Best tech cities for real estate investing?

25 Replies

There's a huge number of cities listed that I wouldn't consider tech cities. Look at studies from Glassdoor, etc. on cities with the most software engineering jobs and you'll find your tech cities.

The commonly cited ones are:
San Francisco
San Jose/South Bay Area
Seattle
Austin
Denver

I'm sorry but nobody from the mainstream tech world will consider Columbus, etc. as a tech hub currently even if there are some tech companies/jobs. Most cities will have a few tech jobs so you can probably make it work but at a less competitive salary elsewhere.

One thing in common with most tech hubs - large numbers of people moving in, not enough housing, better to be a renter than an owner. If I were still in SF I'd be looking to invest in multifamilies out of state rather than in the Bay Area.

Lol at the other thread, Columbus haha. Only a guy promoting and selling real estate there would say that.

Even though Amazon and facebook are building multiple offices in San Diego, I wouldn't consider us a tech hub. 

Search the jobs and let that take you. It doesn't matter if an area is a tech hub or not, just check the amount of listings for your specific type of tech job you're looking for Account Closed since you're moving here.

Do factor in that cost of living is crazy in San Francisco, San Jose, and Seattle right now. Austin is still OK. Denver is pretty rough too. In general, true tech hubs have a high concentration of highly paid jobs that help drive up the price of real estate.

@Jim S. @Ray Lai  Thanks for your responses!

You both have some fantastic points and I understand that the overlap between tech hubs and cashflow markets is quite minimal (as tech markets tend to be appreciation markets).

Here's a harder follow up question that I'm now struggling with: Is it worth forgoing salary/job opportunities to live in a cashflow market (like KC, Indy, etc.)?

Any information would be appreciated, thanks.

Originally posted by Account Closed:

@Jim S. @Ray Lai Thanks for your responses!

You both have some fantastic points and I understand that the overlap between tech hubs and cashflow markets is quite minimal (as tech markets tend to be appreciation markets).

Here's a harder follow up question that I'm now struggling with: Is it worth forgoing salary/job opportunities to live in a cashflow market (like KC, Indy, etc.)?

Any information would be appreciated, thanks.

Usually I caveat my answers but in this case, I give a strong no, not worth it. Why? Because if you look at overall gains (cash flow + appreciation) you see the same places show up that win in the long run. So you can have your cake and eat it too. Go where you can make and save the most to invest. A big fat W-2 will help you get good loans for your first few deals, and also you can always house hack. You will always have the opportunity to move to a cheaper market and play there. It's good to make money and have a good career so that you can start your REI on solid ground.

Originally posted by Account Closed:

@Jim S. @Ray Lai  Thanks for your responses!

You both have some fantastic points and I understand that the overlap between tech hubs and cashflow markets is quite minimal (as tech markets tend to be appreciation markets).

Here's a harder follow up question that I'm now struggling with: Is it worth forgoing salary/job opportunities to live in a cashflow market (like KC, Indy, etc.)?

Any information would be appreciated, thanks.

I would always recommend starting in SF or Seattle and getting a job at a good "brand name" company. A stint at Amazon, Google, FB, Apple, etc. will permanently increase your value elsewhere.

Moving to Denver with a "big name" on my resume allowed me to become a director at age 28 at a fairly large tech company. Now if I went to an even smaller tech city (I.e Kansas City or something) I'd be able to retain a $100k+ job while being able to invest in real estate.

Tl;dr: work at a major company in SF or Seattle for a few years. Save up and buy property out of state. Then you can do anything after.

Agreed, Columbus Ohio is a terrible place to invest. We have no jobs, no growth, the real estate market is completely stagnant, the cost of living is outrageous and there's literally not a single good deal to be had.  Our only computer was lost in the recent riots, so there went our tech job. 

*shifty look* 

Originally posted by Account Closed:

I saw this post:

https://www.biggerpockets.com/forums/12/topics/456...

And I am pretty much in the exact same situation as the writer.

Would you guys say that the information presented in that thread is accurate?

Do you have any other suggestions that others may have overlooked?

