New Investors advice: Dallas/ Rochester/ Houston ?

Question

Hello BP community! I'm a new investor based in the San Francisco Bay Area. I'm planning to buy and hold 2-3 out-of-state properties next year for long term investment and would appreciate some professional advice. Currently, I'm considering Dallas, Houston, Rochester, and Sacramento.

1. Dallas and Sacramento might offer better appreciation potential, but there's a risk of negative cash flow. I need to thoroughly evaluate deals, especially with property management and current interest rates.

2. Rochester shows strong cash flow, especially for multi-family properties, but I'm concerned about rehab costs and minimal appreciation, questioning if it's a suitable starting point for a beginner.

3. Houston falls in between, offering relatively easier access to cash flow deals compared to Dallas and some appreciation potential. But I personally believe Dallas may show better economic growth these years

Which area do you think is more beginner-friendly for remote investing? Any other areas you recommend? Thanks for all your help and happy holidays!

Andrew Postell · Answer

@Ethan Li this is a very common topic of discussion - which city/town is better for me to invest in.  And it's ALWAYS the same answer...which city/town do you have people that you trust?

I'm saying this as a 15 year, out-of-state investor - my recommendation is to ALWAYS choose whatever city you have the most trustworthy contacts in.  Keep in mind that you may never see your asset.  That's an ENOURMOUS amount of trust/money to put into a stranger's hands.  What I mean here is that if you know someone in a different city...but that city may not have as good as numbers as this other city...then stick with the city where you know people.  One wrong move, one wrong contractor, one wrong vendor will erase any "benefit" one city has over another.  Your network is the most important piece for any potential returns when you invest out of state.

So, which area do you have good people in that you trust?

Scott Scoville · Answer

Hey Ethan, I'm an investor and real estate agent in Sacramento. I'm mostly buying for myself and my investor clients, "value add" deals. Rents remain high, vacancies remain low do to a lack of inventory, and opportunities in Class A or B neighborhoods to acquire value add properties by adding square footage and/or beds/baths are a great way to succeed in the Sacramento market. Would be happy to chat more about this if you're interested.

Donato Callahan · Answer

For folks who are analyzing at least two deals a week, yes. They announced recently that their new version is adding MLS Access, Off-Market Properties, Wholesale leads for free to all thier elite users on the platform. I look at a lot of multifamily in a few different markets so it's definitely worth it to me in the cost savings alone for all the different subscriptions I can cancel by just having this one. Biggest value is the time. I don't like jumping from site to site to site.

Carini Rochester · Answer

@Donato Callahan Nice maps. BrightInvestor. Are you finding it worth the $80-100/ month price?

Donato Callahan · Answer

I'm a fan of Rochester. 2 Bedroom rent growth has exploded by 32% over the past few years. At the same time, the population has been relatively stable but taken a big jump in the past few years as well. Then, income is up almost 30% over the past decade. That's a lot to love about the market.

Justin Vogelgesang · Answer

Is there a particular reason you're only considering those three locations? With appreciation in mind and wanting the highest return on investment, I would recommend Fort Worth, or some of the mid-cities as an alternative. Like previously mentioned though, if you have a trustworthy network established somewhere already then that should certainly be one of your top choices.

Cameron Tope · Answer

I couldn't agree more with Andrew - the best area to invest is the place where you have a competitive advantage. The biggest advantage you can have is a rockstar team.

Best of luck!

Mark R. · Answer

I can't comment on Rochester/Sacramento.  Texas is pretty landlord friendly. Dallas and Houston are pretty straight forward for single family. Are you more interested in multifamily?  "Appreciation potential" is a hot topic, I've seen some of the most sophisticated analysis and forecasting a few years out is just a big guess. We continue to see job growth and population growth in many places of TX.  At a high level, you need to be aware of foundation issues in Dallas, and flood issues in Houston.

New Investors advice: Dallas/ Rochester/ Houston ?

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