Best Cash Flowing States & Why

25 Replies

There are so factors, states, and metros within each state to give definitive answers. You have to account for rent/value ratio, property tax, Insurance, vacancy, capital expenditures (yes, some ares need roofs/foundations/siding replaced more frequently), landlord laws, etc.

Typically, the "South" (outside popular high taxes cities), and the "Midwest" are generally considered good for cash flow. With enough research and education, you can find a cash flowing area in almost any state.

@Aaron Moayed I like OH & MO, and probably since I have real world experience in those states. Excellent rent to price ratio, low taxes, landlord friendly laws, pop & economic growth. I've been consistently finding turnkey homes with a 15%-25% coc ROI here.

Every state has cash flow homes.. the only variable is rent and how much you have to put down to be positive cash flow. 

Originally posted by @Aaron Moayed :

What are some of the best cash flowing states to invest in, and why? What about worst, and why?

 States A through M are worst cash flowing.  States N through Z are the best... 

@Aaron Moayed your asking the wrong question. . . . . . . . . depending on your level of experience and education in real estate you would pose the following question. .

what opportunities are others eyes more trained to see than my own that allows them to invest in any market that cash-flows and why cant i see what they see?

any market has opportunities and there is a million and one ways to skin a cat. Instead of asking others what markets are best, do some research and see what strategies are working in various markets around the country and see if you have any interest in executing those strategies or learning them.

Examples:

States with rent control, high property tax, very tenant-friendly laws, high LLC costs, lower appreciation, poor weather, etc... I've started carving these factors down, but apparently you guys just look for the numbers working out no matter where it is? Maybe I'm looking too high up/filtering too much then. I know my appreciation cycle/rent to value ratio analysis was at least worthy. But hmm. There are lots of things to analyze... maybe analysis paralysis here 😂

@Aaron Moayed

Hi Aaron,

I can only speak to my personal experience— which I Broker between Atlanta and Los Angeles for the entertainment industry.

Los Angeles historically has been an appreciation play whereas Atlanta due to its significant filming and production and the migration of so many blue chip companies has been a great area for cash flow for my client, as they acquire properties at a lesser cost than in Los Angeles yet the rents can be arguably comparable.

All that being said, it really depends on your financing structure for the acquisition. The more cash you have to put down, the less of a loan you need, which in turn will truly higher cash flow, in any market.

Originally posted by @Aaron Moayed :

Examples:

States with rent control, high property tax, very tenant-friendly laws, high LLC costs, lower appreciation, poor weather, etc... I've started carving these factors down, but apparently you guys just look for the numbers working out no matter where it is? Maybe I'm looking too high up/filtering too much then. I know my appreciation cycle/rent to value ratio analysis was at least worthy. But hmm. There are lots of things to analyze... maybe analysis paralysis here 😂

yup over analyzing a very simple investment.. I E buy house rent it out..  all of the things you described the market will price for those items and those risks or none risks.. 

end of the day your success wholly depends on the person or persons living in the rental unit.. they can be great and you do well or they can be wholly terrors and you do poorly..   

Throw this in the bucket of questions with the "Which cities/states/neighborhoods should I invest in that will give me the best cash flow/money/returns?" -_______-; . 

Every state has cash-flowing opportunities. 

Originally posted by @KJ L. :

Throw this in the bucket of questions with the "Which cities/states/neighborhoods should I invest in that will give me the best cash flow/money/returns?" -_______-; . 

Every state has cash-flowing opportunities. 

You’re replying to this two weeks after the last reply? And while this question may be off, cities/neighborhoods/counties are not bad questions. “-___________-“

Who cares about when someone responds to a question? People are still answering questions that were posted months ago. 

If you actually do the research, you'll find that every state has cash flowing opportunities. Also like Mike said above, a quick search of the forums will reveal hundreds of posts on this question. 

-_- 

When I research states, and then neighborhoods within states, I find houses with a good price to rent ratio, and a good school system, but statistically 15% vacany is listed as far as houses go. So even though 40% of houses in the area are rented, I ask myself if the area is glutted with homes. Can anyone speak to this phenomenon? What statistics are relevant and which are just contributing to my analysis paralysis?

Thank you.

Originally posted by @Shoshana Shulman :

When I research states, and then neighborhoods within states, I find houses with a good price to rent ratio, and a good school system, but statistically 15% vacany is listed as far as houses go. So even though 40% of houses in the area are rented, I ask myself if the area is glutted with homes. Can anyone speak to this phenomenon? What statistics are relevant and which are just contributing to my analysis paralysis?

