Choice of market for a beginner

[Kokou F.]

Hello BP community,

Kokou here from San Diego CA and I am glad to be part of the BP community. Totally new to real estate investment with zero experience and zero deal under my belt, but I am already a PRO…well…at least so says my BP badge… :) Thank you BP and the community.

I have done lot of research, reading and listening to educate myself on RE investment, yet I am unable to select the right market in which to start my journey. If some of the experienced investors here on BP could help me narrow down these possible markets I have been studying that will be awesome. Of the list below, please suggest in your opinion:

• the top 3 markets for best cash flow for an out of state investor
• top 3 markets to focus on flips or applying the burrr strategy

- El Paso, Texas

- Harrisburg-Carlisle-Lancaster, Pennsylvania

- Atlanta, Georgia

- Des Moines, Iowa

- Kansas City, Missouri

- North West Indiana, Indiana

- Fayetteville-Springdale-Rogers, Arkansas

- Chattanooga, Tennessee / Georgia

- Oklahoma City, Oklahoma

- Jacksonville, Florida

Hope my question makes sense  :)

Thank you all.

[Jay Bhatt]

Welcome to BP. No one can suggest the right market for you in my opinion. Nobody knows all the market you mentioned here.

You have to come up with certain criteria to narrow down the market.

For e.g. Demography, crime rate, Landlord friendly state, population growth, job growth, flight time from your base to visit the market, weather, Homeowner vs Renters ratio

You have to chat with local investors on BP and understand what they like and don't like.

Reach out to other out of State investors to understand how did they decide on the market.

Read the book on out of state investing by David Greene of BP podcast fame.

I have list out 10 steps in my other post on how did Ideciee the market and set up the team.

Hope this helps. Wish you much success.

[Shital Thakkar]

@Kokou F. you are sitting on gold mine...

San Antonio - San Marcos - Austin is one of the fastest growing area in US... you don't need to look outside.

• Top cities for real estate in 2019.... Dallas, Austin and San Antonio are in top 20...
  
  •  https://ulidigitalmarketing.blob.core.windows.net/marketingfliers/Emerging_Trends_in_Real_Estate_2019.pdf
• Fastest growing county
  

  • http://digital.olivesoftware.com/Olive/ODN/SanAnto...

@Edward Beck, How is market in El Paso..? is that market get affected by Oil boom/burst.. ?

[Dan H.]

Best market for you to BRRRR is San Diego area? Why?

• First rehabs are difficult enough without being OOS.  I could not imagine doing my first rehab OOS.
• You can leverage your local knowledge of submarkets.
• If you are BRRRR your goal is to extract out all or virtually all of your investment so the cost of the property is mostly irrelevant as long as you can obtain the financing and achieve the goal of being able to extract virtually all of your investment.
• None of the markets that you listed above have the historical ROI of San Diego. Around 50% of my purchases have infinite ROI because I was able to extract 100% of my investment. A couple other of my properties came close to having full investment extracted, one failed only because it got an absurd low refinance appraisal. I have one property that if I were to refinance I would easily get all of my investment back out but the terms on current loan are too good for me to desire to refinance. Even without addressing how easy it can be to extract all of your investment, San Diego ROI has historically been outstanding due to outstanding rent and property appreciation.
• No rent control. The Core Logic list of cities by ROI this century has San Diego #3 but San Diego is the only city in the top 3 that does not currently have rent control. It bodes well for San Diego to perform better than #1 (San Francisco) and #2 (Los Angeles) going forward.

I would be real leery of trying a remote BRRRR prior to having experience in the remote city and a trusted team.

Good luck with whatever you decide.

[Edward Beck]

El Paso is always 5 years behind the bigger cities in Texas.  I’ve always heard it’s too hard to break into from outside investors.  No major jumps yet but they are coming.  With that you know you won’t get caught holding the bag.  Safe investments.  Lots of good value to still get in rentals aswell.  We don’t seem too big but we board 2.5 million in our sister city juarez Mexico.  

On oil no.  We don’t pump oil.  We have farmers, international trade, and fort bliss.  Media house is 100-140k.  65-100 per sq ft range


Originally posted by @Shital Thakkar:

@Kokou F. you are sitting on gold mine...