Thanks!

 Cleveland has been seeing a huge increase in the BioMedical Tech industry. Feel free to look it up, but it is growing a lot. A lot of credit can be given to the Cleveland Clinic and Case Western Reserve University! 

@Account Closed Go where you can get the best job. Worry about investing after you have a great W2 since that will help you with the down payment and the DTI ratio. Most cities want to classify them as a “technology city”. They all have some kind of “technology park” area and it’s getting easier (and cheaper) to set-up co-working spaces and have a couple of people in Cincinnati decide their VCs and start to fund really early deals. That’s not to say any of this is wrong or incorrect, just that most cities are out there trying to model Silicon Valley. Live where you can have a great career. You can always move to a “cash-flow market” after you’ve amassed a portfolio of property to offset that income.

Originally posted by @Account Closed :

Agreed, Columbus Ohio is a terrible place to invest. We have no jobs, no growth, the real estate market is completely stagnant, the cost of living is outrageous and there's literally not a single good deal to be had.  Our only computer was lost in the recent riots, so there went our tech job. 

*shifty look* 

LOL

Got it, Columbus is a no-go. Thanks

Account Closed I don't live where I invest and you're always going to have more challenges, such as: 1.) you can't really drive by the property to see how the PM is doing, 2.) it's just plain harder to know path-of-progress and stuff like that from thousands of miles away, 3.) along those lines, it's hard to see which areas are getting worse that you want to avoid, 4.) local community banks will often look at your sideways when your address isn't local, 5.) there no way to house-hack if you don't live there, 6.) I'm probably forgetting more than few other things...

And the other side of the coin is that most cash-flow markets have cheaper properties even in nice areas.  I'd imagine a 1,200 ft tear down in Palo Alto is more than a 5,000 sq ft new-build in Akron (if there is such a thing).  I know that's a hyperbolic juxtaposition but you get my point.  

Originally posted by @Account Closed :

Agreed, Columbus Ohio is a terrible place to invest. We have no jobs, no growth, the real estate market is completely stagnant, the cost of living is outrageous and there's literally not a single good deal to be had.  Our only computer was lost in the recent riots, so there went our tech job. 

*shifty look* 

 Damn you're hilarious hahaha. The shifty look was icing on the cake hahaha

What kind of job are you looking for? If software engineer, have you ever considered consulting? It's one of those careers that may potentially allow you to earn high income in a tech hub, but invest in a cash-flowing market because of the travel perks.

Originally posted by @Andrew Johnson :

@Keyan Vakil I don't live where I invest and you're always going to have more challenges, such as: 1.) you can't really drive by the property to see how the PM is doing, 2.) it's just plain harder to know path-of-progress and stuff like that from thousands of miles away, 3.) along those lines, it's hard to see which areas are getting worse that you want to avoid, 4.) local community banks will often look at your sideways when your address isn't local, 5.) there no way to house-hack if you don't live there, 6.) I'm probably forgetting more than few other things...

And the other side of the coin is that most cash-flow markets have cheaper properties even in nice areas.  I'd imagine a 1,200 ft tear down in Palo Alto is more than a 5,000 sq ft new-build in Akron (if there is such a thing).  I know that's a hyperbolic juxtaposition but you get my point.  

 These do sound like real challenges. If you don't mind me asking, do you think your out of state properties provide higher risk-adjusted returns than location-independent investments (say stocks, bonds, etc)?

Originally posted by @Nghi Le :

What kind of job are you looking for? If software engineer, have you ever considered consulting? It's one of those careers that may potentially allow you to earn high income in a tech hub, but invest in a cash-flowing market because of the travel perks.

 Great question and I've definitely tried to assess my options in this regard. Quite frankly, I don't think I have enough experience in industry to really hone in on what type of tech job I'd like to do. I've considered consulting, but I'm not sure how banks would like a variable income if I apply for loans.

I'm not sure, but I think the best option in this case is to find a company that will let me work remotely so that I can have the freedom to live/invest anywhere, while still having a fixed income (plus self-employment taxes can be quite hefty).

What are your opinions on the matter?

