New Investor - Which market to pick?

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New Investor - Which market to pick?

Account Closed
Investor · San Francisco, CA · Member since 2022 · 36 posts · 41 votes

Hello,

My name is Jason and I'm a new real estate investor. I'm having trouble deciding on a market as this is my first purchase. I plan to purchase a MRH in order to Brrrr. I'm familiar with the following areas either be because of college, friends, or family.

- DC/Alexandria, VA
- Blacksburg, VA
- Richmond/Henrico, VA
- Gainesville, FL
- Austin, TX
- San Antonio, TX
- San Francisco, CA (I live here)

I'm willing to look outside those markets, but would love to hear reasons behind that.

Thank you

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y

Columbus ohio..  just beating all the Columbus brokers to the punch :)  

personally I like Las Vegas for west coast investors.. 

1. some of the lowest property tax rates in the country 

2. desert scape  super easy for tenants to keep up with .

3. newer stock  not 50 to 100 year old stuff that is cap ex heavy.  IE stucco siding tile roofs etc. 

4. no state income tax

5. super easy to get to  200.00 round trip from SFO and only takes about 65 minutes.

6. fun place to go.

7. buy nicer areas that have strong rents..

when you run ALL the numbers  tax's  cap ex  on going maintenance you will find you can spend more get a very nice quality home that performs as well as homes that appear on paper to have better numbers..  PS I dont have anything to sell you and its just my experince of owing there and in 15 other states. 

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  • Jeremy HartPro Member
    Residential Real Estate Broker · Blacksburg, VA · Member since 2016 · 155 posts · 67 votes
    4y

    Hi @Account Closed! I'm in Blacksburg, and invest with few exceptions here alone. I have a few specific reasons for that, but namely it's in large part due to the fact that it's the area I know the best, and the area I'm most comfortable in. I'm happy to talk with you about some of the nuances of this market - obviously don't know the others, but happy to share my experiences with Blacksburg over the last 20 years if you'd like to set up a call. 

    2Reply
  • Shawn K HicksBusiness Member
    Real Estate Agent · Gainesville, FL · Member since 2019 · 128 posts · 107 votes
    4y

    As a Realtor in Gainesville FL, I can offer you my subjective opinions while attempting to be as objective as possible:

    3 years ago, finding a great investment opportunity was the equivalent of shooting fish in a barrel. Different investors may have a slight variance in how they report their percentage of return, but to put it in perspective, my local investor pool would typically only purchase a property that showed a 15 to 25% return. I even had a guy pass on what I perceived to be a steal a couple of years ago (24 units in a multi family neighborhood) as he said the return was "only between 12 & 13%". I at that time advised him to look at the monthly cash flow and not just the margin. He has since regretted passing on that opportunity.

    Fast forward to 12 to 15 months ago. By that time, there were no longer any great buys to be found on the MLS. In the event something worthwhile did hit the MLS, it quickly would turn into multiple offers and the price would get bidded up. The solution was there were several wholesalers that still had some pretty good buys off market.

    In todays market, there are not in my opinion much in the way of great buys on the MLS or off market as even the wholesalers are bringing me "deals" at retail prices. When providing this feedback, I am mainly referring to traditional rental opportunities, or flip possibilities.

    To not be all doom & gloom, I want to transition to some positive points:

    Though at the market prices properties are now selling for, the numbers are less appealing for traditional rentals,-AirBnB has caught fire. In particular, there are a couple of local property managers that specialize in & only handle AirBnb properties. This has opened up new opportunities for investors, as the numbers have many investors downright giddy. (I will say there does need to be taken into account that our city council & Alachua County in general have a bit of a reputation for overreach in government. There is some concern as to whether in the future there will be any new taxes, guidelines, ordinances, etc that could impact the ease & profitability with AirBnb. For the time being however, let the good times roll.)

