How to find cash flow markets?

[Ali Saad]

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

[Travis B.]

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

[Kyle Baxter]

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 Do you mind expanding a bit on your Detroit investments? Are there certain areas you avoid? Are they single or multi-family? Are there many issues with tenants?  Detroit is an interesting area to me, but the constant negativity around the crime and downtrodden nature of the city has me worried that it may be too risky. 

[Travis B.]

Quote from @Kyle Baxter:

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 Do you mind expanding a bit on your Detroit investments? Are there certain areas you avoid? Are they single or multi-family? Do you buy and renovate or keep them as-is and just cash flow? Are there many issues with tenants?  Detroit is an interesting area to me, but the constant negativity around the crime and downtrodden nature of the city has me worried that it may be too risky. 

 Hey Kyle, that's a TON to unpack. Happy to do it but dumping it all here on the forum probably isn't the place for it.

[Michael Smythe]

@Ali Saad Detroit is one of the best markets in the country for cashflow rentals!

You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/member-blogs/3094/99854-deep-dive-into-metro-detroit-cities-ecorse

Our analysis is a template you can follow for any city, but doubt you'll find this much info for any other market in the US.

So, why would you invest remotely anywhere else?

How can we assist you further?

[Eliott Elias]

Look no further than Texas. Not all cities cash flow, but there are many that do.

[Bryce Jamison]

I'd highly advise staying away from properties in the 80-120K range (more specifically in the C, D, & F range). These properties always have the best ROI on the spreadsheet, but the spreadsheet doesn't have a formula for the type of renters you're going to get in these properties. That increases cash flow comes with substantial more risk of tenants not paying, tenants causing significant damage, and potential criminal activity. On top of this you'll be out of state which can makes these issues much more difficult in terms of time and money to solve.

[Austin Steed]

Quote from @Ali Saad:

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

 Ohio seems like it would be a great fit for you. I personally like small multi family homes for my portfolio and might not work for the 200k in Columbus. You can for sure find single families for that here though! 

[Alfath Ahmed]

Quote from @Ali Saad:

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

 I would look into the Columbus market for it appreciation and cashflow. It's the Seattle of the midwest. We have Intel, Amazon, and Google's new data center coming to downtown Cbus. Most of my usually buy in areas like Old North, Old Town East/King Lincoln Bronze Ville, Merion Village, Driving Park, North Linden, Hungarian Village, Bexley, and North Hilltop.

I can send you a helpful neighborhood grade map that shows the different areas of Columbus. 

[Robert Ellis]

Quote from @Ali Saad:

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

 Denver, Los Angeles, San Diego, San Francisco, Washington DC, Boston, New York, are many of the cities of clients from biggerpockets that have invested in columbus oh. there's a lot of factors that drive it but I focus on team building so you are comfortable. property management, leasing, repairs or major remodels construction, agent, lender, etc. if you don't have a team rely on the people you talk to. I'll shoot a pm to continue the conversation 

[Dan Heuschele]

Quote from @Ali Saad:

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

 >I live in SoCal and it is extremely difficult to find any cash flowing properties.

Historically this is an incorrect statement for long holds. case shiller lists top 3 residential large city RE markets for total return for this century are San Francisco, Los Angeles, and San Diego. NeighborhoodScout has virtually every large coast XA city as 10 out of 10 for appreciation this century. Rent growth has a significant association with appreciation. My market, San Diego, had an average of $700/month rent growth in the last year for 3/2 SFH (source Rentometer). You can see what this does to any cash flow.

There is poor correlation between initial cash flow and actual long term cash flow. The reason for this is that RE market prices are based on numerous criteria. Some of the big ones are expected appreciation, expected rent growth, and risks. In most markets, the market with the highest rent to price ratio is the lowest class areas. This is because of the risks and effort to have rentals in that market. Similarly, the markets with the best initial cash flow typically have poor historical appreciation and rent growth. The properties with poor initial cash flow often have good/great historical appreciation. Rent growth has a strong relationship to appreciation.

