3 City's, what one to invest in ?

Question

Hello bigger pockets family. I am turning to you for some help and maybe even new ideas I have not thought of. I am a investor from Pueblo CO. And I love investing here and will continue to do so, my only issue is we do not have a strong multi family market ( like nothing is ever for sale ) so i have been looking at a few area out of state and would love some input. i am interested in apartment of 8 plus units or a package deal of duplexes that come up to 8 units. I would like to stay in the B class area and maybe I would look at some C class if it looked like the area was going forwards and not backwards and the numbers worked for that C class to make it worth the headache. I will have about 100K to 130K for a down payment so that should get me around a 500K or 600K property with 20% down. first place I am looking at is Kansas City and surrounding areas. Second place is Omaha NE. ( or Lincoln NE ) Third is Cincinnati OH. ( maybe Dayton OH ) Cash flow is King to me at this stage of investing, but with that said I love a good value add to any property. and would love to have equity. And a little appreciation would make things nice as well thought that is not my # 1 goal right now. with what I have describe what is a realist COC return I should be looking for ? like I said I am open to any and all ideas. even if it's telling me of better places to buy apartments. thank you for reading. Jason Eberhardt.

Andrew Johnson · Answer

Jason Eberhardt I think I'd start looking at places where you might have some tie. It doesn't sound like any of those are places that you've lived, places where family is, places where friends are, etc. In short, a place where you have some kind of data (even if it's a "gut feeling" of where the wrong side of the tracks are) that you can't glean from the ol' interwebs. In your shoes, I'd start with those markets and then see how your desires (B-area, cash-flow, etc.) map to those markets. And it doesn't hurt (when you're an absentee owner) to have a friend that will just random drive by your group of duplex once every couple of months to see that they haven't imploded. Yes, you should be able to trust a property manager, yes they can send pictures, but having someone verify doesn't hurt either. So that about sums up my bias. My bias also says to pick Nebraska. There no logic there, I'm just not wild about a lot of the rust belt. It's less about pro-cornhusker as it is anti-rust belt. Populations seem to be declining in many cities and you investors there solely to chase cash-flow. I'd rather have a city of 50,000 people with solid fundamentals and less cash-flow if I'm looking at a 10+ year investment strategy. Others will disagree.

Account Closed · Answer

Hi Jason,John is right in that you have to have your team in place in your location of choice. Your property manager is your key as they can make or break your investments. I would also ask your property manager if they are also an investor and how often they physically go to the property.

David Faulkner · Answer

Stay local where you can control the acquisition, the asset, and its operations ... that is what makes your return, not the market. Total risk adjusted return is king ... cash faux is a drag queen masquerading around as profit, your purchase price being trickled back to you in small monthly installments on a property going down in inflation adjusted value while sinking CapEx (which does keep up with inflation) into it ... anybody that gets with her without realizing this may be in for a big surprise.

Quinten Sepe · Answer

Hey Jason,I live and invest in KC and know the area well. I'd be happy to help you vet any area you are considering and give you an accurate description of the demographic from a local.I also second the above statements on NE. I cannot speak to OH at this time.Best of luck in your search.-Q

Collin Schwartz · Answer

Jason Eberhardt I currently invest in Omaha and like the overall fundamentals of the area. Its not a place where you receive incredible appreciation but you can find properties that can weather economic storms better than most of the country. The area has lots of growth occuring, solid job market, and developing food scene. If you have questions please reach out to me. My current investments are all multi family buildings 2-11 units.

Jeffrey Gagnon · Answer

I'm about to live in Omaha, looking for properties myself however I don't have much money. But I have access to va loans if I find something I want. If you are looking for someone to help you look at stuff I would be more than willing to help out best I can. Would also be a great learning experience for me :D

John Warren · Answer

This year I purchased an apartment complex out of state. I also was looking for cash flow, and I was looking at similar deal size. If I were you, I would actually start by trying to find the right property manager in the state first. Interview references for property managers, check out their website and listings, due as much due diligence as you can on how they rung their business, etc. I have found that the property manager is by far the most important link in the out of state investing process!The tempting thing is to start by looking at deals to see what kind of COC return you can achieve. Probably, any of the cities you just mentioned will have good deals if you look hard enough. The real key, though, is having a management company you trust to take the returns off paper and into real life!