What city should I invest in?

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What city should I invest in?

Hang Lee
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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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Account Closed:

    The "numbers" work in SF.  You just choose to ignore some of them.

     I don't really choose to ignore them. It's more that people (of my generation) fire me if I include them.

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Chris Mason:
    Originally posted by @Account Closed:

    The "numbers" work in SF.  You just choose to ignore some of them.

     I don't really choose to ignore them. It's more that people (of my generation) fire me if I include them.

    Don't blame me for trying to educate a generation of ignorant investors.   I get crap here for trying to do the same.  I'd rather educate than capitulate to ignorance, 

    2Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Chris Mason:
    Originally posted by @Account Closed:

    The "numbers" work in SF.  You just choose to ignore some of them.

     I don't really choose to ignore them. It's more that people (of my generation) fire me if I include them.

    So let me ask you why anyone would be interested in buying a SF house if they thought there was no appreciation or rent growth and it is costing them thousands more to buy instead of renting?  WHAT is your generation thinking?

    0Reply
  • Alex Franks
    Rock Hill, SC · Member since 2015 · 1k+ posts · 597 votes
    10y
    Originally posted by @Russell Brazil:

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

     Most folks should start at home. Then when they learn about real estate investing then venture out side of their state. 

    Alex

    0Reply
  • Joe Fairless
    Investor · Cincinnati, OH · Member since 2013 · 2k+ posts · 1k+ votes
    10y

    @Hang Lee it depends on your strategy, experience level and your goals with that 175k. 

    0Reply
  • Alex Franks
    Rock Hill, SC · Member since 2015 · 1k+ posts · 597 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

    Invest at home first , most of what is sold in out of state markets are lower end  or over priced nicer homes.  I am sure they are better ways to partner or invest locally.

    Alex

    0Reply
  • Joseph Graeve
    Investor · Claremont, CA · Member since 2014 · 150 posts · 36 votes
    10y

    @Hang Lee

    I invest in Denver and Colorado Springs and I can definitely vouch for them as hot markets.

    Colorado Springs is very stable with 5 military bases near it and is steadily appreciating, would make a great place for reasonable priced rentals with great stability and low crime.

    Denver would be great for flips because of all of the volatility. I am personally a fix and flip investor and have had a pretty great success investing here and making my investors some great returns. It just depends what you're looking for. Let me know if you have any more questions about these markets. I would be happy to answer them.

    0Reply
  • Raimondo F.
    Investor · San Francisco, CA · Member since 2015 · 23 posts · 25 votes
    10y

    Hi @Account Closed, if @Chris Mason is not in the city, I'll be and be very happy to meet and talk about the  San Francisco market. I do believe in location, location, location ;-)!

    0Reply
  • Matt R.
    Westminster, CO · Member since 2015 · 37 posts · 13 votes
    10y
    Denver has been and continues to be very competitive. There are deals to be had here and very hot neighborhoods but lots of investors bidding for those deals. If you're flipping, good contractors are hard to come by as well. Labor is in short supply. I'm booking out jobs well in advance right now and costs are up.
    0Reply
  • 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:

    The "numbers" work in SF.  You just choose to ignore some of them.

     I don't really choose to ignore them. It's more that people (of my generation) fire me if I include them.

    So let me ask you why anyone would be interested in buying a SF house if they thought there was no appreciation or rent growth and it is costing them thousands more to buy instead of renting?  WHAT is your generation thinking?

    • Take PITI on a $1m purchase, 20% down, $800k loan. Call it $5710.
    • Subtract annual mortgage interest deduction and annual property tax write-off multiplied by the formula a CPA gave me that includes their top state and federal marginal tax bracket, divided by 12, from it, note that I'm not a CPA confirm with your CPA. They pay this much less in taxes by virtue of owning.
    • Subtract from that number the portion of their first monthly payment that will go towards principal reduction, they will get at least that much back when they go to sell 5 or 10 years from now. I don't include appreciation OR realtor commissions, but your principal portion gradually goes up over time... I don't include that either. 80% of the time they actually bring up appreciation at this point. I say "no, let's be conservative and not include that for now. Let's entertain the notion that the Bay Area has zero appreciation and see if it still makes sense."
    • Now we have a lower number. PITI of $5710/month just became $2900/month. Spread over their life of ownership, this is how much they will in retrospect have paid for housing that assumes zero appreciation. "You need to be ready to be out of pocket that $5710 number each month, so this is a number that your future-self will look back and see." And I'm not using funny numbers here:
      • the CPA formula is a CPA formula, and 
      • I used the lowest monthly equity gain that will ever occur while they own this home (assuming zero appreciation or depreciation).
    • "Mr and Mrs Smith, do you think you could rent a place in the neighborhoods you're looking that are as nice as the houses you are looking at, for $2900 per month?"
    • I'm pretty sure at this point they are bringing up appreciation in their heads as icing on the cake. But I sold them on it ignoring appreciation, in the Bay Area. Realtors tend to like this because no numbers-oriented person (software engineers, etc) one walks into my office and leaves without being in love with homeownership. You don't want your tenants talking to me; I will steal them from you.
    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y