The better appreciating property is likely to have the better cash flow over a long hold.

Add to this all the advantages you have investing local and all the risks you have investing OOS and you can see why I advocate residential RE investors start local.  Consider OOS RE investing once you have more RE Investing experience.  

Good luck

[Paul Alphonsus]

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 Hi Travis, I am new to real estate investment and I am really interested in learning about Chicago. I am actively working on doing my first investment with the next 3 months and hopefully do more asap after I get my first experience. is it okay if I send you a PM?

[Travis B.]

Quote from @Paul Alphonsus:

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 Hi Travis, I am new to real estate investment and I am really interested in learning about Chicago. I am actively working on doing my first investment with the next 3 months and hopefully do more asap after I get my first experience. is it okay if I send you a PM?

 Hey man, my PM's are always open to help. That said, I'm primarily focused on the Detroit area. I'm not investing in Chicago.

[Patrick Drury]

@Ali Saad
The Cleveland market is great for investing in from out of state since they are landlord-friendly, and have a low barrier of entry and cash flow.

[Marcus Auerbach]

The Midwest for sure. But 120k is not going to get you a really bad experience. Cash flow will look good on paper, but there are two issues: you have a set or risks and expenses associated with low income and high crime neighborhoods. And the buildings are old, which means there are a lot of capex items waiting to be done. You won't notice at first, but over time capex will exceed cash flow, and not by just a little.

So, quality matters, especially if you are OOS and have to pay someone else every time there is an issue. 

I consider myself lucky that life brought me to Milwaukee; it has been an underdog and I think the world has not realized the chnage that has been happening here in the last 10 years. Next year our new freeway system will be completed, the major of MKE propper has announced that he wants to increase population of by over 50% and winter is not what it used to be. You can find a lot of information about Milwaukee on YouTube.

[Florencia Cafure]

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 In which areas of detroit do you find this experience?

[Florencia Cafure]

Quote from @Alfath Ahmed:

Quote from @Ali Saad:

Hi there! 

I live in SoCal and it is extremely difficult to find any cash flowing properties. I'm interested in investing out of state, my criteria is:

- $80-120k purchase price (will go up to $200k if needed, but would rather have a lower purchase price and acquire more properties)

- Cash flow rental

- Pro landlord state

I'm not extremely picky on the area itself - I've done some research myself yet I can't pinpoint which market to enter. From what I've seen, it looks like the mid-west/south best fits my criteria. Does anyone have any recommendations on markets or advice on how they picked their market?

 I would look into the Columbus market for it appreciation and cashflow. It's the Seattle of the midwest. We have Intel, Amazon, and Google's new data center coming to downtown Cbus. Most of my usually buy in areas like Old North, Old Town East/King Lincoln Bronze Ville, Merion Village, Driving Park, North Linden, Hungarian Village, Bexley, and North Hilltop.

I can send you a helpful neighborhood grade map that shows the different areas of Columbus. 

 Would you mind sharing me that too please?

[Kerry Noble Jr]

Definitely Central IN

[Travis B.]

Quote from @Florencia Cafure:

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 In which areas of detroit do you find this experience?

 I'll shoot you a message.

[Travis B.]

Quote from @Marcus Auerbach:

The Midwest for sure. But 120k is not going to get you a really bad experience. Cash flow will look good on paper, but there are two issues: you have a set or risks and expenses associated with low income and high crime neighborhoods. And the buildings are old, which means there are a lot of capex items waiting to be done. You won't notice at first, but over time capex will exceed cash flow, and not by just a little.

This is what literally everyone told me in 2018 before I started investing in Detroit. 

And it can absolutely be true if you don't know what you're doing, trust the wrong people, etc. but it is by no means a rule. It just happens to be the default for folks that think they can buy the cheapest property on the market, put a section 8 tenant in, and chill.

Unfortunately, those experiences lead to attitudes like yours. And the people that are scaring folks away from this strategy are usually the ones that have never even tried their hand at it.

