New investor here looking to make first investment.

[Rahul P.]

Hello to everyone!

I have been following up the content here and on youtube which has been really insightful. I am finally ready to take a plunge on my first investment. But I am still not decided on strategy or market. I am currently divided between straight up SFR or use a BRRRR.

I am not looking to house hack as I am already well established in Phoenix metro.  My main objective is generating a cash flow which pretty much eliminates local market.  I have been researching on  several markets but not yet close to deciding on one. 

Any or all suggestions are welcome. I am open to connecting with experts and also growing my network. 

[Mason Weiss]

Hey Rahul, I'd encourage you to go to some local meetups as well and connect with investors in person. I know plenty of my client's are cash flowing here in Phoenix it just depends on your strategy. Feel free to reach out and we can connect further. 

[John Mason]

Welcome to Bigger Pockets ! You have come to the right place to begin your investing journey.

Have you looked into attending local meetings and joining Facebook groups?

[Robin Simon]

Quote from @Rahul P.:

Hello to everyone!

I have been following up the content here and on youtube which has been really insightful. I am finally ready to take a plunge on my first investment. But I am still not decided on strategy or market. I am currently divided between straight up SFR or use a BRRRR.

I am not looking to house hack as I am already well established in Phoenix metro.  My main objective is generating a cash flow which pretty much eliminates local market.  I have been researching on  several markets but not yet close to deciding on one. 

Any or all suggestions are welcome. I am open to connecting with experts and also growing my network. 

Welcome to BP - rates have finally come down a bit so that cash flow is now possible again in some markets for classic turnkey rentals but still have a bit of a ways to go - if you have the ability to BRRRR - that is going to likely really be the better strategy to get a more robust cash flow at the start

[Wale Lawal]

@Rahul P.

To make a successful single-family rental (SFR) or BRRRR investment, consider your goals, risk tolerance, and hands-onness. Choose a market based on affordability, population growth, job opportunities, landlord-friendly states, and BRRRR potential. Build a strong local team in each market, including real estate agents, property management professionals, contractors, and lenders. Network with investment groups and podcasts for additional resources. Narrow down top 1-2 markets based on cash flow, ease of entry, and appreciation potential.

Good luck!

[Rahul P.]

Quote from @Mason Weiss:

Hey Rahul, I'd encourage you to go to some local meetups as well and connect with investors in person. I know plenty of my client's are cash flowing here in Phoenix it just depends on your strategy. Feel free to reach out and we can connect further. 

 Hi Mason 

Thanks for responding, I will reach out to you to connect further. 

I might be very wrong here, but entry point into the local properties in phoenix metro seems to be very high which makes cash on cash return seems to be very low or difficult. 

Thats why I was considering markets which might have lower barrier to entry probably capped at about 300k 

[Rahul P.]

Thank You  @Wale Lawal and @Robin Simon 

Yes I am leaning towards BRRRR, though still figuring it out as to criteria of how much distressed a property should be or how to determine how much work it needs. I am also not sure yet on if it needs to be SFR or a small multifamily.

[Mason Weiss]

Quote from @Rahul P.:

Quote from @Mason Weiss:

Hey Rahul, I'd encourage you to go to some local meetups as well and connect with investors in person. I know plenty of my client's are cash flowing here in Phoenix it just depends on your strategy. Feel free to reach out and we can connect further. 

 Hi Mason 

Thanks for responding, I will reach out to you to connect further. 

I might be very wrong here, but entry point into the local properties in phoenix metro seems to be very high which makes cash on cash return seems to be very low or difficult. 

Thats why I was considering markets which might have lower barrier to entry probably capped at about 300k 

 Anything can cash flow depending on how much you put as a down payment. Barrier to entry is higher but that can make the appreciation more lucrative than other states in the midwest. I always think about it this way, if you are buying cheap houses it is because people don't want them and don't want to live in that location. Sure your rental numbers might be better for your cash on cash, but the difference between 4% appreciation and 2% appreciation over 10 years will have a MUCH bigger impact on your investment return.

[Melissa Johnsen]

Hey @Rahul P.,

Great REI props can be found in various markets, particularly in the Midwest and Southeast regions of the U.S. These areas not only feature affordable purchase prices for many investors but also offer turnkey homes—either newly constructed or fully renovated—ready for tenants. These properties often have systems with about ten years of life left and are situated in neighborhoods with appreciating property values and rental income.