    What?

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Chris Mason:
    • Now we have a lower number. PITI of $5710/month just became $2900/month. Spread over their life of ownership, this is how much they will in retrospect have paid for housing that assumes zero appreciation.

     I'm curious what the incremental difference is between Mr. Renters taxes if he stays a renter and claims the standard deduction vs buying and having a larger monthly housing expense but being able to itemize deductions.  You are only presenting ONE side of the equation.    I think your CPA is doing some figgering.

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    I have the standard deduction on there and ask them if they presently itemize or not @Account Closed.

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Chris Mason:

    I have the standard deduction on there and ask them if they presently itemize or not @Account Closed.

    So please show us an example of the ACTUAL incremental savings over using the standard deduction as a renter vs itemizing as a home owner.

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    If they don't currently itemize:

    Monthly Housing Expense:$5,710.99
    Est. Monthly Tax Savings:-$1,637.14
    Deduction Adjustment$437.10
    Net Monthly Expense:$4,510.95
    Monthly Principal Reduction:$1,152.66
    Adjusted Housing Expense:$3,358.30

    If they already itemize: 

    Monthly Housing Expense:$5,710.99
    Est. Monthly Tax Savings:-$1,637.14
    Deduction Adjustment$0.00
    Net Monthly Expense:$4,073.85
    Monthly Principal Reduction:$1,152.66
    Adjusted Housing Expense:$2,921.20
    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @Chris Mason:

    If they don't currently itemize:

    Monthly Housing Expense:$5,710.99
    Est. Monthly Tax Savings:-$1,637.14
    Deduction Adjustment$437.10
    Net Monthly Expense:$4,510.95
    Monthly Principal Reduction:$1,152.66
    Adjusted Housing Expense:$3,358.30

    If they already itemize: 

    Monthly Housing Expense:$5,710.99
    Est. Monthly Tax Savings:-$1,637.14
    Deduction Adjustment$0.00
    Net Monthly Expense:$4,073.85
    Monthly Principal Reduction:$1,152.66
    Adjusted Housing Expense:$2,921.20

    You are still not showing what the difference is.  The Govt. gives a flat rate deduction for those that don't want to itemize.  SOMETIMES that is greater than if you do itemize.  SOMETIMES the incremental gain is so little that it is not worth the math.  Can you show that? 

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Account Closed:
    Originally posted by @Chris Mason:

    You are still not showing what the difference is.  The Govt. gives a flat rate deduction for those that don't want to itemize.  SOMETIMES that is greater than if you do itemize.  SOMETIMES the incremental gain is so little that it is not worth the math.  Can you show that? 

     Next time I coincidentally do a mortgage for a CPA, I'll bring it up and have them tell me what formula to use. 

    • I'm not a CPA, I just go off of what they tell me and improve my stuff a little more each CPA loan I do. I don't trust myself or other non-CPAs to know CPA stuff any more than I expect realtors to know mortgage stuff.
    • I always very clearly say "I am not a CPA, these numbers could be different in your exact situation, check with your CPA" and put that in writing if we're communicating via email.

    I've bookmarked this thread; probability of a CPA walking into my office within the next few weeks is probably higher than at any other point in the year.

    Question for you, however. The higher your tax bracket, the more valuable tax goodies are relative to those flat base standard deduction numbers. How many people below the federal poverty line do you think are getting mortgages in the Bay Area? 

    0Reply
  • Harry Zhou
    Investor · Walnut Creek, CA · Member since 2015 · 101 posts · 32 votes
    10y

    Ha, I love this one:

    You don't want your tenants talking to me; I will steal them from you. @Chris Mason

    Just a side note that most working (software engr) couples hit AMT, the tax benefit evaporate.