    @Jenn BaronaTwo local resources I highly recommend to interject with some further feedback for you are: @Jenn BaronaIn spite of the market getting tougher to find "deals", Jen has continued to hustle and find deals. Jen's family I've observed has still had success with a couple of flips of their own,-and is still entrenched in the Real Estate investment community.

    Also, Jen Turner a local investor who has had success with house hacking and a couple of BRR properties is always glad to help and offer insight pertaining to vendors, contractors, etc.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y

    Columbus ohio..  just beating all the Columbus brokers to the punch :)  

    personally I like Las Vegas for west coast investors.. 

    1. some of the lowest property tax rates in the country 

    2. desert scape  super easy for tenants to keep up with .

    3. newer stock  not 50 to 100 year old stuff that is cap ex heavy.  IE stucco siding tile roofs etc. 

    4. no state income tax

    5. super easy to get to  200.00 round trip from SFO and only takes about 65 minutes.

    6. fun place to go.

    7. buy nicer areas that have strong rents..

    when you run ALL the numbers  tax's  cap ex  on going maintenance you will find you can spend more get a very nice quality home that performs as well as homes that appear on paper to have better numbers..  PS I dont have anything to sell you and its just my experince of owing there and in 15 other states. 

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    9Reply
  • Joshua JanusBusiness Member
    Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    @Jay Hinrichs Good work!

    Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. The appreciation rate in Columbus has been 8% higher than the national average over the last year. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.

    https://www.dispatch.com/story/business/2022/01/21/intel-ohio-building-computer-chip-factories-licking-county-jersey-township/9173472002/

    Another example of economic growth is the upcoming Ohio State University Wexner Medical Center Inpatient Hospital which is a 1.9million square foot hospital that will bring over 800 new beds and a thousand new jobs.

    https://abc6onyourside.com/news/local/new-osu-hospital-expected-to-transform-health-care

    Here are a few more recent investments

    https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0

    https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus


    Check out The Complete Guide to the Columbus, Ohio Real Estate Market which goes through the Columbus, Ohio market in depth and will give you a better scope of where the highest levels of growth are taking place and where to look to invest.

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    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Joshua Janus:

    @Jay Hinrichs Good work!

    Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. The appreciation rate in Columbus has been 8% higher than the national average over the last year. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs.

    https://www.dispatch.com/story/business/2022/01/21/intel-ohio-building-computer-chip-factories-licking-county-jersey-township/9173472002/

    Another example of economic growth is the upcoming Ohio State University Wexner Medical Center Inpatient Hospital which is a 1.9million square foot hospital that will bring over 800 new beds and a thousand new jobs.

    https://abc6onyourside.com/news/local/new-osu-hospital-expected-to-transform-health-care

    Here are a few more recent investments

    https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0

    https://news.wosu.org/news/2022-02-08/rumpke-to-build-50-million-recycling-facility-in-columbus


    Check out The Complete Guide to the Columbus, Ohio Real Estate Market which goes through the Columbus, Ohio market in depth and will give you a better scope of where the highest levels of growth are taking place and where to look to invest.


    there ya go !!!  I would try to buy close to the new intel facility.. My daughter is in high level finance at Intel and explained the whole reasoning with the move to Ohio.. good things will happen in and around the new facility for sure..  I still like Vegas though personally for SFR rentals.
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  • Nick Velez
    Lender · Member since 2019 · 250 posts · 219 votes
    4y
    Quote from @Shawn K Hicks:

    As a Realtor in Gainesville FL, I can offer you my subjective opinions while attempting to be as objective as possible:

    3 years ago, finding a great investment opportunity was the equivalent of shooting fish in a barrel. Different investors may have a slight variance in how they report their percentage of return, but to put it in perspective, my local investor pool would typically only purchase a property that showed a 15 to 25% return. I even had a guy pass on what I perceived to be a steal a couple of years ago (24 units in a multi family neighborhood) as he said the return was "only between 12 & 13%". I at that time advised him to look at the monthly cash flow and not just the margin. He has since regretted passing on that opportunity.