Account Closed I picked a place that (thanks to extended family) I visited 20+ times growing up. And I grew up in a family that had SFR rentals bought to "send the kids to college". Consequently, I don't want to be a landlord so being absentee for me was a given. Being absentee is 50/50 of the risk. But the market I invest in also allowed me to buy multifamily and newer as a yield play. So (in a counterintuitive way) I risk adjust by not doing a value add fixer, deal with remote contractors, etc. I have lost many "value add" deals because have to risk-adjust the purchase price. And I also have money in the stock market so it isn't an either or for me.

For what it is worth, I do double expenses in my pro-formas to adjust for absentee-ism! 

Originally posted by @Jordan Moorhead :

@Keyan Vakil I think Minneapolis still has plenty of room left for good deals.

@James Galla I agree with that list!

Yeah I've heard that Minneapolis is a hidden gem for real estate investing while browsing through BP.

Additionally, I hear that it's an "up and coming" tertiary tech hub, but it's quite hard to believe since pretty much every city wants to be known as the next "up and coming" tech hub lol. 

Still, I'm definitely keeping Minneapolis on my radar and if the rumors turn out to be true I'll probably focus my efforts there.

Thanks a lot!

Originally posted by @Andrew Johnson :

@Keyan Vakil I picked a place that (thanks to extended family) I visited 20+ times growing up. And I grew up in a family that had SFR rentals bought to "send the kids to college". Consequently, I don't want to be a landlord so being absentee for me was a given. Being absentee is 50/50 of the risk. But the market I invest in also allowed me to buy multifamily and newer as a yield play. So (in a counterintuitive way) I risk adjust by not doing a value add fixer, deal with remote contractors, etc. I have lost many "value add" deals because have to risk-adjust the purchase price. And I also have money in the stock market so it isn't an either or for me.

For what it is worth, I do double expenses in my pro-formas to adjust for absentee-ism! 

Ahhh ok. So you think that the problems associated with absenteeism can be offset by focusing on yield plays instead of value add and doubling your expected expenses, which will really force you to find great deals, even in a worst case scenario.

That's really interesting, if I do decide out-of-state investing is for me, I'll definitely take this information to heart. Thanks!

Account Closed I'm in no way saying that I'm right or it's smart!  Other people will think value-add is less risky because they get (at the end of the process) built in equity.  But I'm either lazy or lack the confidence/ability to manage a rehab project remotely.  And I don't want to fly out once a week (lifestyle reasons) and those flights would kill overhead costs (budget reasons).  

Also, to clarify, I don't double "all" expenses.  There are things like insurance, property taxes, property management's percentage of gross rents, etc. that aren't going to go up just because I own it from afar.  But I do assume that the utilities are underestimated by 100%, I assume that all of those break-fix items (repair a washing machine, change locks, etc.) are going to cost me double, and even landscaping is going to cost me double.  Since I buy multifamily I often can look at historical (who knows how accurate) printouts of expenses and can take those and double them, add in expenses like pest control (which a lot of people don't use), etc.  

So it does take a little legwork on a spreadsheet to manipulate those categories but at the end of the day I can "bake in" some of the risk to the pro-forma.  

Hi @Keyan Vakil I'm in Boston area and from the tech. Industry and the answer to your job question is, why are you not looking at tech. jobs in Boston area. You do not have to start out a techie knowing a lot , maybe try a course to see if it's for you. There are various roles in the industry where you current skills can be used paired with what you will learn on the job. Most companies are flexible and allow part remote work ( 1 day or 2) but I am seeing the trend change as more and more employers are requiring people to be in the office. A full time W2 tech. job definitely gives you an edge and power to invest and when you are ready, can forgo a full time job, to be a full time real estate investor.
I second @Andrew Johnson list of pains being a remote investor as I also have friends from SFO area, move to Boston temporarily and experienced the same, so learning from other people's experience definitely helps.

I recently got my RE license and going to dive full time to grow my RE investments portfolio. The motivation of being an entrepreneur and being your own 'Boss' is worth the risk!

Hope the helps.