Luckily, I realized that and figured I'd see for myself. I bought a couple low-end homes, did some light rehab, and rented them. Shocker, it worked very well. So I did more and more as quickly as I could. Next thing I know I have 12-doors that are absolutely crushing it from a cash flow perspective.

Flash forward 4 years and the cash flow is incredible still, yes. But appreciation has been stellar as well. Everything I purchased in 2019-2021 as now appreciated 2-3x. 

I understand you are extremely biased to your market, Milwaukee, but fear mongering cheaper markets and saying $120k cash is going to result in "a really bad experience" is disingenuous at best.

[Jonathan Klemm]

Quote from @Paul Alphonsus:

Quote from @Travis B.:

It's pretty easy to find cash flowing markets today simply because there aren't that many left.

Most are in the midwest, and you'll be looking at Ohio and Michigan for the most part.

I'm a bit north of you in the Central Coast and I invest heavily in Detroit. I have 12-doors there now kicking off something like $16,500/mo in gross rents with more than half of that net cash flow.

I'm a big believer in Detroit and all the revitalization that's happening. But I'm also biased at this point with my portfolio and investing activity there.

The most optimal play in that market is to buy something cash, do some light rehab, and then refi out. You'll recycle a lot more of your money that way and be able to scale much faster.

 Hi Travis, I am new to real estate investment and I am really interested in learning about Chicago. I am actively working on doing my first investment with the next 3 months and hopefully do more asap after I get my first experience. is it okay if I send you a PM?

 If you are interested Chicago... there is a great network of helpful investors (many on BP) and a large inventory of old multifamily that needs to be rehabbed.

[Melissa Nash]

The good news is that you can live where you want and invest where it make sense. 

I live in Socal too! And invest out of state with passive real estate investments. You have to decide what type of an investor you want to be but not only that what is the strategy that you want for your life. If you want to be an active investor or passive. 

Personally I do have a mix with both short-term rentals that are primarily here in CA. And then I have passive turnkey out of state in markets like Bham, Ohio, Memphis. I like having my long term rentals professionally managed and I have never seen any of them in person, and don't need to. Its 100% passive. 

I added short-term rentals 5 years ago primarily because I wanted the first property to actually use with the goal to use it when ever I wanted and just have it pay for itself. Then.. I started to actually profit from it and keep buying. 

Long story short..What do you have time for and what are your goals? Short term goals, long term goals? You need to sort that out first and then the rest will follow. 

Best of luck! Melissa

[Eudith Vacio]

@Ali Saad Northwest Indiana 😃

[Nader Shariff]

Mostly in the midwest - I'd consider looking into Detroit, MI - low entry price points (65k - 90K) and strong returns. 

My team and I have had a lot of success there. 

Happy to share my experiences. 

Good luck on your search !

[Mackaylee Beach]

Hey Ali,

Kansas City! I have cash flowing inventory. Feel free to message me to further discuss.

[Sierra Roth]

Quote from @Melissa Nash:

The good news is that you can live where you want and invest where it make sense. 

I live in Socal too! And invest out of state with passive real estate investments. You have to decide what type of an investor you want to be but not only that what is the strategy that you want for your life. If you want to be an active investor or passive. 

Personally I do have a mix with both short-term rentals that are primarily here in CA. And then I have passive turnkey out of state in markets like Bham, Ohio, Memphis. I like having my long term rentals professionally managed and I have never seen any of them in person, and don't need to. Its 100% passive. 

I added short-term rentals 5 years ago primarily because I wanted the first property to actually use with the goal to use it when ever I wanted and just have it pay for itself. Then.. I started to actually profit from it and keep buying. 

Long story short..What do you have time for and what are your goals? Short term goals, long term goals? You need to sort that out first and then the rest will follow. 

Best of luck! Melissa

Hey Melissa, thanks for sharing. I have been doing some looking into Memphis lately, and curious if you would share which neighborhoods you like or would recommend staying away from? Thanks!