Investing in South Dakota???

[Isaac Johnson]

I’m a realtor here in Sioux Falls, and I work with a few investors. I’m getting into investing myself, and just curious to hear from both non-South Dakotans as well as those who have invested in South Dakota.

What are your thoughts on our market?

[Vince Mathis]

@Isaac Johnson I live in Phoenix, AZ, but went to HS in Madison SD and still have family in the area.

I have one duplex (see my profile), which I manage from AZ, and am currently acquiring a quad which will be professionally managed.

SF is a great market, even with current prices, there is a lot of opportunity.

I would recommend gettin on MetaStone Properties mailing list as well as joining the SDREIA.

Let me know if you have any questions!

[Isaac Johnson]

@Vince Mathis Yes! Josh from Metastone is a great dude, and I do attend the SDREIA. When I get my properties up and going I’m definitely going to hire Metastone. Also, I have family in AZ- who are involved in RE down there, so that’s cool.

What else do you plan on getting in Sioux Falls?

[Vince Mathis]

@Isaac Johnson closing on the quad in October.

In another year or so, I'd like to step up to commercial multifamily. Either solo or as a partnership.

[Isaac Johnson]

@Vince Mathis

Well congrats on that closing coming up!

And nice, there are definitely good people to partner up with here on that if you choose to go that route. I’m interested to see how that goes for you.

So what all do you have going on in AZ?

[Vince Mathis]

@Isaac Johnson

Just our personal residence, which has risen from 365k to 600k+ in the last 3 years. On a 0% down VA loan, talk about ROI!

As a buy and hold investor, the options are slimmer and margins tighter in Phoenix. There's a lot of forced appreciation play keeping the locals busy.

[Isaac Johnson]

@Vince Mathis

Wow, I knew something crazy was going on down there haha!

And yeah that would make sense that the options become slimmer, that’s very interesting stuff. I’ve had my eye on flagstaff for a while, the original plan was to move to AZ, but I really like Sioux Falls

[Jack Carda]

@Isaac Johnson I don't have a ton of insight into the Sioux Falls market currently, but that's where I am about to start investing. I'm going to start out with a few wholesale deals to build capital and get good at finding off-market deals before pursuing my own BRRRRs and/or buy-and-holds. Do you have a specific type of property you're looking for? If you're looking for distressed properties and have cash or a HML, I could narrow down my search and send some your way.

I'm currently house-hacking a duplex near Tacoma, WA, where I'm stationed with the Air Force. I'm originally from Kimball, SD, and I lived in Rapid City for three years while stationed at Ellsworth Air Force Base.

@Vince Mathis It's cool to find someone else with a Phoenix and SD connection! I lived in and worked at a hospital in Desert Ridge from 2019-2020 as part of a grad school program with the military. It's a little warm but a very nice area. We loved going camping and spending time in Flagstaff; it's beautiful there.

Do either of you know if the SDREIA ever hosts virtual meetings? I want to get more connected with the local market but obviously can't meet in person.

[Vince Mathis]

@Jack Carda

Yep! We do plenty of camping between Payson and Flagstaff.

The SDREIA had done a few virtuals, but noth the last couple. Follow @Andrew Adam for the most recent info.

[Isaac Johnson]

@Jack Carda

Also thank you for your service!

[Jack Carda]

@Vince Mathis thanks! I gave him a follow.

[Jack Carda]

@Isaac Johnson thanks for your support! I'll shoot you a text.

[Jonathan Harms]

I have recently earned some good insight by "vacationing" in Sioux Falls. I live in Rapid City, so I know the market here pretty well. I've just begun researching Sioux Falls to start investing there too. Here's my take...Both markets are growing with new communities of people moving to town.

In Rapid City, it's (mostly) retiring folks from Colorado (California too) moving in and paying cash over asking price. Our growth is lop-sided on the higher income end, so buy and hold leasing is kind of on pause here. Like @Vince Mathis said about Phoenix, Rapid City has slim buy options and tight margins...lot's of forced appreciation. Also, there are SO MANY real estate agents in Rapid City; only 6 houses sell for every agent in the business (2,265 houses sold, about 375 agents).

What I learned on my visit to Sioux Falls was that the growth occurring there has a more diverse base, not just retirees flush with cash. To me, that means healthy, sustainable growth with plenty of opportunity to find qualified renters for buy and hold. I like Sioux Falls a lot for investing.

[Vince Mathis]

@Jonathan Harms

Definitely agree on the economic perspective.

Sioux Falls has a diverse economy, between top tier hospitals, industry, commercial, and a growing tech scene.

There has been steady population growth of 2-3% which is anticipated to contiinue.

[Joe Splitrock]

Prices here for investment properties are quickly outpacing rent increases. For years I would get about 0.08% of purchase price in monthly rent for my single family homes. Today I am lucky to get 0.06%, even with rents increasing 15-20% in the last year. In my observation, investors are not selling properties in Sioux Falls right now, unless they are undesirable. There is a fourplex for sale right now and you look at the sales history, it sold every 1-2 years for the last 15 years. Trust me there is a reason for that. I would just caution people to avoid the cheaper duplex and quads which may look appealing for cash flow, but are either old or in a bad location. That means higher expenses and more problems.

[Benjamin Aaker]

There are apartment buildings going up on the market right now but in my opinion are overpriced. The cap rates they are asking are down in the low 5s. We are seeing buyers come in from out of state with cash offers at or near asking, which gives confidence to sellers. These investors can make the property cash flow because they aren't using leverage and they look at it as a nice way to park their money. Those of us using leverage will quickly find ourselves underwater on these low cap rate properties. Right now I'm looking for serious value adds or off-market deals.

[Joe Splitrock]

Originally posted by @Benjamin Aaker:

There are apartment buildings going up on the market right now but in my opinion are overpriced. The cap rates they are asking are down in the low 5s. We are seeing buyers come in from out of state with cash offers at or near asking, which gives confidence to sellers. These investors can make the property cash flow because they aren't using leverage and they look at it as a nice way to park their money. Those of us using leverage will quickly find ourselves underwater on these low cap rate properties. Right now I'm looking for serious value adds or off-market deals.

I am in the same boat, but even the off market distressed properties are going for a premium. 

[Kenny C.]

@Jack Carda If you're in Tacoma, we should connect I'm in Puyallup and Tacoma is one of my primary markets.

[J Tarantino]

Quote from @Isaac Johnson:

I’m a realtor here in Sioux Falls, and I work with a few investors. I’m getting into investing myself, and just curious to hear from both non-South Dakotans as well as those who have invested in South Dakota.

What are your thoughts on our market?

Just returned from the Rapid City area. Love SD! Would be interested in a 3 fam house hack. Also interested in northern AZ. Lived in PHX some years ago.