Southern California and Midwest Investors

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Southern California and Midwest Investors

Josh Thomas
San Diego, CA · Member since 2019 · 11 posts · 4 votes

Hello all! I’ve been observing in the background for a few months I wanted to finally reach out with an introduction along with seeking some advice.

I'm current living out in San Diego where I purchased my first property with a VA loan in 2017. A small 2/1 to get my feet wet with hopes of renting this property in the future as my neighborhood is having a lot of growth! I've been interested in real-estate for a few years but it wasn't until I found BP in early 2019 that I realized there were resources out there which could actually help me make some things happen!

SO, as we all know, SOCAL isn’t ideal for hitting the ground running when it comes to building your portfolio. Obviously out of state investing is huge in this community and everyone has their preferred markets. The Midwest is clearly popular for those of you who are seasoned as well as those of us like myself who are starting out. Being from Ohio myself and having family and friends who still reside in Akron and Cleveland, this location seem like a no brainer!

With that said I'm currently out of the country for a few months and my goal is to be armed and ready to actively pursue my first deal within the next six months. Having a fair amount of money in savings I feel like I do not need to be ultra-focused on generating funding in these markets (a large starting barrier removed). I am however experiencing some paralysis on where to direct my efforts next... Although theoretically I have some boots on the ground, I have zero connections to anyone actively investing in these markets. I have not yet settled on a specific location or property type although starting with small multi has always been the first thought. I know Cleveland has been hot for a few years but there must be some of you out in the Akron area? Looking at the MLS in all the various Cle neighborhoods it seems like every property is marketed towards anxious investors like myself... Is over saturation of concern?

Upon my return to the states I hope to have the opportunity to build some relationships with those San Diego based investors who are crushing out of state. Now it’s all about picking a strategy and positioning myself to make my first deal. Any advice on where to direct focus is greatly appreciated!

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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
6y
Originally posted by @Josh Thomas:

Hello all! I’ve been observing in the background for a few months I wanted to finally reach out with an introduction along with seeking some advice.

I'm current living out in San Diego where I purchased my first property with a VA loan in 2017. A small 2/1 to get my feet wet with hopes of renting this property in the future as my neighborhood is having a lot of growth! I've been interested in real-estate for a few years but it wasn't until I found BP in early 2019 that I realized there were resources out there which could actually help me make some things happen!

SO, as we all know, SOCAL isn’t ideal for hitting the ground running when it comes to building your portfolio. Obviously out of state investing is huge in this community and everyone has their preferred markets. The Midwest is clearly popular for those of you who are seasoned as well as those of us like myself who are starting out. Being from Ohio myself and having family and friends who still reside in Akron and Cleveland, this location seem like a no brainer!

With that said I'm currently out of the country for a few months and my goal is to be armed and ready to actively pursue my first deal within the next six months. Having a fair amount of money in savings I feel like I do not need to be ultra-focused on generating funding in these markets (a large starting barrier removed). I am however experiencing some paralysis on where to direct my efforts next... Although theoretically I have some boots on the ground, I have zero connections to anyone actively investing in these markets. I have not yet settled on a specific location or property type although starting with small multi has always been the first thought. I know Cleveland has been hot for a few years but there must be some of you out in the Akron area? Looking at the MLS in all the various Cle neighborhoods it seems like every property is marketed towards anxious investors like myself... Is over saturation of concern?

Upon my return to the states I hope to have the opportunity to build some relationships with those San Diego based investors who are crushing out of state. Now it’s all about picking a strategy and positioning myself to make my first deal. Any advice on where to direct focus is greatly appreciated!

 Welcome to the forums Josh. Saw Cleveland's on your short list so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. If you are worried about over-saturation there are tons of other turnkey markets out there besides Cleveland. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cincinnati, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Birmingham, Alabama
  • Kansas City, Missouri
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
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  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Josh Thomas:

    Hello all! I’ve been observing in the background for a few months I wanted to finally reach out with an introduction along with seeking some advice.

