Posted about 2 months ago

​Top Real Estate markets to invest in through 2020

Previously I wrote about how to identify emerging markets ( That information can be also used to identify emerging neighborhoods in the market that you are in. With that information I have come up with some of my favorite markets to invest in with a potentially bright future.

As you look at the list be aware that in most large cities you will have several neighborhoods that are somewhere within its own cycle that you can capitalize on. Please also be aware that some neighborhoods may never see the recovery stage – or at least no time soon, so look out for those areas.

How to identify an emerging market: 1. Job creation, 2. Increase in population and future expected growth, 3. Building proposed (permits pulled), 4. Government planning 5. Affordability 6. Absorption rate and vacancy rate. 7. Courage. One of the other major factors that I look at, is if there is opportunity to buy value add properties, meaning buildings are being sold in the asset class and size that I desire and there are building being sold at a discount due to a problem needing to be solved.

With all of that said, my list is made up of cities that I see with potential, but many cities I have not fully dug deep into them. I would do your own search, then pick a handful of cities and dig deeper. Then pick 2-3 and dig really deep. One of my suggestions is to get the CoStar or Axiometrics report of the city and neighborhoods you like within the city, then visit and then invest.

Top cities (in no particular order) – note the population growth is 10 year projections

1. Las Vegas, Nevada – good affordability, 2.5%/yr population growth, 6.1% average Cap rate, moderate housing starts

2. Indianapolis, Indiana – good affordability, 2%/yr population growth, 6.8% ave cap, moderate to high housing starts

3. Phoenix, Arizona – Decent affordability, 1.6% population growth, 6.2% ave cap, moderate housing starts

4. Raleigh, North Carolina – Good affordability, 2.6% population growth, 6.1% ave cap, moderate housing starts

5. Atlanta, Georgia – good affordability, 3% population growth, 6.4% ave cap, moderate/high housing starts

6. Oklahoma City, Oklahoma – good affordability, 1.1% population growth, 6.7% ave Cap, moderate housing starts

7. Cincinnati, Ohio – good affordability, 1% population growth, 6.8% Cap rate, moderate housing starts

8. Columbus, Ohio – good/moderate affordability, 1.2% population growth, 6.7% cap rate, moderate housing starts

9. Columbia, South Carolina – Good/moderate affordability, 1.2% population growth, 6.7% ave cap rate, moderate housing starts

10. Cape Coral, Florida – moderate affordability, 3.8% population growth, 6.3% ave cap, moderate housing starts

11. Louisville, Kentucky – good affordability, 1.1% population growth, 6.9% cap rate, Moderate/low housing starts

12. Kansas City – good affordability, 0.9% population growth, 7.1% ave cap rate, moderate/low housing starts

Some black swans: These are cities that miss some criteria, but could be really good picks if the right things happen.

1. Houston, TX – with the hurricane and flooding there is sure to be opportunity for years to come, but do you want a flooded building? Houston has affordability, a growing economy, decent caps at 6.6%, very low housing starts (due to previous over-building) and potential high amount of opportunity. If oil prices rebound into the $50-60/barrel consistently, then Houston (which is not all about oil anymore), could be the best place to buy.

2. Detroit, Michigan – In 2012, I was sitting in a meeting with several people and I said we should invest in Detroit, they all laughed at the idea. Well look at Detroit now! Could Detroit continue to rebound? The population projections are really weak at only 0.1% annual growth, but if companies continue to choose Detroit that could drastically change.

3. Memphis, Tennessee. Memphis is a different kind of city. Very much block to block and almost building to building. Memphis has all the ingredients to see major growth and increased rents. It is ripe for opportunity, sitting at an average 7.8% cap rate with many distressed buildings. The problem? Memphis has seemed rip for growth for decades, but hasn’t able to keep the up the steam.

Some smaller cities with potential:

1. Des Moines, Iowa – 2% population growth, good affordability, moderate housing starts, 6.8% cap rate, but can you find opportunity?

2. Lubbock, TX – Good affordability, 0.9% population growth, moderate/low housing starts, 6.7% cap rate

3. Greensboro, North Carolina – good affordability, 0.9% population growth, moderate/low housing starts, 6.7% cap rate

4. Savannah, Georgia – good affordability, 1.1% population growth, moderate housing starts, 6.6% cap. Good potential with freight shipping

There are other cities that have had tremendous growth for a long time and seem poised to continue with that growth. These did not make my list for one reason or another, but came in close. The issue with these top cities is can you find opportunity? I know investors are still buying in these cities, but can a new buyer come in and buy a quality deal?

