Help Picking an OOS Market- My story below

[Shaylynn O'Leary]

I need help picking an OOS market. Let me tell you my back story. I live in Central Oregon where the median home price is approximately $725k. I have recently obtained a property off market that we’re flipping and wanting to reinvest most of the proceeds into an OOS market that is more affordable. We are not interested in owning rentals in Oregon, only flipping.

Our goal is to have a small but mighty portfolio, much like Chad Carson’s model he describes in his book and podcast. We want to use proceeds from our flips here in Central Oregon to acquire and eventually pay off properties in a more affordable market.

We prefer multifamily properties where we will do a mix of MTR & LTR, but also open to SF. The properties do not have to cash flow a significant amount (although I wouldn’t hate that) they just have to sustain themselves as we have three incomes between us and not looking to quit our W2’s to live off cash flow.

My problem: I’m having a hard time picking a market that meets my goals. Some markets I have considered are:

• St. Louis, Mo
• Kansas City, MO
• Indianapolis, IN
• Dayton, OH
• Raleigh (area), NC

I would appreciate any insight and time anyone is willing to give. Thank you.

[Nicholas L.]

@Shaylynn O'Leary

I think I may have posted this in response to you in another thread a while back, but here goes again.

If you pick a random "low cost" market like the ones you named, don't know anyone there, don't set up a network, buy random properties, and turn them over to people you've never met to manage, you will most likely lose money.  I'm not saying that's your plan, but we just see so many examples of this happening in the forums.  Random example from this week:

Sell at a loss or rent at a loss

On the other hand, if you are willing to put some time in by traveling to the market, spending time getting a network set up, screening dozens or even hundreds of properties, and taking the time to get set up right, you increase your chance of success.  I just never see anyone willing to do that.  They get entranced by the supposedly low prices and buy just to buy.

Also, I know this wasn't your question, but it seems like you've ruled out Oregon.  Too expensive?  The upside of the higher priced markets is a higher barrier of entry which keeps a lot of people out. If you want to do MTR, that gives you a shot at increasing your rents and supporting ownership of a higher priced property.  

Conversely, anyone can buy a random house in the midwest, underestimate capex, and... lose money.  Higher rates and tremendous demand for inventory by both owner occupants and investors have resulted in an inventory shortage all over the US - in Oregon and in Ohio.

Hope this gives you some things to think about.  Not trying to be discouraging, just realistic.  Happy to dialogue more.  I invest primarily in Pittsburgh and if you asked me I'd probably try to talk you OUT of investing here unless you're willing to follow the steps I outlined about getting situated.  =)