    Fast forward to 12 to 15 months ago. By that time, there were no longer any great buys to be found on the MLS. In the event something worthwhile did hit the MLS, it quickly would turn into multiple offers and the price would get bidded up. The solution was there were several wholesalers that still had some pretty good buys off market.

    In todays market, there are not in my opinion much in the way of great buys on the MLS or off market as even the wholesalers are bringing me "deals" at retail prices. When providing this feedback, I am mainly referring to traditional rental opportunities, or flip possibilities.

    To not be all doom & gloom, I want to transition to some positive points:

    Though at the market prices properties are now selling for, the numbers are less appealing for traditional rentals,-AirBnB has caught fire. In particular, there are a couple of local property managers that specialize in & only handle AirBnb properties. This has opened up new opportunities for investors, as the numbers have many investors downright giddy. (I will say there does need to be taken into account that our city council & Alachua County in general have a bit of a reputation for overreach in government. There is some concern as to whether in the future there will be any new taxes, guidelines, ordinances, etc that could impact the ease & profitability with AirBnb. For the time being however, let the good times roll.)

    @Jenn BaronaTwo local resources I highly recommend to interject with some further feedback for you are: @Jenn BaronaIn spite of the market getting tougher to find "deals", Jen has continued to hustle and find deals. Jen's family I've observed has still had success with a couple of flips of their own,-and is still entrenched in the Real Estate investment community.

    Also, Jen Turner a local investor who has had success with house hacking and a couple of BRR properties is always glad to help and offer insight pertaining to vendors, contractors, etc.


    I will second Gainesville for Airbnb's! When compared to other higher cost markets in Florida, Gainesville is truly a hidden gem in the STR space.

    2Reply
  • Raven Lawrence
    Real Estate Agent · San Antonio, TX · Member since 2022 · 12 posts · 2 votes
    4y

    What’s up Jason?! I can’t speak too much for those other markers but I can definitely say that San Antonio has room for a little bit of every kind of real estate investment. What sets us apart from Austin is that we have so much more room to grow. We have space in population, space and in the economy. Best of luck in your next venture! Reach out if you end up making it this way - (210)461-1192

    1Reply
  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    4y
    Quote from @Shawn K Hicks:

    As a Realtor in Gainesville FL, I can offer you my subjective opinions while attempting to be as objective as possible:

    3 years ago, finding a great investment opportunity was the equivalent of shooting fish in a barrel. Different investors may have a slight variance in how they report their percentage of return, but to put it in perspective, my local investor pool would typically only purchase a property that showed a 15 to 25% return. I even had a guy pass on what I perceived to be a steal a couple of years ago (24 units in a multi family neighborhood) as he said the return was "only between 12 & 13%". I at that time advised him to look at the monthly cash flow and not just the margin. He has since regretted passing on that opportunity.

    Fast forward to 12 to 15 months ago. By that time, there were no longer any great buys to be found on the MLS. In the event something worthwhile did hit the MLS, it quickly would turn into multiple offers and the price would get bidded up. The solution was there were several wholesalers that still had some pretty good buys off market.

    In todays market, there are not in my opinion much in the way of great buys on the MLS or off market as even the wholesalers are bringing me "deals" at retail prices. When providing this feedback, I am mainly referring to traditional rental opportunities, or flip possibilities.

    To not be all doom & gloom, I want to transition to some positive points:

    Though at the market prices properties are now selling for, the numbers are less appealing for traditional rentals,-AirBnB has caught fire. In particular, there are a couple of local property managers that specialize in & only handle AirBnb properties. This has opened up new opportunities for investors, as the numbers have many investors downright giddy. (I will say there does need to be taken into account that our city council & Alachua County in general have a bit of a reputation for overreach in government. There is some concern as to whether in the future there will be any new taxes, guidelines, ordinances, etc that could impact the ease & profitability with AirBnb. For the time being however, let the good times roll.)

