Hi everyone! My name is Rudi and I've recently moved to the US from Australia. I've got about $150,000 to invest in some buy and hold properties and looking for some advice. At present I'm considering: - Pueblo, Colorado - Garfield Heights & Maple Heights, Ohio - Montgomery & Huntsville, Alabama The reasons for these are that property is still fairly cheap (homes can be bought for under $60k) and returns seem to be around 15-20% gross depending on the home / market. I live in Colorado so Pueblo is the closest market to me but some of the above have even better returns. I'm not afraid of owning property out of state as i own real estate in Australia currently So, my question is, can anyone with specific knowledge chime in regarding the above and secondly, are there other areas around the country with similar opportunities that I should consider? Ideally i'd like to buy between 3-4 properties and then grow from there. Many thanks for your help! Rudi P.s. if anyone is interested in investing in Australia i'd be happy to help - i don't have knowledge of the US market but have about 15 years experience in Australia.

Hey Account Closed welcome to the US market! I can imagine it's a bit annoying to have to start over after knowing so much about your home market - but a lot of the principles will be the same so you're further along than most. You mention that you want buy-and-hold, are you considering turnkey at all? You also mention you'd like to be more hands-on than a syndicate, but it also sounds like out-of-state is going to hold more opportunities for you. I agree with posters that recommend only self-managing properties that you can lay eyes on regularly. In truth, even if you assemble a team of PM, contractors etc, being out of state and leading the process yourself just means more headache in general, though you can lock in an extra return point or two. There will always be some issue with one aspect of your team and you won't be able to be 'boots-on-the-ground' quickly to handle unexpected issues. Plus, each member of that team needs a cut of the pie which will eat into your margins. For out-of-state investors, turnkey can be a great middle ground. Full disclosure: I am the CEO of a turnkey provider in Birmingham, AL, but I promise not to sell you ;) However, I would encourage you to consider the Birmingham market if you're going to look at AL. We have fantastic jobs growth, employment rates among the best in the country for large metro areas, and a cost of living that is still lower than the national average. The University of Alabama at Birmingham and its teaching hospital are the second largest employer in the state, providing more than 18,000 jobs. We are also a great place for renters who work at the massive Mercedes Benz plant just west of the city. We invest only in solid B class homes with an average rent of $950 - which leads me to a quick point about your comment about C class and sub-$60k properties. I would second other comments here about the need to consider more than the ROI % when looking at cheaper properties. C and D class properties almost always have bigger maintenance costs and higher tenant turnover. In addition, depending on the area, you may be wasting your rehab equity because, even if you put $20k into a $30k property, it is unlikely that anyone who can afford to pay more than $50k for a property will pay that much to live in the kind of neighborhood where you find properties at that price point. This is even more true for D class properties (which, on paper, often show amazing ROI numbers). If you buy a $10k property, it doesn't really matter what you do to it, it will always be a $10k property in reality because no one wants to pay more to live in those areas if they have a choice about it. I would focus on buying a handful of high quality B properties (for the optimal combination of cash flow and capital preservation/ possible appreciation) with low turnover and low maintenance costs rather than many lower-tier properties that will likely bring more issues, especially if you have to deal with Section 8 housing authority bureaucracy. You also said you want 15-20% gross ROI.... what net numbers are you looking at? What expense rates are you using in your calcs? Our NET ROI for financed purchases typically start out around 16-25% and increase as your tenants pay down your loan principle. Cash purchases typically cary net ROI of around 7-9%. If you, or anyone else, wants to see some ROI worksheets that show how these numbers work and what our expenses are, I'm more than happy to oblige. Even if you don't invest in Birmingham, these numbers can serve as a good benchmark for what you should expect. If you do consider turnkey, I'm also happy to send over a list of metric-based questions you should be asking of any provider you consider to ensure they are transparent and performance-driven. With the amount of cash you have on hand, you could put 20% on 5-10 solid B properties and have your tenants pay off your loans pretty quickly. If you don't need rental income to support you right away, this can be a fantastic strategy. In the end it all comes down to how much work you want to put in on a day-to-day basis, what your priorities are re: highest ROI% vs headache/risk tolerance, and how you feel about taking on debt, albeit debt that is paid off by tenants. Sorry for the lengthy post, I kept seeing more things I wanted to touch on with each post I read! If you have any questions about TK or the Birmingham rental market, or anything else I've mentioned here, feel free to shoot me a PM any time. All the best with whatever investment you choose! Clayton

