.  Basically, places that put the 1% rule within reach.  However, finding these geographies seems daunting, as there are 100s of communities that could potentially fit the bill.  Any advice on how to efficiently find or analyse geographies for cash-flow-positive, buy-and-hold investing?

Joan Pla · Answer

@Adrian Kar , fellow Angeleno here :) We are on the same page, I haven't invested either but one constant that I noticed from experienced investors, books, podcasts, etc.. would be this:

1 - Find a lender in the area you want to buy  and ask if they have any recos for agents.

2 - Find an agent that can send you leads  and ask if they have any recos for property managers

3 - Find Property manager and ask if they have any recos for contractors.

The only way I can think of buying in LA is with an FHA loan and moving in but don't expect positive cash flow in many of the properties since rent control keeps many rents way below market rent. Just my two cents.

Ali Boone · Answer

Well I always try to start as simple as possible- checking out where other people are already investing. It just makes the starting point less daunting. Like I can tell you that I'm working with folks buying for cash flow in Chicago, St. Louis, Cleveland, Philly and Indy & KC right now. Other people on here may mention other markets. If you're just trying to find some good cash flow and aren't particularly attached to where it is, just hearing where other folks are buying might solve the whole thing for you. Obviously choose a market that feels good for you, but at least a starting list can give you some direction.

This is kind of an old article, but may give some more ideas-

https://www.biggerpockets.com/renewsblog/out-of-st...

A lot of it too will depend on what you want to buy and what you budget is. And then if you want to do all the work yourself or go the turnkey route...if you do all the work yourself you probably don't want to focus on a city that requires 3 stops on a long airplane trip to get to.

Hope that helps?

Adrian Kar · Answer

This is the EXACT question I wanted to ask also. I haven't invested at all, but want to work the 1% rule too. I live in LA and this city is impossible. A question is, once you find a city, what's the next step? A flight out there? Reach out to agents? Would be awesome if someone had a step-by-step process of someone doing this for the first time!

Joan Pla · Answer

Hi Phil, I know exactly what kind of answer you are looking for and even though I haven't invested yet on any property I can share with you and everybody else some research I did when trying to find good markets to invest in. My criteria was simple "Where are millennials moving to?" and then see what kind of property taxes the cities and states had.

From the lists on the image attached, then I'd narrow it down to areas less prone to natural disasters.

This was a small exercise I did, and I am sure people will agree and disagree with many of the places but hopefully, it's a starting point for a debate and we get more experienced investors to give us their two cents.

Phil Sharp · Answer

Thanks, @Christopher Lee and @Justin Beides.  I have actually already read David Greene's book - it was very helpful.  But it did not offer much advice on how to pick the out-of-state markets to invest in.  That is my question.   I know it is theoretically possible to get anything to cash flow if the numbers are right, but the premise of David's book is that there are places where it is nearly impossible (like where I live in California) and places that are much, much more favorable (where the 1% rule is common and price-to-rent ratios support buy-and-hold).  How do I go about finding these much easier places to invest, as there are literally 100s of communities across the US that I would need to analyse.  Are there any tools or websites that could help me figure out which cities / geographies are prime candidates?

Christopher Lee · Answer

@Phil Sharp Yes you can make any property cash flow positive if the numbers make sense. But don't let that be your deciding factor. If you're in a warzone area where all you get are headaches, you've bought yourself a job and not an investment. If you're in an area where people aren't looking to rent you're going to have a much bigger problem.

David Greene's book suggests finding the people that know about the markets you're looking to invest in and asking them about the finer details Justin mentioned in his post above. Then from there you'd do your due diligence to check that information.

If you haven't already checkout Podcast 257 it talks all about investing long distance.

Best of luck in your investing journey.

Justin Beides · Answer

@Phil Sharp Hey man! Nice to meet you and welcome to BP! I'm fairly new here myself, but I'll help best as I can. There may be 100s of communities that can fit that 1% rule and that's the beauty of out-of-state investing! Options have the potential to be limitless. Technically you can make any property cash flow positive if you work the numbers right in a deal to make the deal profitable. It's just a matter of whether or not the seller would accept it and their needs and reasons for selling. Locations with minimal crime rate, good schools in the area, primary source of economic income(s) , the size of the house (# of bedrooms/bathrooms in the house) are all factors to consider in terms of getting tenants to stick around long-term. The best bet is to not look at the process in one grand scale as all the terminology, factors, running those numbers, etc. as to what makes an area ideal to invest in can be incredibly overwhelming if looked at as one giant beast. Just take things one day and step at a time based on the current challenge in front of you. For long-distance real estate investing, definitely check out David Greene's book "Long-Distance Real Estate Investing" which will definitely help you with what you're looking for to start and check out the bigger pockets podcast when commuting to work. Hope this information all helped out in some way! Best of luck brother. Any other questions just holler. I'll do my best to help.

Which geographies to invest in for buy-and-hold

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