It’s all about that cash flow, baby.
At the right price, your rental property could bring in a lot of extra cash each month and appreciate in value as you’re raking in the money. Before you start charging rent, you’ll need to decide where to buy.
You have a lot of options. Should you focus on a sleepy town that will (hopefully) blow up within the next five to 10 years? Or is it best to invest in a place that’s hot now, cash in, and enjoy some steady growth before you sell? The choice is up to you…
But it’s worth taking a look at all of the best cash flow markets in the country before you apply for a loan.
Some of the hottest cash flow markets in 2020 include:
- Austin, Texas
- Orlando, Fla.
- Dallas, Texas
- Cleveland, Ohio
- Charleston, S.C.
- Indianapolis, Ind.
- Pittsburgh, Pa.
According to the PwC’s Emerging Trends in Real Estate 2020 report, Austin is hot (and not just in August). Current residents will tell you that the city has been booming for years, but the growth isn’t stopping. Of course, anywhere is going to keep growing when Apple announces that they’re building a brand new campus in the area. Grab yourself some barbecue, check out some of the new condos they’re building throughout the city, and stop by my office to say hello.
Orlando isn’t just a place for tourists to come and go. In the past decade, the city’s population has grown by 20 percent. Metro Orlando now holds at least 2 million residents. As the population begins to age and more people start to retire, Florida is going to be the hot place to move. Get ahead of the game and stop by some theme parks to celebrate.
In its “18 Best Places to Buy Rental Property in 2020,” RealWealth Network suggests you can’t go wrong investing in any of the big cities in Florida. Tampa and Jacksonville have frequently made lists for the best places to invest in 2020, and Lakeland was considered a top rental market in 2019.
Like Florida, RealWealth Network explains you can’t go wrong with investing in all of the Lone Star’s big cities, either. Dallas and Houston both have impressive awards and rankings when it comes to job and population growth. Cap rates in at least two Dallas areas hover around 5 percent. The average home price sits around $218,794 with an average rent price at $1,600. Everything is bigger in Texas, and your wins could be big too if you invest in the right places.
Consider San Antonio, Fort Worth, and Amarillo while you’re checking out Texas markets. All of these areas have made it to one list or another as a top cash flow market.
Cleveland is not as hot as Austin and it has nowhere near the amount of tourists as Orlando. But not all investors want to dive into markets that already have such high demand.
Cleveland is steadily growing as a city, cleaning up its act and bringing in more millennials. Housing is cheap! The median home price is far from six digits at an easy $67,000.
There are many factors that affect whether or not an area is good for investing. Home prices, population growth, and employment rate tell a story to investors looking to buy. North Charleston’s unemployment rate is a nice 1.8 percent. This low number, along with a 16.1 percent population growth and an annual gross rental yield of 9.6 percent, tell a sweet story.
The southern town isn’t screaming as loud as hot cities, but it can be a great place to build a strong portfolio with high returns, per a report from Millionacres.
Indianapolis is another hardworking city with a growing population. Cheaper rents are attracting many millennials away from boiling-hot markets—in eight years, the population has grown 8 percent.
Home appreciation has risen 6.6 percent in the past year alone, as indicated by Millionacres data. It’s the second-largest city in the Midwest with a strong range of industries that will support its population for years to come. If you buy now, the median home price is just above $160,000.
Here’s one final option for my East Coast friends. When millennials flock to a city, investors should quickly follow. We all know that millennials prefer to rent rather than buy. Landlords are finding that to be truer than ever in Pittsburgh. Despite a small population dip, the millennial population has grown a lot in the Steel City.
According to Roofstock, Pittsburgh has been slowly creeping back onto the map for the past few years, and 2020 could be the year that makes it a truly hot city.
You can make a bad investment in a hot market. Just because you’ve found a booming city doesn’t mean anything is guaranteed. A lot more goes into your choice than just where people are moving.
Consider how much money you’re using to invest and how to spend it wisely. Choose the right tenants. Budget your reno costs before you start flipping. A hot market is a key piece to the puzzle, but there are a lot more pieces to look at before you can see the full picture.
Where do you intend to invest in real estate this year? Why?
Let’s talk in the comment section below.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.