What city should I invest in?

Investor · Santa Clara, CA · Member since 2015 · 5 posts · 3 votes

Hi bp, If I have $175k to invest in a property, where should I buy? Kansas city? Atlanta? Denver? Dallas? Please advise and tell me which city is best and shy? Thanks, Hang

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

10y

Anywhere within a 90 minute drive of where you are located. Im a firm believer of looking close instead of far away.

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Kevin Grinstead
Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
10y
right now, I would think that Kansas City or Atlanta would allow for your money to grow the best. Denver's market has a much higher entry point and it would be hard to get something for 175k.
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Bill S.Pro Member
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Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
10y
@Hang Lee with $175K as a down payment you can certainly get into the Denver market. With $175,000 purchase price there are opportunities here but they are much more limited.
I'm a little curious about your question. Your options are all over the board. Kansas City is generally characterized as a cash flow city and Denver as an appreciation play (cap rates/cash flow tend to be on the lower end). I would say the first step is for you to figure out what you are investing for and then maybe ask which City would be best for your approach.
The other advise is to use the search feature in the upper right hand corner of the page. There are some very long forum discussions about how to invest $100K or $1M or whatever amount. Again it really depends on what you are trying to accomplish.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Hang Lee:

Hi bp,
If I have $175k to invest in a property, where should I buy? Kansas city? Atlanta? Denver? Dallas? Please advise and tell me which city is best and shy?
Thanks, Hang
San Francisco! High appreciation, high profit and good rent growth. Plus almost fixed property taxes.
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Dylan Peters
Rental Property Investor · San Francisco, CA · Member since 2016 · 22 posts · 6 votes
10y
San Francisco is going to be a tougher market to get into with only 175k. Totally possible but I would think you would get more bang for your buck elsewhere. At least for now.
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Joe Bertolino
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
10y
Sacramento over all of those mentioned.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
That would be a $875,000 property at 20% down. How do yo define "bang for your buck"? You'd be hard pressed to find a more profitable market.
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Wes Brand
Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
10y
@Account Closed Where in San Francisco are you going to find a property at 875k? I've been looking all over the place for about 2 months now and anything decent comes in at around 1.2/1.3mil at the low end. And of the stuff that is cheaper it's very hard to find something that you won't have to carry until rent appreciation makes it cashflow neutral. Also keep in mind that list price is a very loose guide around here. The vast majority of the properties in the area are going to go for far over list if they're at all attractive. A decent place I was looking at in SF earlier this month ended up going for about ~40% over list, for example.
I was able to find quite a few terrible investments at under 875k, though. Places where there are protected tenants in place renting for 700/mo. I know SFH are exempt from rent control, but do you want to be the one kicking out the 85 year old disabled guy? And even if you do...have fun carrying it for 3 years while you wait for the eviction to go through. Or places with insane HOA fees (2k/mo!) in the middle of the city.
The majority of properties in the 875k range are in South San Francisco / Daly City. You might get lucky in Bernal heights, Outer Mission/Richmond/Sunset, Crocker Amazon, Excelsior, and Bayview.
I'm not sure on the appreciation market, but price point wise you'll be better served in Oakland. Stay within 4 BART stops from SF and the neighborhoods are currently going up. You might even find a cashflow positive place near Fruitvale / Coliseum, but you're getting into high crime territory there and are really waiting for gentrification to push the undesirable element out of the area.
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y
Anywhere within a 90 minute drive of where you are located. Im a firm believer of looking close instead of far away.
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group545 Reviews
Website View Page
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Account Closed
Benicia, CA · Member since 2015 · 27 posts · 9 votes
10y
Originally posted by @Joe Bertolino:

Sacramento over all of those mentioned.
Sacramento City itself? Or the suburbs? Are you investing for cash flow or appreciation?
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Yoochul C.
Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
10y
Prices in SF are now dropping. I'm buying new construction in Atlanta.
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Gordon CuffePro Member
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 584 votes
10y
@Hang LeeIf you want to invest for cash flow then Kansas City is a very good bet. You can find good cash flow and it also has a good economy. You can buy a 800k apartment with 175k or you can buy 8 cash flowing homes renting at 850 per month at 70k per house purchase price. You can then shoot for owning them free and clear in 10 years instead of waiting 30 years.
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
@Wes Brand - I see cash flow positive turnkey investment property purchases all the time within a 90 minute drive of crossing one of the bridges leaving SF.
The non-turnkey ones, I see cross my desk as refinances out of hard money.
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Joe Bertolino
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
10y
Originally posted by @Account Closed:

Originally posted by @Joe Bertolino:
Sacramento over all of those mentioned.
Sacramento City itself? Or the suburbs? Are you investing for cash flow or appreciation?
City and I am getting both.
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Wes Brand
Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
10y
@Chris Mason I'd believe it; that's why I suggested within a couple bart stops from SF into Oakland and to the south, Daly City area -- you'll get in for 875k or less and be cashflow positive and the areas are going up in rents and desirability. I haven't done research on those areas, just the general feel I have.
Do you see the same cashflow positive deals IN SF proper, though? I'd be surprised. Could you eventually get positive cashflow in SF? Yeah, but you're carrying the property until then. And you're not buying it in SF proper at 875k (or, what I said before, maybe you can get lucky on one of the outer districts, it's possible, but unlikely, you'll find something in crocker-amazon for 875k or less; I doubt it will cashflow off the bat)
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
@Wes Brand - Yup, agreed. In theory anything in CA will be cash flow positive eventually thanks to Prop 13. But...
- Who wants to wait that long?
- SF has more rent control BS than anywhere else in the country.
Lemme tell you about my evil genius client. He's lived in a rent controlled apartment in SF for about 20 years now. He owns six investment properties in East Bay cities that do not have rent control.
Like I said, evil genius. Gotta admire it!
He is definitely one of the "long game" type REI. I'm sure his rental unit that he lives in wasn't a great deal when he signed that first lease, and I know for a fact that some of those East Bay properties weren't super money makers on day one (one of them, he's cash flow negative just a little bit each month, at least the way lenders do our math).
But now I qualify him for mortgages without even asking for paystubs or verifying employment; just tax returns, leases, and cash to close if applicable, and he can basically borrow however the hell much he wants.
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Jo-Ann LapinPro Member
Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
10y
Not knowing your financial situation and did you want to carry debt or non. Assuming some debt Sacramento, Stockton, Elk Grove, Modesto and Merced could be some markets to look into. Hope that helps.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Chris Mason:
@Wes Brand - Yup, agreed. In theory anything in CA will be cash flow positive eventually thanks to Prop 13. But...
Who wants to wait that long?
SF has more rent control BS than anywhere else in the country
At 6% rent increase compounded annually it's NOT that long to cash flow. The Prop 13 is just "icing on the cake". AND the best thing is that once you hit the cash flow positive mark you still get the 6% annual rent increases! Talk about pure profit. As far as rent control, if that is a problem for you then buy one of the tens of thousands rentals that are not covered by rent control. Geez, problems solved.
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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
Originally posted by @Account Closed:
Originally posted by @Chris Mason:
@Wes Brand - Yup, agreed. In theory anything in CA will be cash flow positive eventually thanks to Prop 13. But...