    I'm current living out in San Diego where I purchased my first property with a VA loan in 2017. A small 2/1 to get my feet wet with hopes of renting this property in the future as my neighborhood is having a lot of growth! I've been interested in real-estate for a few years but it wasn't until I found BP in early 2019 that I realized there were resources out there which could actually help me make some things happen!

    SO, as we all know, SOCAL isn’t ideal for hitting the ground running when it comes to building your portfolio. Obviously out of state investing is huge in this community and everyone has their preferred markets. The Midwest is clearly popular for those of you who are seasoned as well as those of us like myself who are starting out. Being from Ohio myself and having family and friends who still reside in Akron and Cleveland, this location seem like a no brainer!

    With that said I'm currently out of the country for a few months and my goal is to be armed and ready to actively pursue my first deal within the next six months. Having a fair amount of money in savings I feel like I do not need to be ultra-focused on generating funding in these markets (a large starting barrier removed). I am however experiencing some paralysis on where to direct my efforts next... Although theoretically I have some boots on the ground, I have zero connections to anyone actively investing in these markets. I have not yet settled on a specific location or property type although starting with small multi has always been the first thought. I know Cleveland has been hot for a few years but there must be some of you out in the Akron area? Looking at the MLS in all the various Cle neighborhoods it seems like every property is marketed towards anxious investors like myself... Is over saturation of concern?

    Upon my return to the states I hope to have the opportunity to build some relationships with those San Diego based investors who are crushing out of state. Now it’s all about picking a strategy and positioning myself to make my first deal. Any advice on where to direct focus is greatly appreciated!

     Welcome to the forums Josh. Saw Cleveland's on your short list so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. If you are worried about over-saturation there are tons of other turnkey markets out there besides Cleveland. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

    • Cincinnati, Ohio
    • Dayton, Ohio
    • Toledo, Ohio
    • Youngstown, Ohio
    • Cincinnati, Ohio
    • Memphis, Tennessee
    • Birmingham, Alabama
    • Kansas City, Missouri
    • Saint Louis, Missouri
    • Indianapolis, Indiana
    • Detroit, Michigan
    • Erie, Pennsylvania
    • Louisville, Kentucky
    • Milwaukee, Wisconsin
    • Jackson, Mississippi

    Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

    One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

    • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
    • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
    • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
    • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
    • Make sure your property manager is a licensed real estate brokerage.
    • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
    • Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
    4Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    6y

    @Josh Thomas Thanks for your service to our country. You have earned the benefits for those sacrifices. My post is to encourage you to maximize the VA loan benefit.

    The last 2 years San Diego’s RE appreciation has been modest but historically it has far out produced inflation. 
     
    Owner occupied VA loan allows you to purchase with very high LTV. This implies your savings will allow you to purchase a much higher value of properties in San Diego than where you are not occupying. For example, let's say you have $40k and can purchase VA at 97% LTV versus OOS at 75% LTV. Assume closing costs are rolled into loan, you can purchase $1.333m in San Diego vs $160k OOS.

    I would use your VA loan to purchase a small multi family that need some TLC. I would benefit from some sweat equity, being able to self manage, being able to leverage my assets much greater, being able to benefit from San Diego's historically outstanding RE appreciation.

    The VA loan option is an incredible benefit. I suggest you leverage it to the fullest extent possible before looking OOS.

    Good luck

    1Reply
  • Josiah Barkman
    Rental Property Investor · Wooster, OH · Member since 2014 · 72 posts · 41 votes
    6y

    Hey Josh,  I'm in the Akron/Canton market.  If you have any questions specific to this area I'd be glad to help.  Theres lots of great neighborhoods to buy in around here but you'll find the areas can change quickly over the course of a few blocks so its important to know where you're buying.  Overall it's a great cashflow market to invest in!

    1Reply
  • Ben Halabi
    Property Manager · Cleveland, OH · Member since 2019 · 123 posts · 65 votes
    6y
    Originally posted by @Josh Thomas:

    Hello all! I’ve been observing in the background for a few months I wanted to finally reach out with an introduction along with seeking some advice.