    @Jenn BaronaTwo local resources I highly recommend to interject with some further feedback for you are: @Jenn BaronaIn spite of the market getting tougher to find "deals", Jen has continued to hustle and find deals. Jen's family I've observed has still had success with a couple of flips of their own,-and is still entrenched in the Real Estate investment community.

    Also, Jen Turner a local investor who has had success with house hacking and a couple of BRR properties is always glad to help and offer insight pertaining to vendors, contractors, etc.


     Add to that trying to compete against locals from long distance. Trying to rehab from long distance. And rising interest rates. All make this a very difficult proposition in any market. 

    If interest rates go up another couple percent then cash flow real estate investing will disappear.
     

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Eric James:
    Quote from @Shawn K Hicks:

    As a Realtor in Gainesville FL, I can offer you my subjective opinions while attempting to be as objective as possible:

    3 years ago, finding a great investment opportunity was the equivalent of shooting fish in a barrel. Different investors may have a slight variance in how they report their percentage of return, but to put it in perspective, my local investor pool would typically only purchase a property that showed a 15 to 25% return. I even had a guy pass on what I perceived to be a steal a couple of years ago (24 units in a multi family neighborhood) as he said the return was "only between 12 & 13%". I at that time advised him to look at the monthly cash flow and not just the margin. He has since regretted passing on that opportunity.

    Fast forward to 12 to 15 months ago. By that time, there were no longer any great buys to be found on the MLS. In the event something worthwhile did hit the MLS, it quickly would turn into multiple offers and the price would get bidded up. The solution was there were several wholesalers that still had some pretty good buys off market.

    In todays market, there are not in my opinion much in the way of great buys on the MLS or off market as even the wholesalers are bringing me "deals" at retail prices. When providing this feedback, I am mainly referring to traditional rental opportunities, or flip possibilities.

    To not be all doom & gloom, I want to transition to some positive points:

    Though at the market prices properties are now selling for, the numbers are less appealing for traditional rentals,-AirBnB has caught fire. In particular, there are a couple of local property managers that specialize in & only handle AirBnb properties. This has opened up new opportunities for investors, as the numbers have many investors downright giddy. (I will say there does need to be taken into account that our city council & Alachua County in general have a bit of a reputation for overreach in government. There is some concern as to whether in the future there will be any new taxes, guidelines, ordinances, etc that could impact the ease & profitability with AirBnb. For the time being however, let the good times roll.)

    @Jenn BaronaTwo local resources I highly recommend to interject with some further feedback for you are: @Jenn BaronaIn spite of the market getting tougher to find "deals", Jen has continued to hustle and find deals. Jen's family I've observed has still had success with a couple of flips of their own,-and is still entrenched in the Real Estate investment community.

    Also, Jen Turner a local investor who has had success with house hacking and a couple of BRR properties is always glad to help and offer insight pertaining to vendors, contractors, etc.


     Add to that trying to compete against locals from long distance. Trying to rehab from long distance. And rising interest rates. All make this a very difficult proposition in any market. 

    If interest rates go up another couple percent then cash flow real estate investing will disappear.
     


    I think were rates are for DSCR your going to see private funds come in and start to compete IE true private not wall st. backed.

    just think about it 7 to 8% coupons  ???  will be plenty of investor jumping to fund those in their iras etc I know I will enter that arena 

    as long as there is equity and strong borrowers I wont care if they cash flow or not..  break even to a little negative will be fine. 

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  • Account Closed
    OP
    Investor · San Francisco, CA · Member since 2022 · 36 posts · 41 votes
    4y

    Hi, thank you all!!

    I'm reading through all of the posts to see what sounds interesting.

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    4y
    Quote from @Account Closed:

    Hello,

    My name is Jason and I'm a new real estate investor. I'm having trouble deciding on a market as this is my first purchase. I plan to purchase a MRH in order to Brrrr. I'm familiar with the following areas either be because of college, friends, or family.

