Best states to buy n hold in
Lender · Kirkland, WA · Member since 2014 · 44 posts · 9 votes
Best states to buy n hold in
Most Popular Reply
Bellevue, WA · Member since 2014 · 183 posts · 86 votes
12yAs an investor, the moment I see a city hit a Forbes or Money magazine top 'whatever' list, I stop looking in that area.
Why? Because every other Tom, Dick and Harry who fancies themselves a real estate 'investor' will be flooding those markets, paying more than what a property is worth and creating undue competition for properties that are quickly becoming overvalued anyway.
I use these lists to provide me with data about the next up and coming markets. I look at areas just slightly outside the areas listed and look for deals there.
75 Replies
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes12y
The Cleveland Ohio area has a low purchase price point in comparison to it's rental rates.
over 15% ROI is not hard to achieve.
- 12yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Originally posted by @Dan Chapman:
HI, I am looking to invest out of my area as I live in California. I am familiar with a few other markets such as Denver and Seattle but they are a bit spendy too.
What states are good for lower purchase prices and greater ROI?
I have heard Texas, Tenn, Indiana...are good would be nice to buy closer to where I live though. Opinions and success stories?
thanks, Dan
MODERATOR: OK, MY USUAL WARNING HERE. IF YOU POST A RECOMMENDATION OF WHERE TO BUY PROVIDE INFORMATION AS TO WHY YOUR RECOMMENDATION IS A GOOD ONE. "BECAUSE I HAVE PROPERTIES FOR SALE IN THAT AREA" IS A REALLY BAD REASON TO RECOMMEND AN AREA.
Hi Don,
I believe that Michigan and Ohio offer the best value due most investors being scared off by the media pumping the declining population and higher unemployment that the rest of the country.
This opens the door to building a portfolio with these undervalued properties before everyone else wakes up and starts buying.
As soon as the hedge funds start jumping in the train has pretty much left IMO.
Thanks and have a great day.
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes12y
We had a hard time in Oregon and have had a lot of luck in Kansas City. I think generally, the coasts are really hard and the south and midwest are the best. The rust belt also probably has some good opportunities, but it's economically depressed, so a lot more risky. This would be worth checking out in that regard: http://www.realtytrac.com/content/news-and-opinion/best-and-worst-markets-for-rental-returns-heat-map-8023
- Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes12y
The trick is to find markets that have good 'price-to-rent' ratios, meaning the amount you can collect in rent can cover the expense of buying it and operating it, plus leave extra for you to pocket. Unfortunately there aren't many of these areas west of the Rockies. Denver and Seattle aren't typically good ones for it. The only way to get around it is if you are willing to put a lot of sweat work into a property or buy in really bad areas. I definitely don't recommend the latter for an out-of-state investor and the former is preference. Still can be tricky for long-distance owning though.
General markets you will hear talked about a lot are: Houston, Dallas, Philly, Memphis, Atlanta, Chicago, Indy, Kansas City, Cleveland, Detroit, and some others. All of those have one thing in common- the numbers work, in terms of profit. I don't personally recommend some of those as I'm not a big fan of buying in declining markets, but some of the others have huge growth associated with them.
Once you find the markets where the numbers work, then it's a matter of preferences as far as which one to go for. I wrote this awhile back, might help-
http://www.biggerpockets.com/renewsblog/2014/02/22/which-market-should-you-buy-in/
Sorry can't tell you better news about the western states. Not to say there are no deals out this way, but they aren't as obvious or in as big of quantity.
- Rental Property Investor · Chattanooga, TN · Member since 2012 · 74 posts · 43 votes12y
@Andrew Syrios I was going to post that same link. However that map also has to be taken with a grain of salt, since it is just applying a formula using median sales prices and rental prices and not looking at vacancy statistics or other economic factors associated with the area. Likewise, trulia heat maps are fun to look at as well to get a general idea, with the same caveats I just mentioned. I like to zoom in on an area and click back and forth on listing price and rental price to see which areas might be worth looking into. http://www.trulia.com/home_prices/
- Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes12y
Originally posted by @Angie B.:
@Andrew Syrios I was going to post that same link. However that map also has to be taken with a grain of salt, since it is just applying a formula using median sales prices and rental prices and not looking at vacancy statistics or other economic factors associated with the area. Likewise, trulia heat maps are fun to look at as well to get a general idea, with the same caveats I just mentioned. I like to zoom in on an area and click back and forth on listing price and rental price to see which areas might be worth looking into. http://www.trulia.com/home_prices/I definitely agree, any such map or analysis needs to be viewed with a healthy dose of skepticism.
- Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes12y
You are prime for Bakersfield and AV. It is not out of state but the prices are as if. Both are experiencing double digit appreciation with very low taxes as you know. My out of state top choice is Colorado followed by Texas for rental demand and appreciation. Then AZ and NV for same reasons.
thanks,
Matt
- Bellevue, WA · Member since 2014 · 183 posts · 86 votes12y
@Dan Chapman and @Ali Boone Seattle can be a difficult, pricey market to invest in. However, if an investor is willing to be flexible, great investment properties can be found within a 2-hr drive of the city.
There was a recent discussion about where to buy and hold properties within Washington State. It can be found here:
Personally, I see a lot of potential in areas within Pierce County and downtown Tacoma.
- Bellevue, WA · Member since 2014 · 183 posts · 86 votes12y
I just re-read your post again, and overall, I am in agreement with the other posters. However, if you want to stick to markets that you know, I would definitely check out the post and link above.
- Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes12y
I think most people become comfortable investing close to home, and can make good arguments for their choices. If it's me, I'd look for the lowest cost of ownership and maintenance, as well as purchase price. In addition, I would look for landlord friendly states, areas with a stable economy, and states that have low property taxes and low/no state income taxes. Having researched numerous markets in past years, and having more info now than five years ago, I would say Arizona, Texas, Nevada, and Florida fit the bill quite well.
While Michigan has several markets with good price-to-rent ratio, when you factor in everything else, I think you can do better. The Midwest has pretty high property taxes, and unlike a mortgage payment, they never get paid off. I have relatives in Phoenix who own a $350k house and their taxes are like $1200/year. The cheapest house I own (in Lansing )has property taxes that are around $1800/year, and that's for a house that I bought for 30k.
If you plan on holding for decades, the wear and tear on a house with a tile roof, made of block, on a slab, is much less than a climate that has regular rainfall, has a roof that needs replacement every 25 years, and is subjest to more exterior forces, including water infiltration in a basement.
Bottom line is that you'll have to pay more up front, but my two cents is that the cash-flow is better and the holding costs are much lower.
Good luck with whatever you choose
- Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes12y
I look at all the factors mentioned above and also study where the population is moving in the U.S.
In the last 10 years, the south has grown the most (14.3%) 14.3 million population growth. Secondly the West grew by (13.8%) 8.7 million population growth. Northeast (3.2%) 1.7 million population growth and Midwest (3.9%) 2.5 million.
States that grew the most in last 10 years
Population growth % growth
Rank:1) Texas 4.3 million 20.6%
2) California 3.3 million 10%
3) Florida 2.8 million 17.6%
4) Georgia 1.5 million 18.3%Good weather, strong industry & job growth, favorable property taxes, good schools makes an area to be attractive to raise a family and invest.
If I had to choose the top three states to invest : I would pick Texas ( Although I don't like the 3% property taxes), North Carolina, and Georgia.
I invest (buy and hold) in Forsyth County, Georgia which is the 7th fastest growing county in the nation with good demographics, job growth, less than 1% property taxes, and among the best ranking public schools in the state of Georgia.
Rank fastest growth counties:
1. Kendall, IL
2. Pinal, AZ
3. Flagler, FL
4. Lincoln, SD
5. Loudoun, VA
6. Rockwall, TX
7. Forsyth, GA
8. Sumter, FL
9. Paulding, GA
10. Henry, GA
3 of the top ten fastest growing counties are in the state of Georgia.
- 12yChristian CarsonPro MemberCleveland, OH · Member since 2011 · 400 posts · 223 votes
I've always been wary of the southwestern states. The place is a desert, and Lake Mead is at all-time lows. I've heard Phoenix has a good water management system in place, but other cities across the southwest aren't planning well enough for potential water shortages in the future. Las Vegas is building a water tunnel to Lake Mead that's designed to suck every last drop out of the reservoir. If the elevation drops another 30 feet, the efficiency of the Hoover Dam is brought into question. Very scary stuff.
Considering that there aren't really all that many natural reasons for such a large population to be down there, the risk of abandonment and price collapse due to water shortage is sky-high.
- Real Estate Investor · Kirkland, WA · Member since 2012 · 480 posts · 116 votes12y
Originally posted by @James Park:
I look at all the factors mentioned above and also study where the population is moving in the U.S.
In the last 10 years, the south has grown the most (14.3%) 14.3 million population growth. Secondly the West grew by (13.8%) 8.7 million population growth. Northeast (3.2%) 1.7 million population growth and Midwest (3.9%) 2.5 million.
States that grew the most in last 10 years
Population growth % growth
Rank:1) Texas 4.3 million 20.6%
2) California 3.3 million 10%
3) Florida 2.8 million 17.6%
4) Georgia 1.5 million 18.3%Good weather, strong industry & job growth, favorable property taxes, good schools makes an area to be attractive to raise a family and invest.
