buying multiunits out of state. Where are there still good deals?

Question

I’m located in denver and been investing since 2012. Have a good number of units under my belt. The market is too overheated here and want to venture out of state. I just can't decide the best market. I love to self manage but denver is not profitable at these prices.  I prefer great duplex and  4 units. I like b class properties with a young professional demographic for renters. They are easy on property and typically pay rents with out much problem. Id like the strongest returns possible with low vacancy and to stay away from areas that get vandalized etc.

I have considered Minneapolis, Ohio, Chicago, and Michigan because price points are reasonable. But I don’t have confidence yet where to go. The returns look so great on some deep discount deals but fear I would pay for it with vandalisam and high vacancy rate.

What resources do you recommend i look to find the right location.

Any areas that you can recommend as a great fit. Also in the market I pick a strong team will be essential. A maintenance man, property manager and vendors. If you recommend an area if you have a vendor or resource please share also.

Thank you in advance!

Geordy Rostad · Answer

@Josh Gold

If you haven't read David Greene's book on out of state investing, that might be a good place to start.

https://www.biggerpockets.com/store/long-distance-real-estate-investing-ultimate

First hurdle you'll need to overcome is the need to self-manage. It would be pretty difficult to scale your business beyond a certain point if you were trying to do hands-on management. Best bet is to manage your managers.

I spent this weekend looking at Memphis, Oklahoma City, Kansas City, and some others. It's really hard to not be drawn in by the numbers there. I saw a duplex in Memphis for $23k that brings in $600/mo gross. Rents are low too! Something like that could be a good way to dip a toe into out of state investing. The challenge would be finding a property manager to do it for 10% and getting a loan on it if you desired.

Alyssa Dyer · Answer

I can speak for OKC's market. The numbers are right here.

You can lock down a solid C class property for 60-80k. Rents hit the 1% ratio and taxes are only at about 1%. It boils down to $130-$200/month after all operating expenses and debt service on a loan you put 20% down on.

It's hard to beat the stability here. We're super insulated from the recession. No exciting peaks but no drastic drops. The population is steadily increasing, quality of life is good, cost of living is low. It's not a market to overlook.

Randall Weatherall · Answer

If you'd like to get some info on the current Memphis market and where we see it going in the future for some areas, let's connect.

In general: Memphis has a pretty dry market now, with most of the money being in heavy value-add opportunities that would be a big 18-month headache before it really gets moving.  There's a healthy dose of smaller units coming in but if they're half-decent, they're gone in no time with offers to spare because people love the returns here.  $20-25,000 door for a $450-500 rental (keep in mind, these are in areas/neighborhoods I normally wouldn't recommend to out-of-state clients) is appealing to just about anyone, right?!  On the other side of the coin, you can find units that are ready to hold with tenants that pay and you just set it and forget it all day long, but the issue that older investors in this market have is that the CAP on those isn't what it used to be because of an influx of newer buyers.  Our market has changed a lot in the last several years, but I believe that there's still money to be made as long as a buyer comes in with realistic expectations and a solid game plan.

Caleb Heimsoth · Answer

@Dennis M. I’d like some cake too.  Where’s the cake?

Amber Gonion · Answer

I noticed on your post that you were looking for good deals.  In Minneapolis there are certainly some good deals, that is all dependent on the advantages you bring to the table, (management experience, construction exp, cash, etc).   We like to find solid properties with potential.     Many investors are looking for properties that they can get for 30k-50k less than they are worth.   That is possible but usually comes with unknown issues that come up later.  Look for properties with hidden value 5 years down the road and will be in higher demand for rents and value.   With that in mind Minneapolis metro area is a great place to invest.  The area has always been much less affected during recessions and commanded higher rents due the diverse economy of the area.

Logan Freeman · Answer

@Josh Gold @Kurt Pauley KC is a great market for cash flow and not a “depressed” area by any means. Good locations still pulling 8-9 CAPs with solid population growth and other leading indicators. If you’re interested in KC plz feel free to DM me. Work exclusively with out of state investors-i agree, having boots on the ground is very important!

Alyssa Dyer · Answer

@Josh Gold cash flow per door in OKC is similar for SFH's and duplexes. However, getting duplexes priced right, right now is very hard. Many investors prefer multifamily and it's driving the prices up. 2 doors in one transaction is great, but waiting a year for the multifamily deal you're hoping for when you could have bought 2 cash flowing rentals at a great price, isn't what I typically advise in this market.

Dennis M. · Answer

So You want the strongest returns on your investment out of state with little to no headache renting in great areas with business professionals as tenants ! Any other requests while your wishing ? Look the best ROI is going to be in the Midwest in depressed c or d class neighborhoods. Sounds like You want your cake and eat it too . Ohio would be my pick of those mentioned

Josh Gold · Answer

For me multi units just are a better value. 2-4 units to carry a mortgage just reduces risk and greatly increases cash flow in my experience. single family never cashflow as strong for me. But will say the hedge funds swooping up all the multi family have killed the profitability in Denver not sure if that is similar elsewhere.

buying multiunits out of state. Where are there still good deals?

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