    1Reply
  • Jason Hawk
    Real Estate Services · Olathe, KS · Member since 2015 · 329 posts · 57 votes
    10y

    Here in Kansas City you can get a good ROI. You can find properties in the 22K-55K range with instant cash flow. Feel free to PM me.

    0Reply
  • Ron Garner
    Flipper/Rehabber · Atlanta, GA · Member since 2009 · 352 posts · 25 votes
    10y

    Hi Hang and welcome to the forum. I'm in Atlanta and the market is pretty steady with good return on investment. I focus on off market properties which most investors prefer. MLS is more competitive and usually don't produce the numbers investors like. Let's connect and I will add you to my buyer list

    1Reply
  • David Thompson
    Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
    10y

    Hang,

    In Texas, I prefer Dallas and San Antonio right now.  Austin is a bit out of reach and Houston needs more time to settle w/the oil challenges.  If you are out of state and lack connections here, I would advise taking a look at some apartment syndication deals in these two cities.  Experienced operators targeting relative value- add opportunities to re-position class B/C apartments of size in good areas of town experiencing changing demographics.  I spent time looking at some properties recently, doing analysis and although you have to be much pickier and patient, they are out there  As a passive investors, you can enjoy solid cash flow and some upside.  Scale is important and hard to do just starting out and w/o connections.  Find syndication deals w/sponsors that have track records that practice conservative underwriting.  Hang out in apt forums and you will run across them.  

    1Reply
  • Jared Watson
    Investor · Austin, TX · Member since 2015 · 222 posts · 58 votes
    10y

    we are looking at 25%~30% avg ROI in Austin flips

    0Reply
  • Lelith Walker
    Investor · New York City, NY · Member since 2013 · 263 posts · 141 votes
    10y

    Is this your first property? Where is your network the strongest?  How much time do you have to devote to looking and maintaining the property? Whats your travel preference?  Whats your lifestyle preference?

    If its your first then try to stay as close to home as possible.  Look into first time buyer programs, Obama promise zones, property incentives, artist relocation programs-these are the areas tha will turn around.  If your area is too expensive then consider states where you know a lot of people in one state that are willing to assist you.

    Otherwise you can consider Atlanta, San Antonio TX, El Paso, Dallas, Indianapolis, Charlotte, SC, Cleveland, Raleigh, Fayetteville, St. Louis, Fairfax, Woburn, Jacksonville, Arlington, VA, Philadelphia, PA, Detroit and surrounding suburbs. There are plenty others that I have not mentioned that I like as well. I like to choose multi industrial-particularly healthcare, engineering, technology sectors and military presence cause I know the people can pay the rent. I consider population size, unemployment rate, transportation, good income or credit, property tax, income tax, tax incentives. potential growth. Lastly eviction process because NYC process is ridiculous it can take 3yrs but Atlanta, San Antonio, and Fayetteville are 1-3weeks.

    1Reply
  • Sterling WhitePro Member
    Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
    10y

    It depends on what you are looking for @Hang Lee. Each market offers something different. Do you have more context on what you are looking to achieve i.e cash flow, appreciation, single-family, multi-family etc? 

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  • Federico Gutierrez
    Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    10y
    Originally posted by @Lelith Walker:

    Is this your first property? Where is your network the strongest?  How much time do you have to devote to looking and maintaining the property? Whats your travel preference?  Whats your lifestyle preference?

    If its your first then try to stay as close to home as possible.  Look into first time buyer programs, Obama promise zones, property incentives, artist relocation programs-these are the areas tha will turn around.  If your area is too expensive then consider states where you know a lot of people in one state that are willing to assist you.

    Otherwise you can consider Atlanta, San Antonio TX, El Paso, Dallas, Indianapolis, Charlotte, SC, Cleveland, Raleigh, Fayetteville, St. Louis, Fairfax, Woburn, Jacksonville, Arlington, VA, Philadelphia, PA, Detroit and surrounding suburbs. There are plenty others that I have not mentioned that I like as well. I like to choose multi industrial-particularly healthcare, engineering, technology sectors and military presence cause I know the people can pay the rent. I consider population size, unemployment rate, transportation, good income or credit, property tax, income tax, tax incentives. potential growth. Lastly eviction process because NYC process is ridiculous it can take 3yrs but Atlanta, San Antonio, and Fayetteville are 1-3weeks.

     What is an Obama Promise Zone? His out of office at the end of the year

    Every city offers investment opportunities as long as you are not greedy

    Remember a dollar earn is a dollar you didn't previously have.

    0Reply
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