If I had to choose the top three states to invest : I would pick Texas ( Although I don't like the 3% property taxes), North Carolina, and Georgia.
I invest (buy and hold) in Forsyth County, Georgia which is the 7th fastest growing county in the nation with good demographics, job growth, less than 1% property taxes, and among the best ranking public schools in the state of Georgia.
Rank fastest growth counties:
1. Kendall, IL
2. Pinal, AZ
3. Flagler, FL
4. Lincoln, SD
5. Loudoun, VA
6. Rockwall, TX
7. Forsyth, GA
8. Sumter, FL
9. Paulding, GA
10. Henry, GA
3 of the top ten fastest growing counties are in the state of Georgia.
Thanks for posting these stats. Now, does anyone have projections for future growth?
- Real Estate Agent · Phoenix, AZ · Member since 2014 · 33 posts · 4 votes12y
I have a bunch of clients that have moved from Texas to the Phoenix market because of the property taxes in texas being too high… Texas has a great economy but Arizona is not far behind and is expanding and growing like crazy. A typical income property here in Arizona is as followed:
Purchase Price: $100-160k
Rent: $1000-$1300/month
Insurance $400-$550/yr
Taxes $450-$750/yr
HOA $0-30/month
Property Management - 8% of monthly rental income
ROI - 8-18% cash on cash
ROI w/ tax advantages + appreciation - 40-60% ROI
- Real Estate Broker · Phoenix, AZ · Member since 2010 · 52 posts · 12 votes12y
With no natural disasters and a diversified economy, many of my California clients choose Arizona. Other reasons being that it is geographically close and better cash flow here than what they can get in California is another reason.
You can find higher CAP rates in other markets, but there are other reasons for that you'll find when comparing the markets. Overall, Arizona is a desirable market and has been in the top 5 states in many growth categories for the last 50 years and is expected to remain a high growth state.
- Lender · Kirkland, WA · Member since 2014 · 44 posts · 9 votes12y
Thanks for the info all. I do like the options and cases being made. Lots to consider and look into.
- 12ySharad M.Pro MemberCarlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
Hi @Dan Chapman
Welcome to BP!!
I am an investor in Indiana. I do mainly buy and hold properties. I live in Chicago, but own all of my investment properties in Indiana, so technically I am out of state investor..lol..
My properties in Indiana are no more than 30-45 minutes from my house in downtown Chicago. Some of the reasons I like investing in Indiana are:
1) ROI - ROI in my experience has been excellent and you can invest in good areas and still be able to get good ROI on your money.
2) Landlord Friendly - IN is very landlord friendly, at least, the county that I invest in. If you file the paperwork correctly, you can get a tenant evicted in 2 weeks.
3) Proximity to Chicago - I have a number of tenants that live in Indiana and work or go to school in Chicago. There are local trains that run between where I invest in Indiana and Chicago downtown and a number of my tenants commute daily to Chicago.
Best wishes for your future success.
Sharad
- Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes12y
[url]http://www.forbes.com/sites/erincarlyle/2013/12/26/best-buy-cities-where-to-invest-in-2014/[url]
1. Fort Worth/Arlington, TX
2. Dallas/Plano/Irving, TX
3. Charlotte/Gastonia/Concord, NC/SC
4. Nashville/Davidson/Murfreesboro/Franklin, TN
5. Houston/Sugarland/Baytown, TX
6. Atlanta/Sandy Springs/Marietta, GA
7. Oklahoma City, OK
8. Orlando, Kissimmee, FL
9. Las Vegas/Paradise, NV
10. Boise City/Nampa, ID
11. Grand Rapids, Michigan
12. Tampa, St. Petersburg, Clearwater, FL
13. Fort Lauderdale, Pompano Beach, Deerfield Beach, FL
14. Salt Lake City, UT
15. Boston, MA
16. Seattle, Bellevue, Everett, WA
17. Minneapolis, St. Paul, Bloomington, MN/WI
18. Virginia Beach, Norfolk, Newport News, VA/NC
19. Phoenix, Mesa, Scottsdale, AZ
20. Louisville, Jefferson County, KY
- Real estate investor · Las Vegas · Member since 2013 · 798 posts · 171 votes12y
I didn't even read the rest of the list when I saw Virginia Beach at 18. Sure there are a lot of people in and out, but the cost to rent ratio is pretty horrible in most of the areas professionals would want to live.
- Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes12y
Texas, The Carolinas, and Georgia all make a lot of sense for a great place to buy/hold and slowly build your wealth. Lately, I been researching Florida and considering getting my broker license there.
