Cash Flow Markets with the Best Prospects Over Next Few Decades

42 Replies

OK - So I've dismissed personally investing in turnkey markets for a while, mostly because I have unrelenting faith in the long-term prospects of my home city of Denver, CO. BUT, I have now bought a substantial amount (for me) of property in Denver, and do not want to make my next purchase here until sometime in 2018. 

In the meantime, I'm considering making my first out of state investment. And I want to research top down and then bottom up. Top-down - if I'm going out of state, I want to go with a city that produces great cash-flow per dollar invested, but is still large enough to travel to. I'd like to know which city like this has excellent prospects in the eyes of the community. Once I've narrowed that down a bit, I'll begin my research and visiting of that city, and go through the process of becoming familiar with what's a good deal and what isn't, building a team, etc.

So please let me know, what are some good cities with great prospects, cities that are not already expensive? 

Where should I be looking here? 

I am NOT only interested in cash flow. The prospects and potential of a city/market are super important to me. Cash flow is of course a huge part of the analysis, but I believe there are at least a dozen major markets I can go to get solid cash flow in an acceptable range. I want the prospects as well. 

Cities that I've been thinking about include:

Dallas

Jacksonville

Cincinnati

Louisville

Atlanta

Charlotte

Kansas City

Detroit

I'm sure there are some that I have failed to consider, and some among here that I should stop considering. Hence why I am attempting to crowdsource your feedback here. Thanks in advance!

@Scott Trench

I like the idea of investing for cash flow a lot, however I believe that the focus should be on larger multifamily if you are going to be out of state.

I would focus on the markets with the most growth potential. I love Atlanta and Dallas, but they might not be the best cash flow markets. 

I’ll chime in my opinion of Dallas since I lived there a bit. Anywhere in Texas you’ll have high property taxes and with the hot market in dfw right now I think cash flow there is getting harder.

Very interested in the feedback as well being that I'm also considering going out of my market for cash flow.

aren't ATL and Dallas markets pretty much at their top and no longer really that valuable to investors anymore? I guess I should say the average investor looking to go OOS, not some syndicate buying apartments....

Out of your list I invest in KC market... it's decent some good values there and it's fairly well documented. If you search hard enough here and do couple flights... you could have a pretty good grasp of the area. The market is competitive lot of people buying and lots of investors. If OOS a good realtor vital to push the offers through and make em competitive.

@Scott Trench We are active in ATL and Cincinnati. In my opinion, the fundamentals of Atlanta are rock solid. However many people agree with that and are paying handsomely for those fundamentals. I would argue that many are overpaying on the future prospects of those positive fundamentals. This has all but squeezed cash flow out of most areas unless you're willing to really dig for deals which of course is a ton of work. I have not been buying in ATL markets but I have been actively trying. I just can't seem to make sense of anything. 

Cincinnati, on the other hand, does not have the economic fundamentals that ATL has and likely never will but its strong enough to feel stable and the cash flow is still there especially in the smaller (under 60 unit) properties including 1-4 unit buildings. Being from Cincinnati, growing up there, starting our REI business there I know the market very well. The barrier to entry that seems to hold out of state investors back from succeeding in Cincy in these smaller properties is the property management. For some reason I have never been able to understand, there are no good 3rd party management companies in Cincinnati who focus on small properties. As our portfolio grew we vertically integrated and built a management arm to oversee our portfolio this has worked for us.

If you'd like to talk more on either market feel free to reach out. I am happy to share current deals we are buying in Cincy if that would be helpful for your research. 

Best of luck!

Hey @Scott Trench

I'm curious what your criteria was for narrowing dow to the locales you listed? After some research into Jacksonville, I decided against it, but I'm thinking maybe I overlooked something. 

I like Grand Rapids: above average population growth, diversified and modernized economy and cultural depth in art and craft brewery scene which I think makes it desirable. I think the city has good long term prospects. I also like KC and Cincinnati on your list. I’m excited to follow your journey and see where you land. Thank you for sharing it with us.

I wonder if cash flow (profit) and future value inversely proportional

I personally agree with @Kate Stephens on Grand Rapids, even though i might ave some bias:) It is a very diverse area in industry and social aspects. there are also a few other emerging markets withing an hour of GR (Muskegon & Kalamazoo) that may be worth a look in the near future, Just my 2 cents 

I like Cincinnati because you have a myriad of unique neighborhoods affording investors the opportunity to utilize different investing strategies. There are A neighborhoods like Hyde Park, Oakley, Mt. Lookout, while with higher price points, also a safe bet to appreciate 5-7%/year. You have transitional neighborhoods in the B-C range like Madisonville, Northside, Walnut Hills, and Norwood that provide good flip opportunities and rentals as well. You can invest in student rentals with the University of Cincinnati, Xavier University, Mt Saint Josephs, Cincinnati State, and Northern Kentucky all nearby(80,000 total). Price Hill, West End, Westwood, and other C-D areas offer high returns, the 2-5% type deals.

That being said, it's a city you need to visit, or have boots on the ground because neighborhoods change drastically very quickly.... different ends of the same street can be.... well very different. But, I enjoy investing here and think it provides opportunities for all types of real estate investors. 

Cheers

I would say the South East has some great potential. Mobile, AL, Huntsville, AL, Also look into a lot of SC and NC markets as well as Savannah, GA. Memphis has potential, but get to know that market really, really well before buying. Others are Indianapolis, IN, Quad Cities, Tulsa and OKC

@Scott Trench

I sent you a message on the Cincinnati market, let me know if you want to talk more!

@Scott Trench I live, work and invest here in Jacksonville. It is a strong economy with the Navy, Mayo, MD Anderson and logistical operations due to the Port and rail.

