All Forum Posts by: Alyssa Abegg-Garcia

Hi Alyssa!

I would be glad to connect and discuss your goals to see if I could be of assistance. I began my OOS investing journey investing in Indianapolis back in 2018 while living in Eugene,Oregon and my step-son still lives in Westport, WA! I've lived the pros an cons of remote investing and would be glad to share my experiences.

I now live in Indianapolis and work exclusively with OOS investors, particularly those investors looking to acquire cash flowing small multi-family and/or short term rentals.
Since relocating here, I've enjoyed expanding our own portfolio while also offering services to OOS investors looking to invest in Indiana. I wear a few hats as a realtor, property manager, STR host and project manager so if you'd like to chat about any or all of those services, I'd be glad to schedule a call!

Hi Alyssa,

Congrats on taking the first steps toward building your real estate portfolio! If you’re focusing on the Midwest, I’d highly recommend adding Detroit to your list of markets to explore. I’ve been investing in Detroit since 2019, building my portfolio to 12 doors, all while living in California. The city offers a unique mix of affordable properties, strong rent-to-price ratios, and growing appreciation due to the revitalization happening throughout the area.

Our team specializes in helping out-of-state investors like yourself navigate Detroit's unique market. We focus exclusively on off-market properties, guiding investors through the entire process: sourcing deals, managing renovations, and providing property management services. If you're considering a BRRRR strategy or Section 8 housing, Detroit is an excellent market for both.

Here are a few resources that might help you get started:

• Detroit Real Estate Overview: https://www.buyingdetroitrealestate.com/detroit-real-estate-investing/

• Section 8 Investing in Detroit: https://www.buyingdetroitrealestate.com/section-8-investing/

If you’d like to learn more or discuss how our team can help you reach your goals, feel free to book a call here: https://calendly.com/tbiziorek/20min-detroit-re-chat.

Best of luck on your journey, and I’d be happy to connect if you’re interested in diving deeper into the Detroit market!

Cheers,

Travis

@Alyssa Abegg-Garcia have you considered Detroit?

Prices were up over 20% in 2024!

https://detroitmi.gov/news/detroit-home-values-increased-ave...

https://www.cbsnews.com/detroit/news/detroit-home-prices-amo...

https://www.detroitnews.com/story/news/local/detroit-city/20...

Regardless of where you decide to invest, recommend you first figure out the property Class you want to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

DM us if you’d like to discuss this logical approach in greater detail!

If you have an investment horizon with goals 5-10 years out, you're going to need property appreciation and rent appreciation to get you there. The 10 year return in an expensive market will obliterate the 10 year return in most of the midwest. Every city also has sub-markets...appreciation in Carmel is going to appreciate exponentially more than the Eastside of Indy with loads of $70k houses. It is, however, probably impossible to find cash flow in Carmel (even though it would likely provide the best 10 year return).

If you really want to be work optional in 5-10 years, I'd encourage you to find the most expensive market that you can stomach and invest there. At the end of 10 years, sell that and convert to a cheaper, cash flowing market (and maybe pay cash). 

Or if you want day 1 cash flow, try a high effort strategy like short term, mid term, rent by the room, etc. I'm a fan of mid term rentals in college towns with a level 1 trauma center, 400+ bed hospital...places like Ann Arbor, Madison if you can count that as a college town, Champaign-Urbana if you want a cheap one, etc. that are really cool places to live. Ultimately, what determines appreciation is the answer to the question - "Do people with options want to live here?"

Nice to meet you Alyssa. I'm in Western WA as well, house hacking and have 5 units in Pierce county. I'd recommend coming to some networking events in the area. Several people I know currently are investing in Indiana and Ohio. Just my two cents but for your first deal out of state, I wouldn't settle for cash flow neutral. 

I agree with the notes above but will also caution you to make sure you're very conservative in your underwriting for the multi-family properties with more square footage. My experience with the smaller multi-family units has been that more occupants = more wear and tear on your property so the turnover costs are often higher than SFH. Sometimes it can take longer to place a *qualified* tenant into these properties as well so your vacancy can be a bit higher.