I think Florida has a lot of potential and may be a great market to enter. I took a drive down to Orlando and Tampa / Clearwater several times to check out the real estate market there. Florida had the third largest inflow of population after Texas and California.
Originally posted by @Mike McKinzie:
[url]http://www.forbes.com/sites/erincarlyle/2013/12/26/best-buy-cities-where-to-invest-in-2014/[url]
1. Fort Worth/Arlington, TX
2. Dallas/Plano/Irving, TX
3. Charlotte/Gastonia/Concord, NC/SC
4. Nashville/Davidson/Murfreesboro/Franklin, TN
5. Houston/Sugarland/Baytown, TX
6. Atlanta/Sandy Springs/Marietta, GA
7. Oklahoma City, OK
8. Orlando, Kissimmee, FL
9. Las Vegas/Paradise, NV
10. Boise City/Nampa, ID
11. Grand Rapids, Michigan
12. Tampa, St. Petersburg, Clearwater, FL
13. Fort Lauderdale, Pompano Beach, Deerfield Beach, FL
14. Salt Lake City, UT
15. Boston, MA
16. Seattle, Bellevue, Everett, WA
17. Minneapolis, St. Paul, Bloomington, MN/WI
18. Virginia Beach, Norfolk, Newport News, VA/NC
19. Phoenix, Mesa, Scottsdale, AZ
20. Louisville, Jefferson County, KY
- Boston, MA · Member since 2014 · 152 posts · 63 votes12y
Hello @Dan Chapman ! Welcome to the site- it seems you're getting your first taste of how helpful members of BP nations are with any inquiries one might have.
I like Ken McElroy's view on selecting properties & he actually goes into great detail in BP podcast #52. He's an expert that knows a boat load more about selecting markets than I do right now.
See: http://www.biggerpockets.com/renewsblog/2014/01/09...
When you are selecting a market to invest in, especially if you're looking to invest out of your local area, you have to evaluate markets on a macroeconomic level. The value of a rental market is a function of three factors- jobs, people, and money.
You have to ask yourself where the 3 are flowing towards and seemingly coalesce. A quirky acronym I use is to think of the late, great financial titan, J.P Morgan. J= jobs, P= people, and the Morgan stands for money. I take the 3 factors and personify them with J.P Morgan.
When looking at markets for fun (I can't start investing due to my youth), I ask myself a simple question. You should ask yourself this too- "Would J.P Morgan invest here based on the the three critical factors?" After all they're 'his' metrics. LOL.
Once you've found your ideal locations based on "J.P Morgan", select a price point you're after in that market.
Texas seems to do great in all three areas and it seems to do great in all 3 areas. I could be wrong in saying this, but I believe that a guest on one of the earlier podcasts stated that Texas (paraphrasing here) "produced more jobs after the financial meltdown (2009-11ish) then the other 49 states combined." There are also some really strong rental markets out in the Midwest, namely St. Louis.
BUT, and this is a big but, don't forget that there are great deals in every market. When I was younger I believed that the grass is greener on the other side, but I know that there are DIAMONDS in our own backyards.
Russell Conwell dedicated a rather large portion of his sermons to delivering the story of an African man who left his homestead in pursuit of diamonds. He ended up traveling all about the African continent & not finding a single gem stone. The man who bought his land for pennies on the dollar ended finding large deposits of diamonds & became wealthy beyond his imagination.
Thoughts?
- Bellevue, WA · Member since 2014 · 183 posts · 86 votes12y
As an investor, the moment I see a city hit a Forbes or Money magazine top 'whatever' list, I stop looking in that area.
Why? Because every other Tom, Dick and Harry who fancies themselves a real estate 'investor' will be flooding those markets, paying more than what a property is worth and creating undue competition for properties that are quickly becoming overvalued anyway.
I use these lists to provide me with data about the next up and coming markets. I look at areas just slightly outside the areas listed and look for deals there.
- Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes12y
JP Morgan. I like that. Job, People, and Money. I think high paying jobs is where Florida falls short in "JPM" . Most of the jobs in Florida don't pay very well.
In addition to "JPM" I also look at "SAM" in determining where to invest. "Schools" and "Asian Migration". I do believe that by thoroughly studying the demographics and history of an area, one can predict faster than average appreciation in real estate prices by investing in that area.
Atlanta has seen one of the fastest growing Asian population in-flow in the last ten years. Georgia's #1 public high school is the first Asian majority high school in the state and Forsyth County sits exactly north of this school. It was a no brainer for me to know where to concentrate my resources.
Some investors like to diversify their investments in several states, but I believe in the "law of concentration".
- Real estate investor · Las Vegas · Member since 2013 · 798 posts · 171 votes12y
@James
@James Park undefined
What is the benefit attached to Asian migration? Are you connecting that to better school scores?
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