    - DC/Alexandria, VA
    - Blacksburg, VA
    - Richmond/Henrico, VA
    - Gainesville, FL
    - Austin, TX
    - San Antonio, TX
    - San Francisco, CA (I live here)

    I'm willing to look outside those markets, but would love to hear reasons behind that.

    Thank you


    Columbus, Ohio is a great market to pick up rental properties because of the lower home prices and demand from renters. JPMorgan Chase, Nationwide, Honda, L Brands, Huntington, and Amazon are just a few of the many companies that have thousands of jobs in the city.

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  • Fernando E.
    Rental Property Investor · SF Bay Area · Member since 2016 · 234 posts · 103 votes
    4y
    Quote from @Jay Hinrichs:

    Columbus ohio..  just beating all the Columbus brokers to the punch :)  

    personally I like Las Vegas for west coast investors.. 

    1. some of the lowest property tax rates in the country 

    2. desert scape  super easy for tenants to keep up with .

    3. newer stock  not 50 to 100 year old stuff that is cap ex heavy.  IE stucco siding tile roofs etc. 

    4. no state income tax

    5. super easy to get to  200.00 round trip from SFO and only takes about 65 minutes.

    6. fun place to go.

    7. buy nicer areas that have strong rents..

    when you run ALL the numbers  tax's  cap ex  on going maintenance you will find you can spend more get a very nice quality home that performs as well as homes that appear on paper to have better numbers..  PS I dont have anything to sell you and its just my experince of owing there and in 15 other states. 

     Thanks @Jay Hinrichs its been along time since we met in SF meetup. Hope you are well. Thanks for the tip in Las Vegas, my sister and I were looking into Hawaii for an out of state property, numbers don't work. I'm also looking into Phoenix Arizona, Florida and Las Vegas Nevada for multi family home. I just did a quick search and bam, found this comment. Thanks boss, I appreciate your comment here. Cheers! 

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Fernando E.:
    Quote from @Jay Hinrichs:

    Columbus ohio..  just beating all the Columbus brokers to the punch :)  

    personally I like Las Vegas for west coast investors.. 

    1. some of the lowest property tax rates in the country 

    2. desert scape  super easy for tenants to keep up with .

    3. newer stock  not 50 to 100 year old stuff that is cap ex heavy.  IE stucco siding tile roofs etc. 

    4. no state income tax

    5. super easy to get to  200.00 round trip from SFO and only takes about 65 minutes.

    6. fun place to go.

    7. buy nicer areas that have strong rents..

    when you run ALL the numbers  tax's  cap ex  on going maintenance you will find you can spend more get a very nice quality home that performs as well as homes that appear on paper to have better numbers..  PS I dont have anything to sell you and its just my experince of owing there and in 15 other states. 

     Thanks @Jay Hinrichs its been along time since we met in SF meetup. Hope you are well. Thanks for the tip in Las Vegas, my sister and I were looking into Hawaii for an out of state property, numbers don't work. I'm also looking into Phoenix Arizona, Florida and Las Vegas Nevada for multi family home. I just did a quick search and bam, found this comment. Thanks boss, I appreciate your comment here. Cheers! 


    its worked well for us with no leverage we were getting 6 to 10% COC then add in tax bene's.. with max leverage not sure what the returns would be.. we bought solid B to B + Gated community etc.

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  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Account Closed:

    Hello,

    My name is Jason and I'm a new real estate investor. I'm having trouble deciding on a market as this is my first purchase. I plan to purchase a MRH in order to Brrrr. I'm familiar with the following areas either be because of college, friends, or family.

    - DC/Alexandria, VA
    - Blacksburg, VA
    - Richmond/Henrico, VA
    - Gainesville, FL
    - Austin, TX
    - San Antonio, TX
    - San Francisco, CA (I live here)

    I'm willing to look outside those markets, but would love to hear reasons behind that.

