Newbie From Seattle Looking For Out-of-State Markets

[Evan Liu]

Hey everyone!

I've been lurking here for a few years now, but I've finally resolved to buy my first property this year! I'm a buy-and-hold investor looking to invest in single & multifamily properties out of state. Ideally, I'd like to target A/B class properties with a minimum rent of $900/month and a levered cashflow of $200/unit while maximizing CoC returns. Does anyone have any recommendations for markets where these types of deals can be easily attainable?

I'm currently considering St. Louis, Indianapolis, and Cleveland and would appreciate any referrals for property managers or agents.

Thanks,

Evan

[Michael Haas]

@Evan Liu for rehabs we currently target CAP rates of 8% plus and have hit 10%+ a couple times. (That's assuming 3% vacancy, 8% CAP EX, no property management fees). Back in 2011-2012 15-20% CAP wasn't that hard, but those day's are past us for now.

The real value in a house hack isnt the CAP it's the cash-on-cash though, and that depends a lot on how much you put down, and using a low downpayment and/or down payment assistance programs makes huge cash on cash returns possible.

I’m pretty sure you qualify for assistance programs, you just may not be looking at the right ones. A purchase in a Low to Moderate Income Tract (LMI), such as Hillman City here in Seattle, would qualify for special programs with better features than regular mortgages with a 2% Down Payment Assistance with certain lenders. This is an in house product for them- No income restrictions- you can literally make a billion dollars a year and still get help with your downpayment.

Maybe you’re thinking of Washington State Housing Finance Commission Program? That program allows us to take out a loan with 3%-5% down, then get 4% down payment assistance so the cash required to close is super-minimal or even 0. This strategy works spectacularly well with house hacking, and can bring cash-on-cash returns through the roof but household income must be under the program limits (up to $145,000) to be eligible.

PM me if you’d like to grab a beer or coffee and discuss some options. I don’t think it’s any “either Seattle or Indy” questions, I think you can do both. And any investor not taking advantage of far more favorable owner occupant financing is leaving money on the table. 

PS: properties with ADUs or DADUs cash flow better than multis in Seattle, and given the city's new legislation in 2019 these ADU investments are looking even better.