All Forum Posts by: Dennis Li

 Hey Dennis! Have you checked out the BiggerPockets market finder tool? Investing is such a personal decision, and I certainly think you did the right thing by starting with your own research and then reaching out to the community for input. This tool may help you take a deeper look at markets and maybe find markets that are you to you as well. Combined with the deal finder which will show you actual listings in the market once you identify the market, you can take a lot of the guesswork out of your research!

https://www.biggerpockets.com/markets
^Market finder tool

https://www.biggerpockets.com/deals
^Deal finder tool

@Dennis Li  it’s my backyard, which definitely makes it easier. I always recommend investing in your local area if you can. I’ve been purchasing rentals here since 2006 and have built up a sizable portfolio. While Memphis has seen some population decline, most of that is to the suburbs, with higher-income individuals seeking newer construction. There’s also been an shortage of inventory in the $500,000+ price range. For me, Memphis has been a great place to invest because I don’t have trouble finding renters. Even with more rentals coming on the market due to private equity buying up properties, my homes rarely sit vacant for long. I make sure to renovate and maintain them upfront and during tenant turns. The homes I manage for others that experience extended vacancies usually do so because the owners want maximum rent without putting in the necessary work to make them competitive to others in the immediate area. Memphis is, and likely always will be, a blue-collar city. It’s a strong renter’s market, even more so now with declining homeownership rates. While we may not be the “next big thing” like Austin or Nashville, you don’t need an explosive market to succeed in real estate. If you can identify that next booming market, go for it—get in early before prices skyrocket. For example, we opened a Gus’s Fried Chicken in Knoxville six years ago and another one last year; when we opened doors back in 2018, Knoxville was an emerging market, and we bought a couple of homes there for rentals that worked out well. We bought low, collected rent for a few years and then cashed out. Now, the real estate market has exploded, and there’s little left to buy that can cash flowl Meanwhile, I keep building my portfolio in Memphis and Little Rock. These markets are consistent and easy to cash, making it easier to grow my portfolio compared to chasing the next big thing. We’re also opening a Gus’s in Chattanooga, and while I’ve found a couple of decent deals there, the cash flow is not as good as what I get in Memphis or Little Rock. Any purchases in Chattanooga will be speculative—if they cash flow even a little, that’s fine with me. This was a very long way of saying, Memphis cash flow’s and I can rent my houses out reasonably quick. It has worked for me for 17 years. Several of mine are not paid off and many more will be over the next 5 years. I turned 48 this year and chasing speculative markets is not going to be my thing. I am past that. Now looking for stability and cash flow.

@Dennis Li

hello. unfortunately, with prices and interest rates where they are, you are going to have to put a substantial amount down in order to generate $200+ per month in cash flow.  and you'll need a property in good shape - ie not needing a lot of capex - for cash flow to be steady.  a big ticket item like a roof or a furnace or even a few appliances can wipe out cash flow for years, depending on how you factor it in to your numbers.

and... i just don't know if this is a good use of your capital.  if you add up a hefty down payment + closing costs + rent ready costs... that's a lot of cash for a $250K property, and so your return is going to be pretty low.  do the math.

i also would not buy in any market that you haven't been to at least a couple times in person so you can see properties in person and try to set up your team.  can you buy a great rental in a good neighborhood in Pittsburgh for $200K?  yep.  would i recommend that someone from CA who has never been here pick out a random $200K property on Zillow and buy it, and hope for the best?  nope. nope. nope.  the property might look great and have shiny countertops, and then you'll find out there's a water drainage issue in the backyard, and then the furnace breaks in year 3 for no reason, and then the dishwasher needs to be fixed even though it's brand new.

and again - i'm a broken record on this - i would just re-set your expectations for 'cash flow.'  you're just not going to start netting $200 a month in month 1 and take off from there.  the first few years of owning a property is typically a stabilization period.  it's in years 10+ that things really take off - rents have hopefully gone up, you've paid down the mortgage some, etc.  those first few years can be unpredictable and the cash flow can be lumpy.

hope this helps - not trying to be negative, just trying not to sugarcoat things.

There are so many. Start my a place you would want to visit so that you can take a mini-vacation.  Look for cities with low taxes, no state income taxes and friendly landlord laws. I put those criteria into ChatGPT and came up with. BTW, the list TN. I live in West TN and have build a nice size portfolio,  but if you can find a deal in East TN, I would jump on that. 

If you're seeking states with no state income tax, low property taxes, and landlord-friendly laws, consider the following options:

1. Wyoming

• State Income Tax: None.
• Property Taxes: Effective property tax rate is approximately 0.56%, among the lowest in the U.S. Real Wealth
• Landlord Laws: Wyoming has no rent control ordinances, allowing landlords to set rental rates freely. The eviction process is relatively straightforward, typically taking about three to four weeks. Real Wealth

2. Texas

• State Income Tax: None.
• Property Taxes: While Texas has no state income tax, it compensates with higher property taxes. The effective property tax rate ranges from 1.6% to 1.8%, depending on the county. MarketWatch
• Landlord Laws: Texas is considered landlord-friendly, with laws favoring property owners in areas like eviction processes and rental agreements. LawDepot

3. Tennessee

• State Income Tax: None.
• Property Taxes: Effective property tax rate is around 0.64%, below the national average. Real Wealth
• Landlord Laws: Tennessee has favorable landlord laws, including no rent control and a streamlined eviction process. Real Wealth

4. Florida

• State Income Tax: None.
• Property Taxes: Effective property tax rate is approximately 0.83%, slightly below the national average. Real Wealth
• Landlord Laws: Florida is known for its landlord-friendly regulations, with no rent control and efficient eviction procedures. Real Wealth

5. South Dakota

• State Income Tax: None.
• Property Taxes: Effective property tax rate is about 1.22%, close to the national average. Real Wealth
• Landlord Laws: South Dakota has favorable landlord laws, including no rent control and a straightforward eviction process. Real Wealth

@Kaylee Walterbach that is a really great spreadsheet I had not seen before.

I just sent it to a couple of people I am helping in real estate and I said: Ask yourself how would Warren Buffett read this spreadsheet?

Find the mediocre cities that you believe could have a future growth spurt. Research online can show jobs coming in and government adding assets to the area, etc.

Go in early to the market and buy cheap. Hold and ride the wave up...

So, realize that the big number cities may have already had their day, and you missed it. Be careful investors.

You just described Memphis TN! 

 Hi Dennis, Phoenix has had massive population spikes and the TSMC Manufacturing plant is bringing a ton of high-paying jobs to the area, I foresee growth.  Regulation is also landlord-friendly.  Prices will be steeper but definitely keep your eye out for off market deals.

Best, 

Thomas

Unfortunately Las Vegas is going to be only condos in that price range.