    Thank you


     Just invest in San Francisco county like Peninsula,  imagine May 22 avg price is only $2,416,000, last year on same month it's $1,900,000.

    You bought piece of 1 bathroom in Peninsula year ago and u made half million in one year without doing anything.

    Bonus: there's no snow in Peninsula lol :) 
    Days in market: 3 days..... can't beat it lol


    0Reply
  • Garrett CrosbyPro Member
    Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
    4y

    There are so many great options... you can make great arguments for which market is "best" - but I'll give you my personal experience below: 

    I'm heavily invested in Fayetteville, NC. Just bought another home this week. The CoC return for SFH's are fantastic there. Another thing that I like is that this city is literally next to Fort Bragg - one of the largest military institutions in the USA. In other words, from an economic perspective, this is another safeguard in the event there is a recession. We will always need a military and staff to run the base. :)

    Other than that, I'm a big fan of vacation rentals and flips in CA. I'm an agent here and have found a lot of success for investors seeking higher returns with less risk of eviction. 

    Happy to talk more in detail if you ever want to connect. Cheers and best of luck! This is the best industry to be a part of! :) 

    [email protected]
    2Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 996 posts · 1k+ votes
    4y
    Quote from @Account Closed:

    Hello,

    My name is Jason and I'm a new real estate investor. I'm having trouble deciding on a market as this is my first purchase. I plan to purchase a MRH in order to Brrrr. I'm familiar with the following areas either be because of college, friends, or family.

    - DC/Alexandria, VA
    - Blacksburg, VA
    - Richmond/Henrico, VA
    - Gainesville, FL
    - Austin, TX
    - San Antonio, TX
    - San Francisco, CA (I live here)

    I'm willing to look outside those markets, but would love to hear reasons behind that.

    Thank you

    Hello Jason,

    Not every location will meet everyone’s goal. So, instead of providing a list of locations, I will provide the process I would follow for selecting a location. That way, you can alter the process to match your specific goal.

    Dependable Passive Income

    So we are on the same page, my investment goal is dependable passive income streams, not just buying properties. My definition of a dependable passive income is as follows:

    • Reliable - You continuously receive income in good and bad economic times.
    • Inflation Adapting - Your rental income increases faster than inflation, so you have the additional dollars you need to maintain the same lifestyle.
    • Persistent – The income continues for a long time; you and your spouse will not outlive the income.

    To meet all three requirements, you must follow a process. The one we use is illustrated below.

    https://www.lasvegasrealestateinvestmentgroup.com/nwassets/images/successChain20220627-1.svg

    I will briefly walk through each step, but focus on location selection.

    Location

    Location is the most important investment decision; it is not the property. The location determines all long-term characteristics. When evaluating a potential investment location, choose one that meets the following requirements.

    • Inflation adjusting - The dollar's buying power is decreasing; you see this every time you go to the store or buy gas. Inflation is currently at about 8.5%. Unless your rental income increases faster than the current inflation rate, you will not have the needed dollars to maintain the same standard of living. For example, suppose your rental properties generate $10,000/Mo. At 8% inflation, in 10 years, you will need $20,000/Mo. to buy the same set of goods and services as you can today for $10,000/Mo. If your rental income increases to $20,000/Mo. over 10 years, you did not have an increase in buying power; your rental income just maintained the same buying power. If your rent did not increase to $10,000, your buying power declined. If this is the case, your living standard will also decline. The critical metric for determining whether your rental income will rise fast enough is pre-COVID rent and price growth rate. If rents and prices did not keep pace with inflation before COVID, rents will not keep pace once COVID effects go away. For example, prices in many cities are starting to decline, and many more will follow. Below are 10 cities where prices fell the most over the last 12 months.