I am happy to discuss with you and others when ready. I’ve been investing in Jacksonville for 10 years and have lived here most of my life. My family operates cash flow positive businesses and we also own commercial warehouses.

Again anytime, just ask.

I am in a similar boat (live, work and invest) in Denver and am starting to think I need to invest out of state. You seem much further along than I am, I don't have a short list of cities yet. My two cents and a not fully formed thought....  out of your list I would stick to Detroit, KC, Cincinnati. If I were to invest out of state, I would stay in the midwest. The one random thought I keep coming back to for this justification (other than that is what a lot of investors are telling me) is what happened with the 2017 Presidential election. Not to get political but I think Clinton  (along with many others) really overlooked the midwest and how it has not bounced back from 2008 as quickly or at all. I think this has been an oversight for awhile and a lot more attention will be put on the midwest cities in the upcoming years. This would present an awesome opportunity for appreciation if more resources are devoted to building these midwest communities and infrastructure. Best of luck and keep us posted! 

Originally posted by @Jered Sturm :

@Scott Trench We are active in ATL and Cincinnati. In my opinion, the fundamentals of Atlanta are rock solid. However many people agree with that and are paying handsomely for those fundamentals. I would argue that many are overpaying on the future prospects of those positive fundamentals. This has all but squeezed cash flow out of most areas unless you're willing to really dig for deals which of course is a ton of work. I have not been buying in ATL markets but I have been actively trying. I just can't seem to make sense of anything. 

Cincinnati, on the other hand, does not have the economic fundamentals that ATL has and likely never will but its strong enough to feel stable and the cash flow is still there especially in the smaller (under 60 unit) properties including 1-4 unit buildings. Being from Cincinnati, growing up there, starting our REI business there I know the market very well. The barrier to entry that seems to hold out of state investors back from succeeding in Cincy in these smaller properties is the property management. For some reason I have never been able to understand, there are no good 3rd party management companies in Cincinnati who focus on small properties. As our portfolio grew we vertically integrated and built a management arm to oversee our portfolio this has worked for us.

If you'd like to talk more on either market feel free to reach out. I am happy to share current deals we are buying in Cincy if that would be helpful for your research. 

Best of luck!

 I just spent my first day and night in Cincy  boy the area north of down town is super cool and under going an amazing transformation.. I see MONEY there.

Judges from your list of markets your chasing returns. Upcoming, under appreciated, markets seems to be what you intended instead.

@Scott Trench fun discussion topic! I would put Allentown on your list! Massive development is under way that is bringing a lot of jobs and young professionals. They started with building a new Hockey arena right at the heart of the city that brings with it lots of fun night life. Now they are working on a few high rises and luxury apartment complexes. Check out the city plan called the NIZ.  Prices are still pretty low with great cash flow in the meantime, but with great opportunity for appreciation as development and construction continues. I'm also pumped about the Water Front effort that is on the horizon! 

https://www.allentownpa.gov/Neighborhood-Improveme...

You mentioned big enough to travel to also. The ABE airport is pretty decent and we are also only an hour from Philly, and just over an hour from Newark. You fly in Scott I will clear my schedule and give you a tour and introduce you to some fellow BP movers and shakers in the Allentown area. 

@Scott Trench I may be biased ;) but I'd say you should consider Birmingham! Over the last few years our downtown has undergone a huge transformation and we're a huge destination for millennial entrepreneurs, which is good both for culture and innovation now, and long-term tenants /potential owner-occupants down the line when they settle in to start families. Our unemployment rate has been steadily decreasing this year, we don't have more than 30% of our workforce in any one industry (which helps us maintain stability when one sector sees a downturn) and we have a great university with a teaching hospital that provides stable, well-paid employment for thousands of people (which means good tenants that can pay on time every month). Just one more place to consider - there are amazing REI opportunities all over the nation.

Best of luck!

Clayton

@Scott Trench what size market are you looking for? Is there a minimum? Personally I️ like Northwest Arkansas and Tulsa Oklahoma.

NWA is still running strong with Walmart, Tyson Foods, JB Hunt, as well as the UofA... I️ think the entry residential is somewhat saturated as well as large MF but there is opportunity in the mid size MF.

Tulsa... I️ think it’s still recovering from the energy market being depressed and there is opportunity everywhere. Too many good things going on there to list in one post.

Hey @Scott Trench ,

You’re missing a great city on your list—Philadelphia, PA. Philly has so many options to invest with great cash flow and appreciation potential as many parts of the city are undergoing significant revitalization. Philly is a prime location roughly midway between New York City and Washington, D.C.

University City has a lot going on, checkout this link that explains the neighborhoods long term plan: http://www.philly.com/philly/business/real_estate/...

This link will show you the exact projects going on in University City

https://philly.curbed.com/maps/university-city-phi...

This study just came out showing that the Philly metro must add 38,000 apartments by 2030 to meet rising demand: https://philly.curbed.com/platform/amp/2017/7/18/1...

There would be pockets in all of those that could be outstanding. IMO the city that you like to visit or has something of interest to you besides real estate. Kill two birds theory. Or just drive south 2 hours. 

Good luck! 

@Scott Trench cashflow comes before an emerging market becomes and emerged market. You listed secondary markets. You might wanted to broaden your search to tertiary markets.

Also sorta unrelated... dallas is a has emerged market and therefore not much cashflow for the oos owner.

@Scott Trench,

Firstly I want to congratulate you on your first book "Set for Life". Someday I wish to become an author myself, once I gain more knowledge and wisdom.

I put together some numbers from case shiller and you can see that Denver, Dallas, Seattle, and Portland are all making new highs. Unlike Denver, Dallas has high property taxes and landlord insurance. You can see from the chart above that KC, Detroit, Cinnannati, and Atlanta are still among the best cities to low rental properties for landlords.  

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