San Antonio - San Marcos - Austin is one of the fastest growing area in US... you don't need to look outside.

• Top cities for real estate in 2019.... Dallas, Austin and San Antonio are in top 20...
  
  •  https://ulidigitalmarketing.blob.core.windows.net/marketingfliers/Emerging_Trends_in_Real_Estate_2019.pdf
• Fastest growing county
  

  • http://digital.olivesoftware.com/Olive/ODN/SanAnto...

@Edward Beck, How is market in El Paso..? is that market get affected by Oil boom/burst.. ?

[Darson Grantham]

@Kokou F. I’m also new(er) to the RE investing world but ai know the Des Moines/central Iowa market very well, particualarly the buy old mindset. If your interested in looking at some property details in this area message me and I’ll grab a few that I’ve been eyeing but don’t have the funds for. If your looking to flip, I wouldnt be comfortable helping you out bc I’ve not ventured in that direction. To give you and idea of what is available, I’ve just purchased a property that is over the 2% rule, and cashflows $200/door on a 4plex. Total investment was $135k. Down side is that I’m managing the property myself due to not being able to find a reliable prop manager, but since I have the time and quite frankly want to learn the in’s and out’s before hiring a prop mgr. Beat of luck!

[Mark Doty]

Originally posted by @Dan H.:

Best market for you to BRRRR is San Diego area? Why?

• First rehabs are difficult enough without being OOS.  I could not imagine doing my first rehab OOS.
• You can leverage your local knowledge of submarkets.
• If you are BRRRR your goal is to extract out all or virtually all of your investment so the cost of the property is mostly irrelevant as long as you can obtain the financing and achieve the goal of being able to extract virtually all of your investment.
• None of the markets that you listed above have the historical ROI of San Diego. Around 50% of my purchases have infinite ROI because I was able to extract 100% of my investment. A couple other of my properties came close to having full investment extracted, one failed only because it got an absurd low refinance appraisal. I have one property that if I were to refinance I would easily get all of my investment back out but the terms on current loan are too good for me to desire to refinance. Even without addressing how easy it can be to extract all of your investment, San Diego ROI has historically been outstanding due to outstanding rent and property appreciation.
• No rent control. The Core Logic list of cities by ROI this century has San Diego #3 but San Diego is the only city in the top 3 that does not currently have rent control. It bodes well for San Diego to perform better than #1 (San Francisco) and #2 (Los Angeles) going forward.

I would be real leery of trying a remote BRRRR prior to having experience in the remote city and a trusted team.

Good luck with whatever you decide.

@Dan H. these are the posts that make me want to connect with you sometime.  I feel like it’s expensive here because it’s worth it! 

[Mark Doty]

@Dan H. see previous...

[Kokou F.]

@ Jay Bhatt

Thank you for the input. My question may have come out wrong, but what I am asking is not so much to be told where to start but to see which market other people, based on their own experience will pick as their top 3 from the list I provided. I expect people will pick different markets for various reasons. So my hope is to take the opinions from various investors to assist me in my choice. So ultimately the market I decide to go in will solely depend on my conclusion taking into account what others have said. 

And definitely I see every single reply to my answer as a source from which I can learn something.

Can you point to the link of your 10 steps list you mentioned. I searched but couldn't find it ...yet...

[Kokou F.]

@Shital Thakkar

You are probably closer to that gold mine than I am. I am in San Marcos California :)  I haven't given much thought to that region but I will have to check it out and o my homework.

Thanks for sharing the 2019 RE article. It is pretty loaded with information

@Dan H.

I will send you a PM and we can connect if you don't mind since you are only few miles away.

Thanks for the input.

[Kokou F.]

@Darson Grantham

Congratulation on the first deal. That must be exciting. I wouldn't mind finding similar deal. Is your property in Des Moines? Was it already rented before you bought it? and did you have to put any money into it for repairs?

I will sent pm and we can talk more.

Thanks

[Jeff Schechter]

Hey @Kokou F.

I guess it depends on what your strategy is. Buy/Hold, BRRRR, Flip? Different cities, neighborhoods (and even streets) may lend themselves better to one strategy than another. Fist, define/decide what you're wanting to accomplish, how many resources (cash AND time) you have to put in, and your path will become clearer.

