Real Estate Deal Analysis & Advice

What to Do If You’re Located in an Expensive Real Estate Market

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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Chicago downtown skyline at twilight with highway and traffic.

Often, certain investments are working in your town, but they are just not working at your financial level. In other words, the numbers work, but they are so high that the barrier to entry is keeping you out. If so, there are creative methods you can use to get involved. For example, forming a partnership, raising private money, or engaging in real estate wholesaling can allow you to still be involved. There are also a lot of creative ways you can invest in properties that require far less money.

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I understand, of course, that in some areas, a home selling for $300,000 still may only rent for $1,000 per month. I understand that in some areas, the relativity between rent and price is out of whack. Sometimes, properties are just not worth buying.

What then?

find-deals-hot-market

Related: AirBnB vs. Traditional Rental Income: A Creative Way for Investors to Cash Flow in Expensive Cities

What Is Working in Your Area?

Perhaps your goal is to buy and hold single family homes in Manhattan. I'm sorry, but that's probably not going to work out real well for you. Each location is optimal at certain things but not at everything. If the math doesn't seem to work on a certain type of investment in your area, perhaps it's time to consider what is working.

  • Would wholesaling commercial properties be a better use of your time?
  • What about multifamily properties?
  • How about condo conversions?
  • What about fast food triple-net leases?
  • Have you considered subsidized low-income housing?

Before blacklisting your entire town, make sure you take time to investigate exactly what your town is good at. Perhaps you’ll discover a highly profitable investing strategy that your “expensive town” is excellent at.

There are dozens of different ways to invest in rental properties; you might just need to find the right niche. To find what is working in your town, simply connect with investors who are actively engaged in your market. What are they investing in? How are they making a profit? Discover the secret to their success, and you’ll find the path to yours.

Aerial view of a green leafy suburb

Have You Checked the Outskirts?

How much do Starbucks’ employees make in downtown New York City? My guess is not a whole lot more than they make in small rural towns. My point is this: the large percentage of society who makes less than $15 an hour and works in expensive cities still needs to live somewhere near their place of work. Baristas are not making six figures, yet they still manage to work in expensive areas. How?

Related: 4 Things to Understand BEFORE Investing in Markets with Declining Populations

In nearly every expensive city, there are pockets of low-priced properties. Don't get me wrong, I'm not advocating slumlording or investing in a dangerous ghetto. Those areas have problems and extra expenses of their own. Location is still key in any real estate investment. I'm referring to the middle-class neighborhoods on the outskirts and in the suburbs. Generally, these areas are found 20 to 40 miles outside the city center, in smaller towns and communities.

Speak with a good real estate agent about these areas or get on BiggerPockets and connect with some local successful investors and see where they are investing. Find the best location with the lowest prices, and focus your efforts there.

If still you find that there are no decent locations nearby that you can invest in, perhaps it’s time to look outside your area and consider long-distance investing.

Are you located in an expensive market? Have you found ways around prices that just don’t make sense?

Leave your comments below!

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has tau...
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    Robert Beryl Real Estate Agent from Coral Springs, FL
    Replied about 3 years ago
    I’m trying to start out, reading as much as possible and loving the Podcasts. I’m in one of those high priced areas; South Florida. I don’t feel I know enough yet, but they are building new ocean high rises which are condo hotels. This seems (though need to run more numbers) like a possible way in for me.
    Herman Virgen from Los Angeles, California
    Replied about 3 years ago
    Los Angeles has a ton of suburbs and cheap areas still.
    Myron Kinsey Army veteran (retired) from Las Vegas, Nevada
    Replied about 3 years ago
    What are some in particular if you don’t mind me asking? Thanks in advance.
    Lance Roberts
    Replied about 3 years ago
    Check the Inland Empire and areas of Long Beach. All that come to mind for me…
    Herman Virgen from Los Angeles, California
    Replied about 3 years ago
    Not worth buying anything now unless you have a ton of cash you need to spend. Best to wait for the crash
    Aaron Moayed Real Estate Broker from Sacramento, CA
    Replied about 1 year ago
    What crash.... It's only gone up in the last two years... Please don't be a know-it-all guru... There wasn't even any statistical data lending credit to a looming crash.
    David A. Santana Rental Property Investor from Harker Heights, TX
    Replied 11 months ago
    @aaron moayed It’s called history. Prices always go up until they don’t. There are always corrections in the stock market and real estate. You know the market is way too crazy when people are paying $250,000 for a DUPLEX in Killeen, TX to get $1,500 in rent. Any idiot can overpay for property.
    Matt Rachow Investor
    Replied 9 months ago
    Prices will soften at some point. However, the forces that caused the 08' (and 91') crash do not exist in this market. Too much current overall equity, stricter lending standards, hedge funds and other financial entities who own properties free and clear.
    JRod
    Replied about 3 years ago
    I live, work, and play in an expensive area of Cali. The numbers just are not working at this point. I met a 90 year old real estate investor that gave me a good tip….harvest cash now and enjoy the view until the opportunity rolls back again.
    Jeff Schechter Investor from Indianapolis, IN
    Replied about 3 years ago
    Disappointing that you did not mention Turnkey. The whole point of the Turnkey industry is to help investors get the kinds of returns they cannot get in their local area, no matter what strategy they employ.
    Jane Yu
    Replied about 1 year ago
    i'm new to RE investing but wanted to try to start in my local market (Boston), a very HCOL area. Anyone with experience in investing in the greater Boston RE market who can share any good tips?
    Oleksandr Ivanovskiy Rental Property Investor
    Replied about 1 year ago
    You absolutely right. I invest 100 plus miles away from my residence because of that reason.