1. Dallas/Fort Worth, Texas

2. Austin, Texas

3. Orlando, Florida

4. Jacksonville, Florida

5. Charlotte, North Carolina

6. Provo, Utah

7. Salt Lake City, Utah

I am sure that I left some cities off the lists, but the cities that made my lists needed to hit as much of the criteria as possible. There are plenty of cities with population growth or great cap rates, but then failed on other items. For instance Cleveland, Ohio has an average cap rate of 7.9% with opportunity to get a great value add deal, but the metro population is projected to decline by 0.4%/year through 2030. Seattle, Washington is projected to have solid population growth, but the rent is not affordable and the cap rates come in at 5.4%.

Let me know what you think are the best real estate cities to invest in.

To your success!

Todd Dexheimer

Comments (15)

  1. Tiny 1515800266 avatar amyd27

    So helpful, thank you!

  2. Tiny 1514943170 avatar certainly

    Great article.

  3. Tiny 1508264250 avatar vinced7

    @Todd DexheimerGreat post Todd!

  4. No avatar

    @Todd Dexheimer thanks for the great article! What are your thoughts on reports such as this: There is no mention of affordability in this report, thats an important gap, other than is there useful information in it?

  5. Tiny 1514512936 avatar ericdnelson

    Thank you for the advice. I have family that live in Utah. It hit your list twice. I will have to do some research about that area before I make my next visit there.

  6. Tiny 1399663143 avatar investorinnc

    I live in Raleigh, NC. Our population growth has been impressive in the last 20 years and is projected to keep up in the near future because of the our demographics. Major Universities, solid and well diversified employers, smart development.  When looking at a particular market mentioned, Investors should also consider the surrounding counties to find excellent deals.  Raleigh is in Wake County, however, this is the next big thing is in neighboring Chatham County: Durham County has also been growing at an amazing pace. 

  7. Tiny 1500527597 avatar chrisl232

    Definitely a great starting point where one would want to begin their research!

  8. No avatar

    Hi, where do you get numbers on housing starts and buildings proposed? Thanks.

  9. Tiny 1495682877 avatar tlittle

    Great article! I'm grateful to benefit from the fruits of your labor as well.  Detroit's been on my mind all year.  I'll take a visit with folks I know in the area to drill down a bit.  Thanks again.  Happy Investing.

  10. Tiny 1499987279 avatar tomdonnelly

    Thanks for posting Todd.  I recently did a 1 hour tutorial with axiometrics and am on the fence about purchasing.  The platform is impressive and I can definitely see the value but want to make sure I choose the right info source if I'm going to drop that kind of $.  Do you utilize axiometrics to find leads once you've chosen your city and neighborhood?  I couldn't tell in the tutorial if this would work well for that purpose.  

    1. Tiny 1507610011 avatar toddd23

      @Tom DonnellyI don't use axiometrics, however, I have heard good things about them. When I choose a market I then dig deep and also get CoStar reports from the brokers. City webpages have great information as well and going to CBRE, Marcus, etc to get their reports is great. 

  11. Tiny 1487969703 avatar billiejmiller

    Great post! Thanks for sharing all your hard work!

    We are about to dump some of the equity we've earned in Denver into multi-family elsewhere. Indianapolis has been growing on me. 

  12. Tiny 1507400548 avatar chrisko

    Incredible post! Thank you for your diligence! I see you mentioned Memphis Tennessee however I was considering another Tennessee city, Chattanooga, which has positive job growth and lower that average unemployment however I am unaware at its Cap Rate. I am curious if this city has met your radar! Thanks!

    1. Tiny 1507610011 avatar toddd23

      @Christopher Kolasa Chattanooga, TN did not hit my list because of it's size. That doesn't mean it is not a good market. Check out my post on how to identify emerging markets to see if it hits most of the major items.

  13. Tiny 1508309907 avatar jameskojo

    Great post, Todd! Too few are actually willing to name names, and as usual, we all now get to benefit from your hard work and knowledge.

    On Detroit: I've seen a lot of press about it's turn-around and the level of investment in the city, and the rise in housing prices and rents speak for themselves. However, what I don't see mentioned in the macro-analysis is where all the *new* jobs are supposed to come from. It seems to me, it's still a town dependent on the automotive industry. Things may be looking stable for the industry now, but it's highly volatile and subject to further disruption by oil and new players (e.g. Telsa.) Have you seen any evidence that they might re-invent themselves and diversify into new industries? What about the "courage" factor you speak of? Have you seen any of that from their leaders?

    Thanks again for being a fount of information!