Which market would you choose for cash flow?

7 Replies

Hello BP, beginning investor here writing my first post and looking for your advice!

So here is my situation... I work remotely, I'm not attached to any physical location and looking to start my real-estate investing journey by acquiring cash flowing multi-families (probably residential as opposed to commercial to begin with, with a possibility of house-hacking with an FHA loan).

Currently I live in San Francisco (renting) and if I keep this up I'll probably need to sell one of my kidneys :-\

I'm looking to move to a different market (don't care how far / hot / cold) to actually live in, get a true feel for it, research it from the inside out, specialize in it and most importantly operate locally.

I've done a lot of "general" homework - watched a ton of podcasts, read many books and analyzed some online data so I know what areas people and experts are talking about and developed some opinions - but at the same time I know that market attractiveness is very dynamic and subjective.

So if YOU were in my situation and had to choose one market that you believe will provide the best upside for cash flow TODAY - what is it?

Thanks!

Amit

Well, for starters, I'd focus on my own mental health first, and cash flow second.  For instance, if I have to have the ocean in my life, I wouldn't move to arkansas no matter the cash flow.  I saw this recently living full time in Maine where the winters became unbearable and I had to leave to save my sanity, so for sure, quantify your wellness needs first and then go after cash flow.  

To the second part of your question and focusing on my wellness needs first, we have yet to find a singular place that meets all our needs at all times of the year, so we live full time in an RV and are choosing markets based on where we want to travel. 

Your question is also really generic...there is not one market in the US that you can identify that will be the best for all readers in every situation.

I hope that helps, and good luck with your blog post!

- JM

@Amit Golan

Wherever you go I suggest looking at 2-4 units. Live in the smallest one and rent out the rest. A great way to start investing imo. Also, I’d worry less about immediate cashflow and more about a decent location that will appreciate over time, and will not take a hard crash in a recession. I’d try to stay in CA if you can. Look at areas like Sacramento, outer Bay Area, North Bay, maybe Central Valley or inland empire, etc. But focus on high growth markets with some “there” there. The main issue you have is that we’re top of market. But if you pick a good location and find a decent deal with some upside (perhaps unit renovations) then it’ll pay off in the long run. And then you refi, pull cash out, and go on to the next one. Worked like a charm for me ;)

@Amit Golan , congrats on getting started! Fresno has been good to me and it's pretty close to you, only about a 3 hour drive.  Fresno is not the cheapest place in the US, but as far as CA goes it's providing some great cash flow.  I'd suggest checking it out, if you ever want to chat more about Fresno just shoot me a message.  See ya! 

@Amit M. - Thanks for the suggestions! I've been looking for reasons to stay and invest in CA but was probably not looking in the right areas for me...

In my current situation, not having a lot of upfront cash, I'm aiming more towards cash flow as opposed to appreciation because first, I believe a cash-flowing property as my first deal will more easily open the door for me to raise private capital for future deals and second, I want to start building income from REI and prove to myself that I know what I'm doing with the numbers :)

For my first deal I definitely wouldn't buy anything other than a 2-4 unit property (preferably a 4-plex). If staying in CA and having to invest in a more expensive multi-family, I'll probably just go with an FHA loan (which means not getting a property with a rehab upside) and live in one of the units without a positive cash-flow to start with like you suggested (at least save some $$$ on rent and have that cash saved up). And if at the same time I got myself a good recession-resilient property - awesome.

From your experience, your investments around the bay area (or generally in CA) were doing good during a recession?

@Jeff Zimmerman , thank you :) really want to pull the trigger on my first deal already...

I took a peak at some listings in Fresno and the area really looks a lot more friendly for my wallet! I'll do some more research about the area and will definitely get in touch with you to hear more.

Thank you