    I'm current living out in San Diego where I purchased my first property with a VA loan in 2017. A small 2/1 to get my feet wet with hopes of renting this property in the future as my neighborhood is having a lot of growth! I've been interested in real-estate for a few years but it wasn't until I found BP in early 2019 that I realized there were resources out there which could actually help me make some things happen!

    SO, as we all know, SOCAL isn’t ideal for hitting the ground running when it comes to building your portfolio. Obviously out of state investing is huge in this community and everyone has their preferred markets. The Midwest is clearly popular for those of you who are seasoned as well as those of us like myself who are starting out. Being from Ohio myself and having family and friends who still reside in Akron and Cleveland, this location seem like a no brainer!

    With that said I'm currently out of the country for a few months and my goal is to be armed and ready to actively pursue my first deal within the next six months. Having a fair amount of money in savings I feel like I do not need to be ultra-focused on generating funding in these markets (a large starting barrier removed). I am however experiencing some paralysis on where to direct my efforts next... Although theoretically I have some boots on the ground, I have zero connections to anyone actively investing in these markets. I have not yet settled on a specific location or property type although starting with small multi has always been the first thought. I know Cleveland has been hot for a few years but there must be some of you out in the Akron area? Looking at the MLS in all the various Cle neighborhoods it seems like every property is marketed towards anxious investors like myself... Is over saturation of concern?

    Upon my return to the states I hope to have the opportunity to build some relationships with those San Diego based investors who are crushing out of state. Now it’s all about picking a strategy and positioning myself to make my first deal. Any advice on where to direct focus is greatly appreciated!

     Hello Josh and welcome to the site, I see that you are looking to invest in a couple of markets and Cleveland is one of them. Cleveland is one of the best turnkey market and the most popular for investors because of high rental demand and low cost of entry, property prices are pretty inexpensive here. I would take a look at the following Cleveland Price & Neighborhood Map, Cleveland Cash Flow, as well as The Property Taxes and Your Net Returns. Good luck to you!! 

    1Reply
  • Josh Thomas
    OP
    San Diego, CA · Member since 2019 · 11 posts · 4 votes
    6y

    Thank you all for the insight!

    @James Wise I appreciate all of your thorough feedback. I have looked over your Cleveland guide a few times and its very helpful as you know. What I don't want to do is over think this whole thing and put off action. Its easy to do that however I think I'm still lacking some fundamentals. I appreciate your guidance!

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    6y
    Originally posted by @Josh Thomas:

    Thank you all for the insight!

    @James Wise I appreciate all of your thorough feedback. I have looked over your Cleveland guide a few times and its very helpful as you know. What I don't want to do is over think this whole thing and put off action. Its easy to do that however I think I'm still lacking some fundamentals. I appreciate your guidance!

     Really can't go wrong with a B-Class bungalow.

    1Reply
  • Josh Thomas
    OP
    San Diego, CA · Member since 2019 · 11 posts · 4 votes
    6y

    @Dan H. Ideally gaining additional San Diego properties is the big picture goal! With that said I feel like attempting an OOS allows me to actually make something happen with a lower barrier to entry. Looking back I should have used my VA the first time around for an owner occupied multi however I just wasn't aware of all the possibilities at that time! Hide sight. Im really not sure how the process works for using a second VA loan. As long as my primary residence is still held within a VA loan, Im not entitled to additional full VA funding as I understand? Given my current low interest rate, I don't think Im going to be getting out of that loan any time soon... However this is another area which Im lacking knowledge. I don't plan on leaving SD any time soon but Im hoping to have the means to upgrade my family in the years to come.

    @Josiah Barkman Im absolutely interested in the Akron area! As I understand it the massive efforts downtown show no signs of slowing down. From what I understand there has been a bunch of movement with the medical industry extending down from Cleveland as well? I have family who works for the city and I know you can experience the neighborhood changes you mentioned pretty rapidly haha. Ill be sure to reach out. Thank you!

    @Ben Halabi Thank you for taking the time to link me to those posts! I have a lot of studying to do here!

    0Reply
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