Thank you.

 For those types of properties, I’ve seen vacancy rates on the lower end (closer to 6-8%). Which state/MSA? Which school district? How are you determining vacancy rates?

The most recent one I looked at was in Kansas City and the schools for that address were rated between 8-9, elementary through high school.

I determined vacancy just by googling neighborhood information, zip code, etc.

I don't know if it's relevant or accurate.

But since you have been good enough to respond to me, I wonder if you could help me with my current dilemma. 

I own half a house with a relative of mine in a C area of a place where the cash flow is okay (~.9 %), the house is renovated, the prices are stable, but there is fierce competition among investors for these houses, so it's difficult to get one, let alone more, and the renter pool is plentiful, though due diligence on selecting a renter is primary. That said, my relative manages it for both of us and does not charge me for his services, so it's entirely hands off for me.

Here comes the dilemma:

I have (finally, finally) managed to save up $40,000 plus reserves to buy either another complete rental or buy the other half of this house I own with my relative.

If I buy my relative out, or if I buy a complete rental in the same area we own this one, he will manage for me at no cost.

ONLY, in order to buy a complete rental by myself in this same area, I would have to let him buy me out of my half of the house we are partners in. (It's a money issue)

BUT, if I could find a complete rental in a less expensive but better class area (Kansas City, Huntsville, Al, etc.), then I could get another whole rental for myself, and STILL keep the partnership with my relative (which I'm loathe to give up). BUT, I have to factor in paying for management fees to a management company and being long distance with NO feet on the ground for me other than paid services I'd have to manage from afar.

I do not want to over analyze this, and I do want to take action. Any advice or thoughts on this dilemma, or questions you might have for me?

Thank you.

Originally posted by @Shoshana Shulman :

The most recent one I looked at was in Kansas City and the schools for that address were rated between 8-9, elementary through high school.

I determined vacancy just by googling neighborhood information, zip code, etc.

I don't know if it's relevant or accurate.

But since you have been good enough to respond to me, I wonder if you could help me with my current dilemma. 

I own half a house with a relative of mine in a C area of a place where the cash flow is okay (~.9 %), the house is renovated, the prices are stable, but there is fierce competition among investors for these houses, so it's difficult to get one, let alone more, and the renter pool is plentiful, though due diligence on selecting a renter is primary. That said, my relative manages it for both of us and does not charge me for his services, so it's entirely hands off for me.

Here comes the dilemma:

I have (finally, finally) managed to save up $40,000 plus reserves to buy either another complete rental or buy the other half of this house I own with my relative.

If I buy my relative out, or if I buy a complete rental in the same area we own this one, he will manage for me at no cost.

ONLY, in order to buy a complete rental by myself in this same area, I would have to let him buy me out of my half of the house we are partners in. (It's a money issue)

BUT, if I could find a complete rental in a less expensive but better class area (Kansas City, Huntsville, Al, etc.), then I could get another whole rental for myself, and STILL keep the partnership with my relative (which I'm loathe to give up). BUT, I have to factor in paying for management fees to a management company and being long distance with NO feet on the ground for me other than paid services I'd have to manage from afar.

I do not want to over analyze this, and I do want to take action. Any advice or thoughts on this dilemma, or questions you might have for me?

Thank you.

 Is the .9% factoring in the free management?

Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets.

@Aaron Moayed States are not markets. Every state has many metropolitan statistical areas. Some are better than others for prices and rents. There are several good cash flow markets, however, in my opinion, Indianapolis and Kansas City are two of the best. Not only do they cash flow well, they have strong economic and demographic trends like population and job growth which is important not just for short term cash flow but long term asset value.

@Shoshana Shulman is the .9% per month? Or annually? Or is it 9%?

Does your relative live near the house you own with him? Does he own others in that area? Make sure that he would still really be interested in working as hard if/when he has nothing at stake. This would apply whether you buy his share or he buys your and you use the cash to buy something else.

If you go into another long distance market with the plan of buying one or two houses, it could be a tough road, because you're one of a million and property management companies may or may not perform to your standards, and you may not even know about it. Realistically, how often will you physically fly all the way to KC to check on an investment that's shooting off $5k/year (12.5% CoC on your $40k investment)? You will blow your returns out of the water real fast.

On the other hand, if your plan is to scale up - and fast - then finding a "better" market may be the way to go, and having lower returns because of the small scale for the first year or so may be worth it, because you will be able to build a sustainable business model over time.

I'm in Ramot - pm me if you want to meet up and talk in person!