Who wants to wait that long?
SF has more rent control BS than anywhere else in the country
At 6% rent increase compounded annually it's NOT that long to cash flow. The Prop 13 is just "icing on the cake". AND the best thing is that once you hit the cash flow positive mark you still get the 6% annual rent increases! Talk about pure profit. As far as rent control, if that is a problem for you then buy one of the tens of thousands rentals that are not covered by rent control. Geez, problems solved.
Hey I'm just trying to be honest and play devil's advocate here about the dangers of all the tenant's rights stuff in San Francisco, but if you want to go sell the concept of San Francisco investment property deals/properties/mortgages that typically break the 1% rule, have low cap rates, and will often be cash-flow negative out the gate, some non-trivial percent of these mortgages which I will be writing, go for it, thanks, and keep writing posts like this. :P
Hit me up for beers next time you're in the area.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Chris Mason:
Hey I'm just trying to be honest and play devil's advocate here about the dangers of all the tenant's rights stuff in San Francisco, but if you want to go sell the concept of San Francisco investment property deals/properties/mortgages that typically break the 1% rule, have low cap rates, and will often be cash-flow negative out the gate, some non-trivial percent of these mortgages which I will be writing, go for it, thanks, and keep writing posts like this. :P
Hit me up for beers next time you're in the area.
Aloha Chris, the dangers of "tenants rights" seems to only happen to landlords that think they can circumvent them and then are surprised when they get smacked royally. I believe @Amit M. expounds on the benefits of owning under rent control. Go around, not through!
1. 1% rule. Makes no sense ANYWHERE.
2. Low cap rates? Not a profit metric either.
3. Cash flow? For poor investors or investors that are poor. Sad face.
I'll be back most of the summer, are you in the City?
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
Originally posted by @Account Closed:
Originally posted by @Chris Mason:
Hey I'm just trying to be honest and play devil's advocate here about the dangers of all the tenant's rights stuff in San Francisco, but if you want to go sell the concept of San Francisco investment property deals/properties/mortgages that typically break the 1% rule, have low cap rates, and will often be cash-flow negative out the gate, some non-trivial percent of these mortgages which I will be writing, go for it, thanks, and keep writing posts like this. :P
Hit me up for beers next time you're in the area.
Aloha Chris, the dangers of "tenants rights" seems to only happen to landlords that think they can circumvent them and then are surprised when they get smacked royally. I believe @Amit M. expounds on the benefits of owning under rent control. Go around, not through!
1. 1% rule. Makes no sense ANYWHERE.
2. Low cap rates? Not a profit metric either.
3. Cash flow? For poor investors or investors that are poor. Sad face.
I'll be back most of the summer, are you in the City?
I can be, and if you can say all that with a straight face, and believe it, then I obviously need to do some listening to you, so I will be as needed. Anyone can do all the math nonsense with equity positions and assume crazy appreciation will continue forever, so I'm hoping you've got a pitch that's better than that. :P
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Chris Mason:
Originally posted by @Account Closed:
Originally posted by @Chris Mason:
Hey I'm just trying to be honest and play devil's advocate here about the dangers of all the tenant's rights stuff in San Francisco, but if you want to go sell the concept of San Francisco investment property deals/properties/mortgages that typically break the 1% rule, have low cap rates, and will often be cash-flow negative out the gate, some non-trivial percent of these mortgages which I will be writing, go for it, thanks, and keep writing posts like this. :P
Hit me up for beers next time you're in the area.
Aloha Chris, the dangers of "tenants rights" seems to only happen to landlords that think they can circumvent them and then are surprised when they get smacked royally. I believe @Amit M. expounds on the benefits of owning under rent control. Go around, not through!
1. 1% rule. Makes no sense ANYWHERE.
2. Low cap rates? Not a profit metric either.
3. Cash flow? For poor investors or investors that are poor. Sad face.
I'll be back most of the summer, are you in the City?
I can be, and if you can say all that with a straight face, and believe it, then I obviously need to do some listening to you, so I will be as needed. Anyone can do all the math nonsense with equity positions and assume crazy appreciation will continue forever, so I'm hoping you've got a pitch that's better than that. :P
I'm backed by 40 years of market data.
Crazy appreciation? $50,000 in 70's, $100,000 in the 80's, $200,000 in the 90's, $400,000 in the 00's, $800,000 in the teens. Adjust by your starting price point in the 70's. Are you really arguing against those numbers or just that you think it will all stop? I've heard we've reached the top in the 80's 90's 00's and teens. Same ole, same ole.
Is there a point we are actually arguing?
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
Originally posted by @Account Closed:

Originally posted by @Chris Mason:
Originally posted by @Account Closed:
I'm backed by 40 years of market data.
Crazy appreciation? $50,000 in 70's, $100,000 in the 80's, $200,000 in the 90's, $400,000 in the 00's, $800,000 in the teens. Adjust by your starting price point in the 70's. Are you really arguing against those numbers or just that you think it will all stop? I've heard we've reached the top in the 80's 90's 00's and teens. Same ole, same ole.
is ther a point we are actually arguing?
There is no point that we are arguing.
I wasn't doing mortgages in 2007. I came into it post-meltdown. You are backed by 40 years of market data, data that I agree with.
But my experience has taught me that when I start putting appreciation assumptions into the numbers I present, people (especially people of my generation who are mostly my clients) look at me like I'm the Wolf of Wall Street dude trying to sell them Aerotine Dynamic stock (or whatever it was in the film). The recession wasn't that long ago, and IRL the Wolf of Wall Street dude did indeed do mortgages for a hot second after he lost his stock broker license but before he was convicted.
So my position is that I must present numbers that support owning a home as a residence or investment that assume zero percent appreciation. Realtors f-cking love me because I can do that for owner occupants, and I genuinely believe what I present (& put my money where my mouth is as a homeowner), for their young first time homebuyers that are super cynical.
For investors, if I assume 0% appreciation and a bunch of tenants rights nonsense eating up net profit, the numbers do not work for SF. I can't make them work, because they don't work, unless we start placing speculative bets on appreciation.
TLDR: you and I are actually both doing this backwards. I'm supposed to be like "oh get a zillion maxed out mortgages in SF, it'll work itself out because of appreciation!" and you as a conservative real estate investor are supposed to be like "uhhh SF is a bad place to invest." We're both reading the wrong person's script, but it's all good, makes for a fun convo.
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Logan AllecBusiness Member
Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
10y
@Account Closed, thanks for your posts...they've encouraged me to keep investing locally here in the LA area even though it seems everybody and their mother is putting money out-of-state. I'm in this for the long haul, and over the long haul, appreciation is what makes you win the real estate lottery (as I think I saw on your profile before), and this seems to be what the folks who have been in this game the longest (and who actual won at it) are saying. If I wanted an extra $300 per month, I'd drive Uber once every few Saturdays, not throw my money into a property I've never touched thousands of miles away.
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Account Closed
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Originally posted by @Chris Mason:

So my position is that I must present numbers that support owning a home as a residence or investment that assume zero percent appreciation. Realtors f-cking love me because I can do that for owner occupants, and I genuinely believe what I present (& put my money where my mouth is as a homeowner), for their young first time homebuyers that are super cynical.
For investors, if I assume 0% appreciation and a bunch of tenants rights nonsense eating up net profit, the numbers do not work for SF. I can't make them work, because they don't work, unless we start placing speculative bets on appreciation.
Appreciation rates are as much a fact as rental rates, vacancy rates and expense rates. You don't IGNORE those. The market is setting those rates and you are choosing to IGNORE the market or SPECULATE that you are smarter than them.
Assuming zero appreciation equalizes all markets across America. Are you really unable to grasp the location, location, location?
The "numbers" work in SF. You just choose to ignore some of them.
"tenants rights nonsense" Never been a problem to me or any informed investors that I know.
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Wes Brand
Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
10y
SF is showing signs of slowing down in the short term. I personally know a few people who aren't under rent control that have had rents decrease instead of increase this year. I don't think that makes it a bad market for building wealth, but the market will not "make the numbers work" unless you're betting on appreciation in rents (which is totally valid, but make sure you avoid the rent controlled properties). The best you can do without waiting for rents to go up is even cashflow, so you're not losing but not gaining (or if you are losing, it's something minimal, couple hundred to a couple thousand a year), and even that is tough. There are also a ton of "trap" properties. Places where you have to pay 1.5mil to get in and then pay an additional 2k/mo for the HOA and it'd only rent for 6-7k/mo.
I'd say the best option in SF is to try to get lucky with a distressed property or a FSBO if you manage to run across one. Actually the real best option is to wait for the next big earthquake that comes through and buy right after it...we're overdue anyway...
Alternatively, you can go to the outer areas of SF. I haven't done the research on their market, so I won't speculate on what happens beyond saying it's not unheard of for the outer city to fall harder, faster, than the inner city. But again, I haven't done the market research on them.
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