Out of State or Turn Key Markets Evaluated on a GRAPH
A picture means thousand works.
Disregard the numbers I see all these markets as pretty much the same its just what you are looking for on the appreciation and cashflow sliders. If you want to know where the data came from there is none but it is simply my UN-biased opinion (UN-affiliated).
So there are about 10-20 markets that you can buy with a greater than 1% Rent to Value ratio. These markets would be in Quadrant I. Yes we are going to back to high school math class here.
Quadrant II (to the left of Quadrant I) appreciates however has negative cashflow example would be Seattle, California, New York,
Quadrant III (below Quad II) has negative appreciation and negative cashflow. This is just the worst. Example would be Detroit because for all we know they will never figure out the water problem and you will not cash flow because your going to have to carry a gun to collect rent.
Quadrant IV (below Quad I) has negative appreciation and positive cashflow. Its kinda tough to find real examples but think of places that have positive cashflow and in declining neighborhoods.
Takeaway is stay in quadrant I and IMHO you can't really go wrong. Try to diversity within Quadrant I. Get some Memphis/Birmingham to offset some Atlanta.
Original BiggerPockets Forum Post:
Comments (3)
Love it, easy to read and makes perfect sense. Of course there's a million nuances with each market but diversification is an excellent weapon against risk. I was glad to see my own findings match yours.
Josh Bursztyn, about 8 years ago
Josh, do you try to buy some in that lower cluster (NC, AL, IN) and some in the upper cluster (TX,ATL)?
Lane Kawaoka, about 8 years ago
Lane, thanks for posting this. I like this at-a-glance chart to assess which markets to be in based on your investing goals (as a fellow cash flow investor, I think we're both concluding the same markets by looking at this graph). It's a great tool for new investors to focus their efforts on specific markets (easy for them to get overwhelmed or be unsure of which market to invest in) and it's a great tool for experienced investors to balance/rebalance their real estate portfolio.
Kent Clothier, about 8 years ago