Let’s face it. It is tough living in a big city. It is no secret that life in a big city is seriously expensive. With ever-climbing costs, the situation just keeps getting harder. To top it all off, there’s the the skyrocketing costs of real estate! It’s just not easy to find an ideal spot worth investing in. Soaring prices, bad neighborhoods, and an overcrowded market are all big reasons so many would-be investors simply don’t ever get to it.
Everyone knows what happens when demand is high: Prices rise.
So, do you still want to follow the crowd and call a tiny patch of land with a tiny set of rooms your own? If so, then invest in the West Coast and East Coast. Investing there may be one of the stupidest things you can do right now.
Now, you might be thinking, why on earth is investing on the West and East Coast such a bad idea? Well, it’s because huge hedge funds have raised billions of dollars and bought tons of available properties. The first ones they bought were the best deals. There are absolutely no deals left, and the few available are usually not even worth the sweat. Right now, you would be paying top dollar and getting a crappy ROI to boot. But hey, you tell me. How does a $300,000-$500,000 single family home that rents for between $1,200-$1,500 per month sound? Does that seem like a good deal to you? Let me answer that for you: not at all! These are ridiculous and lousy investments in my opinion. I would rather stay in bed sleeping than wreck my balance sheet buying properties like this.
Why All Investors Should Consider the Midwest
Now, if you are someone who refuses to be a follower, I might have some awesome news for you. Think Midwest. Yes, you heard me. The Midwest is where all the real estate action is. Wake up and smell the roses. City dwellers won’t even believe how far their money can go in the Midwestern states. Here, you’ll end up spending almost one-fifth of what you’ll shell out on real estate in any area on the East or West Coasts.
Yes, life in the Midwestern region is different. Yes, it’s less crowded there and a lot quieter, but isn’t it better to have more space, more conveniences, and a stunning piece of real estate at knock-out prices? Well, many people with families would argue that it is indeed better to live there than anywhere else. With top-rated schools, the possibility for a high-end lifestyle, and effortless connectivity all finding their way to these locations, there isn’t much to complain about.
The Midwestern region is known for its scenic natural vistas, which are virtually non-existent in big cities, thanks to rapid urbanization. Most Midwestern areas offer an incredible lifestyle at extremely lucrative prices. So what is the catch, you ask? Well, there isn’t any catch. The cost of living here is much more reasonable than in most big cities. This means people get to save way more than they could ever manage in the big city! Comparatively an under-explored market, the Midwest has potential beyond compare!
Why should you care as an investor? Because these Midwestern families are your future rentals. There’s such a clear demand for rental properties in the Midwest.
5 Reasons to Consider Midwest Investments
But there’s more. When was the last time you felt like a kid in a candy store? With deals so sweet you will feel like a kid again, the Midwest is sure to bring back some great feelings. Why? Properties are available between $50,000-$70,000. In addition, many of these $50,000-$70,000 properties will bring in a rent of $700-$1,000 per month. Now, I don’t know how good your math is, but this gives you a ridiculously high ROI. Many of these houses could be found in solid B areas! You can think of the Midwest as a hidden gold mine waiting to be explored. In many parts of the Midwest, a mere $1 million will buy you a stunning mansion with acres of open space surrounding it. You might even get a lake-facing property, or one with a huge pool and a car collector’s garage!
Let’s face it — life is too short to be spending your time in cramped spaces. Many people feel that way, and that’s why the Midwest is such a success for families. Of course, living in a place that doesn’t resemble a chicken coop is a big plus as well.
Take advantage of the low cost of living and low-priced properties. Invest in properties that give you a perfect ROI and do not burn a hole in your pocket. And there ain’t any place like the Midwest to do that! Here are five things that we absolutely love about the Midwest:
- It is so well contained and life is so much simpler. Its unspoiled solitude is both captivating and oh-so invigorating. Translation? Happy tenants. There’s no big city pressure in the Midwest; everything is just nice.
- Low cost living! An affordable lifestyle with all possible luxuries to go with it is never a distant dream here. That means more cash for rent. It also explains, in part, why rent is relatively high here. It also means that maintenance may be cheaper as well. Don’t forget, especially if you’re living on the East or West Coasts, your hard-earned cash simply has more milage in the Midwest.
- While big cities might be known for neon lights and crazy traffic, the Midwest is known for its serene outdoors and calming silence. Compared to busy city life, the Midwest is like an oasis. There sure are some really beautiful locations. It’s also perfect for the average family: Great family trips assured.
- The Midwest might not be the center of a bustling universe, but there’s still a lot of activity here — economically speaking, that is. There are few financial headquarters, many factories, and an overall less-corporate environment. There are loads of good blue-collar workers, jobs, and job stability.
- There’s a notable lack of pretension. Why is this important? Well, in terms of the maintenance and amenities you need to provide for a mid-class home, it makes a huge difference. People’s expectations are usually a bit lower, and that means easier tenants. It’s not a huge difference from the Coasts, but it’s still noticeable to investors.
Now, those of you who know me know that when I speak about good investment opportunities, I never talk about the appreciation of a property. Right now, the East and West Coasts have some decently appreciating real estate. The thing with appreciation, however, is that it’s basically anyone’s guess as to where it’s going. Many people buy an expensive property and hope that it increases in value in a record amount of time. You might call it investing, but I call it gambling. You know, all I care about is a good cash flow from properties. If you think about it, that’s all that matters. And it’s exactly what the Midwest has to offer. Don’t ask me about where the properties are going in terms of value because I simply don’t care.
Add in extensive homeownership (thanks to some of the lowest average home prices in the country), simple lifestyle, and low-cost living, and you’ve got the perfect mix for investing in properties. After all, homeowners take care of their homes and make living in their neighborhoods as nice as they can.
Check it Out for Yourself
Of course, I understand that if you’re currently living somewhere else, it’s hard to imagine what it’s like elsewhere. It’s why I always recommend that people go check it out for themselves. Know where you’re investing. Think about traveling to the Midwest, and check out some properties in areas that appeal to you. It doesn’t matter that you won’t be living there — it’s just always nice to know that you understand what living in a certain place is like.
Above all, considering a purchase price of $60,000 for a single family home with a rental income of $800 each month, you’d be hard-pressed to find a deal with a similar return anywhere else — especially if you take into account that one $600,000 East or West Coast home buys you 10 of these Midwestern homes. I personally own 20 properties and am looking to buy another 30 by the end of the year.
How’s that for a passive income?
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.