Account Closed We own a portfolio of properties in Pueblo and are big fans of Pueblo. If you want cash-flow in Colorado, it is a great option. You can also learn and make mistakes with smaller amounts of money, which has really helped us. The Pueblo/ Pueblo West population has continued to grow despite the major layoffs in the steel factors back in the 1980's. I'm confident that beautiful weather, mountains and the low-cost of living will continue to draw residents and businesses to the area. We are currently looking at focusing on a second market in Ohio... maybe Columbus, Cleveland or Akron. One major difference we have noticed between Pueblo and Ohio is property tax rates. The annual property taxes are often 3 to 4 times higher in Ohio compared to Pueblo. So we are trying to work that into our numbers. Mike

Account Closed Investing in the U.S. is NOT all about cash flow. Investing in the US, is, I have to imagine, like investing anywhere else in the world. Investing is about building equity AND generating cash flow. Now, there are two ways to get cash flow. First, buy the cheapest D Class property you possibly can in the poorest, most depressed town in the country or nearby and earn a commensurately large amount of rent per dollar invested. Second, buy a nice property in an in-demand area, earning little to no cash flow per dollar invested immediately, hoping that the area will improve and rents will one day rise. Now, you say you are buy and hold oriented. The questions buy-and-hold investors should ask themselves are: 1) Looking back 30 years from now, I want to say, "Gee, look how smart I was to invest in _________ town. ________ town crushed it, and my real estate is generating tons of cash flows from 30 years of rising rents and I have millions in equity built up. I'm sure glad I invested in ____________. Where is _________? Is it Pueblo, CO? Could be. But, I think that I am going to look back 30 years from now and fill in those blanks with the following places: Denver Boulder Colorado Springs Ft Collins Longmont You'll have to fill in that blank for yourself. 2) Can I afford to cover the mortgage and hold onto the property in good times and bad, based on current cash flow? If you can cover the property payments easily and are in a great spot with great prospects, you might find that your cash flow, equity, and all the other great stuff that goes with real estate investing happen to you over time. If you invest in the place with the best "cash flow" you may find that you deal with non-local problems over and over again. Just my thoughts.

If you want to be hands on and in control, which I agree is a good way to go, then stay local and do NOT venture out of state ... the second you buy somewhere in a far away market, then POOF! there goes your control and hands on, you are then 100% reliant on your "boots on the ground" in those markets to make or break those investments. For another thing, what makes you think that $60k out of state properties will be more profitable? If they are so darn profitable, then why do all the local investors who know the area better and are seeking out profits just like you only price those properties out at $60k (or probably less) ... does that make sense to you? I would seriously rethink your analytical approach and definitions of profitability.

I too thought @Scott Trench answer was awesome and if I were you I would print that response and read it every day I invested. I would change or add the fact that I think the return is way more important that just the cash flow, but that depends on what/when you actually need the cash. You are in the middle of one of the fastest growing areas and you can absolutely find quality investments up and down the front-range. I lived there for 8 years and that is where I got my start as an active investor. Focus on what your needs are with your $150,000 and rather than simply chase yield, pick the best investment for you and your time frame. It may be local, it may be upstate or it may be across the country. Be open to the fact that it may even be in some other form of investing like lending or passively owning a REIT. Bottom line - don't be in a hurry. Returns on passive property are tricky and are not always what they appear to be on paper. There are plenty of opportunities around you and the best will be clear when you know exactly what you expect to earn with your money and how long you expect to earn it.

where would you invest $150,000 for buy and hold?

Kelly Crone

Investor · Littleton, CO · Member since 2016 · 47 posts · 9 votes

where would you invest $150,000 for buy and hold?

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