The cash flow from a property largely depends on your down payment. A lower down payment might lead to a break-even scenario or even negative cash flow. However, some investors embrace this strategy, especially if they want to minimize their upfront capital and plan to refinance within a few years—particularly with ongoing discussions about the Federal Reserve potentially lowering interest rates into 2025. The good news is that with the right approach, you can also achieve positive cash flow in these markets.

Ultimately, success in real estate investing hinges on selecting a growing market, a desirable neighborhood, and building a strong support team. Navigating this journey alone can be time-intensive, so partnering with a reputable team can make all the difference. That is what our team at Rent to Retirement has been doing for the past decade with BP. I'm here to answer any questions you may have about analyzing markets or getting started. Most importantly, choose a market that aligns with your investment goals for the best results!

Wishing you all the success!

Melissa Johnsen
Rent to Retirement Investment Strategist

[Noah Wright]

Hey Rahul, welcome to the world of real estate investing! It sounds like you're doing your research, which is great. Deciding between an SFR or a BRRRR strategy can really depend on your risk tolerance and the type of cash flow you're aiming for.

The BRRRR method can be great for long-term equity building and maximizing your returns if you're up for a more hands-on approach, especially in markets where property values allow for renovations that increase value. On the other hand, an SFR might offer more stability with less intensive management.

If cash flow is your primary goal and Phoenix isn’t making the cut, you might want to explore cash flow-heavy markets in the Midwest or the South. Places like Indianapolis, Memphis, or even parts of Texas could be worth looking into. I’d also recommend checking out markets with strong rental demand and lower entry points.

I specialize in DSCR loans for investors, so if you want to explore financing options that don't rely on traditional income verification, I'd be happy to chat and help you get started.

Looking forward to seeing where you land!

[Andrew Syrios]

Welcome to BiggerPockets Rahul and best of luck investing!

[Sydney Howard]

Welcome! Happy to help in the Los Angeles, CA market. 

[River Sava]

Hey Rahul, 

Welcome to BP! BRRRRs are a great way to build appreciation and cash flow, espeically in the market you're looking into. Good luck as you continue your investment journey and would love to connect!

[Wale Lawal]

Quote from @Rahul P.:

Thank You  @Wale Lawal and @Robin Simon 

Yes I am leaning towards BRRRR, though still figuring it out as to criteria of how much distressed a property should be or how to determine how much work it needs. I am also not sure yet on if it needs to be SFR or a small multifamily.

BRRRR is a strategy to buy distressed properties at a discount, renovate them, and refinance them based on the new value. To determine rehab costs, calculate the After Repair Value (ARV), total rehab costs, purchase price, and other expenses. Single-Family Homes (SFR) offer lower purchase prices, easier management, and better cash flow, while Small Multifamily (Duplex, Triplex, Fourplex) offer better cash flow, economies of scale, faster scaling, higher purchase price, complex financing, and tenant management.

Good luck!

[Todd Anderson]

Rahul,

Welcome to the BP community.  This is the place to find all the information necessary to make that first plunge.  

@Wale Lawal,  you are right on point on area.  That is a great list of considerations for what most investors are looking for.  

As for the strategy,  I know all the hype is behind Brrrr,  but this comes with a lot of risk for the first investment.  Many of the investors I talk with have themselves or know someone who has tried the Brrrr and ran into one of the many stumbles that this strategy has.  Not to mention trying to do this from a distance.  Unless you are in the area or have a team that you know can handle the entire proses, be carful.

Many of the investors I work with find, you can find a new construction investment, in an area of obvious appreciation, that cashflows day one.  You have less repairs and own a property for the best years of its life.  Then if you can find this with a turnkey provider that has veneers for you to use,  the investment is much less risky and can have some similar returns over time.   

Please connect if you would like more detail.

Best of luck.

[Jackson Harris]

Hi Rahul, welcome to BP! 

I'm an investor and agent myself in the Phoenix area. There are definitely areas you can find cashflow I think it really depends on the strategy you take and the area. 

Happy to connect and talk about what my partner and I do to generate cashflow on our properties locally.

[Jesse Dominguez-Castelan]

Hey Rahul. I come across different properties that would work for either of those two strategies. If you're not against learning about them give me a shout, would be awesome to connect.