    • Income reliability - A rental property is no better than the jobs around it. If your tenant is unemployed, they are not paying the rent. And, it is not just the jobs they have today. Companies and corporations have a limited life span. The national average for companies is 10 years. The average life of an S&P 500 is only 18 years and falling. So, new employers must be setting up new operations in the location, creating new jobs that pay similar wages as your tenant pool is earning today and requires similar skills. Indicators for a location that will have the current and future jobs needed to keep your tenants employed and paying rent:

      • Increasing state and metro population - The state and metro population must be increasing. If the state or metro area is flat or losing population, do not consider it. Moving to a different location is expensive, both financially and emotionally. If conditions are bad enough for the population to decrease, many things must be undesirable.
      • Low crime - Eliminate any city listed on Neighborhood Scout’s list of the 100 most dangerous cities in the US. Companies considering new operation locations and people looking for a place to live will not consider any city on this list.

    • Low operating costs - People and companies are fleeing high tax states due to the cost of living and doing business. Regulations, rental restrictions, and similar indirect costs are a financial burden. There are also direct costs for investors like property and state income taxes. All of these indirect and direct costs are a direct hit on the net income from the property. Also, regulations like rent control and eviction restrictions may prevent you from raising the rent fast enough to keep pace with inflation or removing non-paying tenants.

    • Low probability of natural disaster - I regularly see pictures of communities devastated by tornadoes, hurricanes, floods, etc. When such a natural disaster occurs, the entire community is destroyed. Even if your insurance company builds back your property, all the jobs, retail, and services are gone. Your tenant pool will not wait years for your property to be rebuilt. People and companies will immediately move to where they can live and work today. So, if a disaster occurs, you may be in a position where you have the same overhead (mortgage, taxes, insurance, etc.) and no tenants are paying the rent. Are such disasters common? No. I view natural disasters like I view cancer. The odds of your getting cancer are relatively small. But, if you do get cancer, it is devastating, and “odds” mean nothing. The best metric I know for evaluating natural disaster risk is comparing the cost of homeowners insurance (ValuePenguin is one such source). The states that are the most prone to natural disasters are California, Texas, Oklahoma, Washington, Florida, New York, New Mexico, Alabama, Colorado, Oregon, and Louisiana. Do not buy in high-risk locations.

    After Selecting a Location

    Tenant Pool

    The next step in the process is selecting a good tenant pool. The only way to have a dependable passive income is if your property is continuously occupied by what I define as a good tenant. I define a good tenant as someone who:

    • Has stable employment in a market segment that is very likely to be stable or improve over time
    • Has a credit history with which you can evaluate the likelihood that they will perform
    • Pays all the rent on schedule
    • Takes care of the property
    • Does not cause problems with neighbors
    • Does not engage in illegal activities while on the property
    • Stays for many years

    Property Selection

    Once you select a good tenant pool, you target them through the properties you purchase. You want to select properties that your target tenant pool is willing and able to rent. I will not go into specifics but there is a direct relationship between the tenant pool and the properties they are willing and able to rent.

    Renovation

    Renovation is transforming a property that your target tenant pool is willing and able to rent into one that will rent quickly and for full market value. Also, renovate to minimize long-term maintenance costs. There are many considerations when it comes to renovating the right way.

    Summary

    If you just want to buy properties and you do not care if the rent keeps pace with inflation, is reliable, or persistent, almost any location will do. If you want a dependable passive income that you will not outlive, will keep pace with inflation and is reliable and persistent, then the location is the most important decision you will make. I put together the following simplified process, which will enable you to quickly eliminate locations that will not meet your passive income requirements.

    https://www.lasvegasrealestateinvestmentgroup.com/nwassets/images/abreviatedProcess20220628.svg

    Thanks for your time,

    …Eric


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  • Fernando E.
    Rental Property Investor · SF Bay Area · Member since 2016 · 234 posts · 103 votes
    4y

    Thanks @Eric Fernwood for sharing this, its very helpful. 

