Cash Flow Markets with the Best Prospects Over Next Few Decades
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!
Oh, and based on this discussion, and corroborated by a recent podcast with @Todd Dexheimer , Cincinnati is my frontrunner for now. I will definitely still be looking at other markets for consideration in this investment, or a future investment.
Thanks!
Scott
All of the markets mentioned by others on this thread have average prices that are above the point where you would generate decent cash flow (10% COC).
I would recommend the following:
Rank all states/cities by population growth forecasts (U.S. Census) and job growth forecasts (Bureau of Labor Stats). Rank them by price-to-rent ratios. Then do a quick MLS search. You're looking for properties that you can buy in the $80-130K range that will rent for higher than $1200 monthly. All of these cities are already oversaturated with investors and prices too high to cash flow, unless you have some sort of inside track... If not, I would suggest investing in areas a bit outside of these quickly growing markets.
This will help you accomplish the specific goals you mentioned (cash flow and appreciate potential).
FYI: Ohio is ranked 47th for population growth from 2000 to 2030 by the U.S. Census. I would not expect solid price appreciation in Cincinnati.
I wish you the best.
jon.
Originally posted by @Scott Trench:Oh, and based on this discussion, and corroborated by a recent podcast with @Todd Dexheimer , Cincinnati is my frontrunner for now. I will definitely still be looking at other markets for consideration in this investment, or a future investment.
Thanks!
Scott
Just out of curiosity, wouldnt Cincinnati have the risk of being dominated by P&G? P&G just came out of a pretty nasty proxy fight, and I think there are concerns that they may still need to lower the corporate overhead.
If that happens, doesnt Cincy become a risk for real estate investors?
I agree that DFW has made a huge run, and we wont see that kind of a run in the next 5 years, but the long term fundamentals are pretty strong. Large diverse industrial and technology base, top level airport access, business friendly environment etc. Just over the last few years you have had major parts of State Farm, Toyota, Capital one and others move substantial portions of their business to Dallas. I would think it would continue.
I really wonder if there is a 'perfect' area to invest, I am kinda coming around to the idea that investing in what you know trumps going far afield to buy real estate.
If you do end up taking a tour of Dallas, send me a shout and I would be more than willing to give you a tour of the areas I think are most promising in Dallas.
@Bart H. While P&G is the second largest company HQ'd here, it's not even one of the top 9 local employers.
Kroger- 21k
Children's Hospital 15.5k
University of Cincinnati 10.5k
UC Health 11.2k
Mercy Health 10.4k
General Electric 10.5k
CVG 12.5k
Proctor and Gamble is at 10k. It's vital to the area, but it's not Walmart to Bentonville, AR. Cincinnati has 10 other Fortune 500 companies HQ'd here, such as Kroger, ahem...Macys, General Cable, Cincinnati Financial, Fifth Third Bank, along with a few others I can't seem to recall at the moment.
There are a lot of anchors from an economic standpoint that give me confidence in Cincinnati, be it the Fortune 500 companies, or one of the fastest growing research universities in America in UC. Cincinnati also has a certain 'cool' factor it has lacked in the past... many of my late twenty something friends are moving back from Chicago, San Fran, Austin, etc, in large part because Cincinnati has been revitalized in many parts of the Urban Core, and still offers a tremendous cost of living compared to places like Seattle, Nashville, NYC, etc.
I'm a firm believer in what's going on here in Cincinnati... and out of state investors are starting to pick up on that as well.... my last missed deal had 6 out of state bids.
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When I first started looking at deals in 2015 there was very little out of state money competing against my offers in Cincinnati. Now, nearly every MLS deal I make an offer on personally, or for my local clients has cash offers from out of state, usually multiple. Also in the past year, about half of my business has come from out of state clients who have asked me to find and close deals for them locally, generally from Biggerpockets members asking me for assistance. It has been a pretty rapid and surprising market shift, particularly in multifamily.
So I'm still new at this so take it for what it's worth which may not be much!
In looking at some information I got from the Nation Association of Realtors site I found this spreadsheet of Median Sales Price of Existing Single-Family Homes for Metropolitan Areas. Some of these might not meet your criteria but some interesting numbers. This is not that far removed from something @Scott Trench himself posted in forms not long ago.