[Sam Shueh]

Suggest you search demographics, income, tax rate, crime rate to sort through these areas use spreadsheet sort and filtering functions until you can narrow down to manageable muni. Take a trip to these places and look.

Good luck,

Sam Shueh

[Rick Pozos]

I would have to agree with @Dan H.. Look at your own area. People get foreclosed on in San Diego every month. People die in San Diego every month. People get divorced every month in San Diego. I know that sounds kinda morbid, but that is how you will find a deal in any city. It is just a matter of getting to the people to let them know you will buy their property.

There is no better place to buy than the area that you know best, your hometown. I buy just in and around San Antonio because that is the area that I know best. 

Use what you know. You should know San Diego, buy San Diego.

[Lee Ripma]

@Kokou F. The truth is there are people making money from RE in all the markets you mentioned. I don’t belive there is a best market, only a best market for YOU with your resources, connections, and strategy. I started out of state in Kansas City and if you look through my posts you’ll see details on how I’ve done it. The key for me is local partners that I trust. Now that I cut my teeth in a market where I could afford to lose my money (but didn’t) CA has never looked as good to me as it does now. I’m working with a MF investor in LA and realizing how incredible the returns are in CA if you buy right. I always thought you had to do your own deals to learn but what I realize now is that you can be passive and watch what someone else does. I now think that is a great way to get started. If you’ve got the time to go through a BRRRR and make a zillion mistakes (like I did) go for it. If you don’t have time but do have money then think about partnering up in one of the markets you mentioned or in CA!

[Darson Grantham]

@Kokou F. Thanks! It was already rented, I met all the tenants and somewhat “reassesed” them as tenents to see if they were someone I felt comfortable with. The property is not in Des Moines, it is in Fairfield a town of 10,000 ppl 2 hrs hours away.

[Darson Grantham]

@Kokou F. Oh and no, didnt have to put any money into it. I will spruce up each apt as it turns over but nothing major.

[Aaron Winters]

@Kokou F. Kansas City is a hot market, what are you looking to invest in?

[Kokou F.]

Hi everyone!

 @Jeff Schechter

Thanks for your input. My plan is to do Buy/Hold using BRRRR with focus on long term cash flow. But if it makes more sense to start with turnkey in the right market and the numbers are right I am ok with that. Doing Flips are also on my radar since the gap between BRRRR and Flip shouldn't be that wide.

I would like to focus on two different markets where I will target SFH in one an MFH in the other and then Flip whatever makes sense in between the two markets. My challenge so far is where to plant that first seed. I hope with members tipping in their $0.05 :) and by the time this thread goes dead my path will be clearer.

@Sam Shueh

@Sam Shueh I agree with your suggestion. @Jay Bhatt also made similar point earlier: Demography, crime rate, Landlord friendly state, population growth, job growth, flight time from your base to visit the market, weather, Homeowner vs Renters ratio. I have some research to do. :)

@Rick Pozos In theory focusing in my town will be ideal, but in reality I think it is easier said than done in my area if long term cash flow is the goal. At least in this current market condition where it seems the norm is more like "0.5% rule" instead the 1% or 2% rule. However if appreciation or flip is the goal then the San Diego County market can be good. But again I could be totally wrong and just not looking at the right place.

[Kokou F.]

Hi @Lee Ripma I agree there is profit to be made in any market. Every single contribution to my question so far has helped me indirectly in the narrowing down process of which market will be the best for ME :)  

I think I have more to gain, learn and more fun to have along the way if I go the BRRRR way in this beginning than taking the passive approach and let someone else have the fun. Especially since the cash I can start with is limited and tiny, I think I can grow it faster or at least make it work more using BRRRR.

Maybe when I start running into walls I can get in touch for tips since you have already walk the walk :)

@Aaron Winters

@Aaron Winters I have looked a lot at Kansas City and its vicinities and will not turn it down if numbers play out right. As a starter I am indecisive when it looks like many places have potential with varying degrees of distinguishing characters. I am looking to invest in residential 1 - 4 units.

Thanks for chipping in.

[Mike D'Arrigo]

@Kokou F. Personally I think Indianapolis and Kansas City are the top two. I see that you have Des Moines IO on your list which could be interesting also. I've been active in Indy and KC for several years. Feel free to reach out if you'd like some insight on either of those 2 markets.