    0Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Account Closed
    I would definitely recommend Columbus OH. It's a solid hybrid market of cash flow and appreciation. Columbus has lots of job opportunities and population growth. I currently live and invest here in Columbus OH and would recommend it.


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  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    4y

    If you don’t buy a property in Columbus I’m going to punch you in the face.

    3Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    @Account Closed

    I would highly recommend Houston Texas, as rental income growth and appreciation here are steady.

    Also you can get other data about Houston Texas like population growth, average household income etc. on Site To Do Business (www.stdb.com)

    All the best!

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  • Scott Sklare
    Real Estate Broker · Beloit, WI · Member since 2015 · 234 posts · 60 votes
    4y

    Hi Jason, Beloit and Janesville WI (south-central Wisconsin) is a goldmine for investors. 

    0Reply
  • Brendan Harrison
    Real Estate Broker · Tulsa, OK · Member since 2020 · 157 posts · 67 votes
    4y

    Hey Jason! 

    Have you looked into Oklahoma? Our numbers are staying strong, cost of living is low and the state is very landlord friendly. We're also growing like crazy, so tons of cashflow opportunity.

    I'm a real estate investment specialist in the Oklahoma City and Tulsa markets and I work with a lot of investors like yourself to help connect them to investment properties. My team is moving 35 properties/month across Oklahoma. I'd love to connect and share some info on the market. Feel free to reach out if you're interested in a phone call at some point!

    1Reply
  • Landon Whitt
    Property Manager · Oklahoma city · Member since 2018 · 58 posts · 55 votes
    4y

    CLASS A & B are no longer cashflowing on the average. I would look into class C and find a manager capable of handling the client load and renovate for bulletproof. Its not snazy but its in extreme demand across the nation right now. Ask your self, am i doing this to look cool or am i doing this to fill demand for customers in the market called housing???

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Account Closed:

    Hello,

    My name is Jason and I'm a new real estate investor. I'm having trouble deciding on a market as this is my first purchase. I plan to purchase a MRH in order to Brrrr. I'm familiar with the following areas either be because of college, friends, or family.

    - DC/Alexandria, VA
    - Blacksburg, VA
    - Richmond/Henrico, VA
    - Gainesville, FL
    - Austin, TX
    - San Antonio, TX
    - San Francisco, CA (I live here)

    I'm willing to look outside those markets, but would love to hear reasons behind that.

    Thank you


    I recommend the major cities in Ohio:

    -Columbus, great for appreciation, pp is a bit higher around $220k for multifamily

    -Cincinnati, has a mix of cash flow and appreciation, average multifamily around $180k

    -Cleveland, has alot of cashflow potential, average multiform around $140k

    There are other smaller markets like Dayton, Akron, and Newark, which we are starting to see a lot more traction due to huge corporations being here like Amazon, Intel, and The Limited.

    Looking for cashflow? Look into Cleveland, its got good cashflow potential with appreciation happening as well.

    Looking for appreciation come to Columbus, there are still 1% deals, but the more attractive part is the population growth and other economic drivers! According to this article Columbus is on the trend to be the 5th hottest market in the nation. https://learn.roofstock.com/blog/columbus-oh-real-estate-market.

    0Reply
  • Shawn K HicksBusiness Member
    Real Estate Agent · Gainesville, FL · Member since 2019 · 128 posts · 107 votes
    4y
    Quote from @Landon Whitt:

    CLASS A & B are no longer cashflowing on the average. I would look into class C and find a manager capable of handling the client load and renovate for bulletproof. Its not snazy but its in extreme demand across the nation right now. Ask your self, am i doing this to look cool or am i doing this to fill demand for customers in the market called housing???


     This was the case in Gainesville FL the last few years. D+ to C+ properties had the best returns. I would ask my clients, do you want something pretty, or do you want something that makes you $. The hot thing in our market now however is many are jumping on the Airbnb band wagon.

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