This shows an average % increase from Q3 16 to Q3 17 but it also gives numbers from 14, 15 and 16 to run out a bit further to show that growth has been steady for most of these. I'm not going to dump the whole sheet but in looking at Cincinnati there has been a 7.7% increase and the Median price is still respectable at 169.1. Looking at some with similar price points here are some other cities that might be able to be considered.
| Area | 2014 | 2015 | 2016 | 2016.III | 2016.IV | 2017.I | 2017.II r | 2017.III p | Q3-Q3 |
| Ocala, FL | 100.0 | 112.0 | 128.0 | 135.0 | 132.0 | 137.9 | 149.0 | 150.0 | 11.1% |
| Cape Girardeau, MO-IL | 137.2 | 136.1 | 140.3 | 132.5 | 145.1 | 139.0 | 146.5 | 147.2 | 11.1% |
| Canton-Massillon, OH | 112.9 | 119.1 | 123.1 | 125.0 | 124.6 | 117.5 | 131.0 | 137.2 | 9.8% |
| Akron, OH | 115.7 | 118.6 | 125.6 | 131.5 | 122.8 | 118.2 | 139.4 | 144.1 | 9.6% |
| Rockford, IL | 86.3 | 91.4 | 107.1 | 111.9 | 109.5 | 105.1 | 122.5 | 122.2 | 9.2% |
| Buffalo-Cheektowaga-Niagara Falls, NY | 129.0 | 129.8 | 132.5 | 138.9 | 132.8 | 125.9 | 140.0 | 151.6 | 9.1% |
| Gulfport-Biloxi-Pascagoulia, MS | 117.1 | 126.7 | 126.9 | 126.2 | 124.9 | 121.1 | 135.9 | 137.6 | 9.0% |
| Oshkosh-Neenah, WI | 124.8 | 131.0 | 131.2 | 134.3 | 129.9 | 135.3 | 140.3 | 146.1 | 8.8% |
| Beaumont-Port Arthur, TX | 135.6 | 138.0 | 144.3 | 145.2 | 153.2 | 142.2 | 156.1 | 157.8 | 8.7% |
| Cincinnati, OH-KY-IN | 140.6 | 145.4 | 152.3 | 157.0 | 151.2 | 145.4 | 168.6 | 169.1 | 7.7% |
| Topeka, KS | 111.9 | 119.1 | 124.0 | 127.1 | 125.1 | 121.4 | 129.7 | 136.8 | 7.6% |
| Montgomery, AL | 126.9 | 126.2 | 131.2 | 135.8 | 129.2 | 121.3 | 141.1 | 145.7 | 7.3% |
| Elmira, NY | 100.8 | 105.5 | 116.1 | 109.4 | 132.2 | 90.0 | 111.6 | 117.3 | 7.2% |
| Toledo, OH | 87.2 | 107.3 | 117.0 | 119.8 | 120.3 | 107.6 | 127.6 | 128.4 | 7.2% |
| Gary-Hammond, IN | 135.1 | 141.7 | 149.0 | 156.8 | 144.4 | 138.9 | 163.9 | 167.7 | 7.0% |
Now I know these numbers are subject to a lot of factors such as area employment/employers or pending infrstraucture but I think it shows there are some areas that may be worth looking into that may fall outside of the normal places to look.
I have seen a few of these towns talked about like Toledo, Cincinnati, and Gary-Hammond but several of these may only be known to the locals.
There were several areas on the list that have better % returns but I wanted to keep the price point below that of Cincinnati and with an increase of 7% or better.
I'm not sure exactly where in Fla Ocala is but I'm going to take a look once I post this!
Good discussion for sure.
In case that is a bit hard to read here is a screenshot of the same information.
@James Park Did you create that chart yourself or did it come from an article or something? That is incredibly helpful and insightful!
@Jon Q. Great idea! Have you used that strategy to pick markets in your region?
It’s all about the team first, market second when out of state. The list you have is a good start.
Find the best Property Manager you can in each city, then pick the best one overall. That is your market.
@James Dickens This chart is awesome! I currently live and invest in Cape Girardeau. The market here is moving so fast man. With a record number of college students each year, and plans for further downtown development, AND ATT bringing 1200 new jobs here soon this trend will only continue. A good and a bad thing about Cape when it comes to investors is how over saturated it is with landlords. There are ways to make good money here, but the competition is stiff. Which may contribute to the rising median value. If anyone is interested in this area shoot me a PM!
@Stephen Schott yea I looked at Cape after I looked at Ocala and there are a lot of really cool properties near the college. I did see quite a bit in the way of rentals as well on Zillow. I also saw an apartment building that looked nice but no information on how many doors and what layouts they had. Does look like a nice area but I was surprised to find that the higher end real estate was not overlooking the river and the river appears to be on a high bluff? Anyway looks like a cool place. Will send you a PM!
I would go with ATL because I lived there and think the market has a lot of potential. But I’d wait a bit since the market is really hot and I, like a lot of other investors, think the crash is coming soon.
@Stephen Kunen you are predicting a "crash" with the economy doing well, the Saudi's put a trillion dollars into a hedge fund for US roads and infrastructure the next thing Trump has on his list. Unemployment low, job growth, I'm curious to know what facts do you have pointing to a crash vs a modest correction? The coasts are doing extremely well but the rest of country is not back to 2007 numbers.