Buying $120-200k homes Edmond, OK to Rent?

Question

Hi!

I'm interested in buying nice, SFHs in the $120-200k range in Edmond, OK to rent. I'd be buying homes in good condition that I could rent turn key, more or less. Is anyone on BP in this market too? I'd love to hear the pros/cons.

Kiera Underwood · Answer

Account Closed I'd just keep in mind you might get a bit more bang for your buck if you move into even a B class area. You don't have to go 100 years old, but you can likely get into something for thousands cheaper that's in a condition that continues to receive market rent rates (no rehab) that cash flows for much more than an Edmond rent! Good tenants can come from clearly communicating your expectations with your PM. That said Edmond isn't a bad choice, I just think playing devil's advocate can be really important!

Cassi Justiz · Answer

Hey Account Closed,

@Kiera Underwood is spot on with Edmond. I work with several investors that buy in Edmond almost exclusively. Some buy closer to that $120k range and others are closer to the other end of your range ($180k-$200k). On the lower end of the spectrum 1% rule is kind of the best case scenario, but it doesn't hold up once you get over about $130k.

My investors that buy what I consider "higher end" rentals are unique in that they are looking for LONG term buy and hold and don't buy based off instant equity or high cashflow. Most of my investors that buy in Edmond do conventional financing (20-25% down) and are okay with leaving that money in the deal to make the cashflow numbers work. They also are buying with some expectation of appreciation based off historic averages, tax advantages to help offset W2 income and it's usually only a portion of their overall wealth building/retirement strategy. Even in the higher price range, most are still getting 6-8% cash on cash returns (plus tax advantages) on their down payment which is better than even a high interest savings account.

Edmond is not a place that makes sense for most investors looking to do BRRR or commercial financing. It also doesn't make sense for people that need a lot of cashflow quickly. (Example, people that want to build up a rental portfolio in 5 years to replace their income). But it can be solid if you know you want a nicer more "low maintenance" rental in a stable market. Again, as mentioned above the rental market in Edmond is super competitive. So if you don't have an above average rental for your price point, you will have issues with vacancy.

This fall I leased out 3 rentals in Edmond for the same investor. All 3 tenants were moving to these specific neighborhoods so that they could get/keep their kids in a specific school. That is one of the huge advantages of buying rentals in Edmond that you don't always get in other areas. All 3 of these homes were fully rehabbed and were some of the more well maintained homes at their price points. You basically have to have "retail" grade rentals at almost every price point in Edmond to be competitive. "Rental grade" in Edmond really doesn't cut it at most price points if you want to get great tenants.

Kiera Underwood · Answer

Account Closed are you local to the area? Just curious what's pushing you to Edmond. The pro is that you're in a great area, your tenants will potentially be more predictable from a payment perspective and assuming condition is incredible at that price point, you likely won't have much maintenance. The cons are that there there are a lot of properties for rent in Edmond, so make sure to do your research and predict your rent rate appropriately. There is competition and you don't want to be overpriced. WIth a conservative rent rate to ensure you don't have too much vacancy your likelihood at cash flowing at that price point is lower. If you're comfortable purchasing, not cash flowing but allowing your tenants to pay down your loan, Edmond might fit your goals!

Account Closed · Answer

@Cassi Justiz @Kiera Underwood @Arlan Potter. Thanks for the advice, everyone! It's such solid advice and about what I was thinking it'd be in terms of returns, etc. My goal is reasonable returns without much worry or work.

I am local and was looking at Edmond or similar for a few reasons: (1) I want great tenants. Obviously you never know for sure who you'll get but I am just not as comfortable working in a rougher neighborhood like NE, MWC, etc. where you can buy houses for $50k. I just want nice middle class folks who want a safe home, like UCO students or families who want a good school district. (2) I want to buy something turnkey. I don't want to do any more rehabs. The value of my time isn't worth it. I'm interested in cute houses that I can just put a for rent sign up on on closing day. (2.1) I have a full-time job that is my primary focus. I don't want to do BRRR and can put my 25% in and leave it until I sell and I retire.

I'm open to other areas too, but just noticed looking around that Edmond was a place that seed like I could get a good deal on a nice house under $200k that I won't have to fix up or worry about as much as a 100 yr old house in the urban core.