Newark, CA · Member since 2016 · 38 posts · 7 votes
I live in the bay area and am looking to invest for cash flow. California isn't a great place to do that right now. I hear that the mid west tends to be the best place for cash flow. I was wondering what cities are particularly fruitful?
Hi @Alex Aguilar, the cities mentioned have high positive cashflow.
I would be interested in pointers for Oklahoma City and Raleigh. Those are very healthy cities but I did not find any easy way to invest there for an out of state investor.
Some of the cities mentioned have a secular trend of population decline, which does not bode well for the long term. You can use it to check how population changed from 1950 to now, and from 1990 to now.
Also, there is a caveat about high yield. I believe you can get 14% net even from turnkey, you can get above that in Detroit, but also in many inner cities. The worst that can happen is that the tenants vandalize the property, then once it is vacant, the property gets stripped of its furnace,boiler,windows,copper pipes and wire by burglars. (I don't know what thieves are doing with all these used furnaces/boilers/wiring. For all I know, it makes sense for them to sell them back to people who need them for rehab.)
An increase in marginal yield corresponds to an increase in marginal risk, but that risk is not born evenly by investors: the ones with bad setup end up with a vacant property, while the ones with good setup can access that higher nominal yield.
To support that "city xxx" is good for investment, one would need to know what gross yield, vacancy rate/average tenancy duration (there is a cost to switching tenant) and net yield people achieve there.
Cash flow isn't an easy find out here unless your buying at huge discounts and/or adding killer value through rehabs. I love when investors think outside the box and use the technology and resources we have today to investors from a distance. Best of luck!!
If investing in other states/cities, how do you handle purchasing, finding tenants, maintenance, etc? Do you fly out to find the properties? Or depend on an honest realtor? Do you use property management companies? Would love to hear what works best for you all when investing is outside your living area.
We have two properties in Idaho, we live in California. We went there and bought the properties and then have a management company who manages it for us. We got lucky and found a great management company. It is hard to find one.
My area isn't as high as San Francisco (we have a property in Emeryville too!) but like you, it's high enough to make us want to look elsewhere for better cash flow. It seems nearly impossible to find anything that will fulfill the 1 or 2% rule! Our family will probably be moving to the Montgomery area for a year come next summer and we've heard good things about Pratville, AL... does anyone have any experience or insight into that market?
@Alex Aguilar There's several good cash flow markets in the U.S. however, personally, I think that Indianapolis and Kansas City are the two best. Not only do they offer very affordable prices with strong rents, they both have vibrant, growing economies and populations. You can find a lot of info on both on my website. Feel free to reach out if you'd like.
@Mike D'Arrigo I am located in Turlock, about an hour and twenty from you. My husband and I own 6 SFR, one being our primary. We have two out of state in Idaho, but looking into the possibility of finding properties in other states. I am interested in knowing more about the other cities you suggested. I will check out your website.
@Amber Turner Please feel free to give me a call or e mail me. I'd be happy to share my thoughts with you. Be sure to check out my podcasts on the website.
@Mike D'Arrigo Thank you! I will definitely check out your website and podcasts. We are in the middle of a refi, but when that closes, we will be looking for our next step.
I agree knowing the market makes a big difference. Also if you chose an area with low appreciation then you need to use the buy and hold strategy. We invest in Oklahoma City and it works well for us. We lived there for 10 years so know the area well and have been long distance investors now for almost 5 years. We do buy sub $50k and must be lucky, very low tenant turnover, great property managers and good cash flow.
@Sara Cunningham, when you buy sub $50k, about how much rehab do you have to add? We like to be all in at the 2% rule when completed. It is getting harder to do that around here now though. Can that be done in OKC area?
If you are looking for a solid, low-cost of entry, 2%+ buy and hold market I would suggest Milwaukee WI. This is NOT a market for appreciation, however cash flow is king in this market.
If you are looking for a solid, low-cost of entry, 2%+ buy and hold market I would suggest Milwaukee WI. This is NOT a market for appreciation, however cash flow is king in this market.
Any tips on which are the good / bad neighborhoods there?
@David Traeger I know the Milwaukee market well and have a couple of quick hitting items I can pass along to give you and overview. Feel free to inbox or give me a call.
@David Traeger I invest on the North Side Milwaukee. I know the zips on that side however there are good deals on the East Side as well but they are a bit more pricey. 53210,53216,53206 are the zips that I like. @Kyle Murphy Milwaukee is my bread and butter! It's a great cashflow market. Not so much for appreciation. I have a some deals on my website under the "view our deals" tab. Take a look when you have time.
@shawn 53206 is the most incarcerated zip code in the nation. There is a documentary about it that I have yet to see. I don't know the other zip codes off hand but I presume they are in similar situations as the 53206. How do you find managing properties in those types of areas? Yeah they cash flow when the rents are collected and the properties aren't vandalized. I know that one PM I spoke to stated that there is an area in the 53206 area code dubbed the "Triangle of Death" and he nor his staff will go there. Just wanted to know from a fellow New Yorker how you jump those hurdles.
Systems....Joe. The 06 zip is not for the faint of heart. You have to understand the mindset of the renter. I have a unique perspective as I grew up in a similar neighborhood. Ever heard of Brownsville Brooklyn? Google it. Thats my competitive advantageThat zip is not for everybody and yea the tenants pay late often times but systems keep things in Place. For example I receive my rent from some tenants directly from their employer(with tenant consent of course) or as bill pay directly from a checking account. The properties cost almost nothing to operate so the risk (for me) is worth the reward. On average a property in that zip cost $186 per month to operate. When rents are $800-$975 it makes sense. I have a team in place that I've vetted for over 12 months before I put a dime in that market. I understand that market. Have not had 1 eviction in 12 months. All tenants are current. I have no complaints
Shawn, I am very familiar with Brownsville, East New York, Bushwick, Bedstuy, etc... The difference between the NY market and the Milwaukee market is that the job market is stronger and people cannot afford to live closer to their places of employment that are in manhattan. There is a subway close by that allows people to get into NYC quickly where the job market is almost always good and the rents are too high to live in Manhattan so people push out to Jersey City, Hoboken, Weehawken, Williamsburg, Greenpoint, etc... where a renter's dollar gets goes a bit farther.
Keep in mind that the land in some of the areas in Brooklyn mentioned is worth more than the structures built on it.
Kudos to you and your team on your performance, but would you agree that your are an exception to the rule? I would imagine there are many investors, first time or otherwise that would have a much different experience and I wouldn't say that a first time investor should start in that area unless they can stomach the potential losses that come along with the risks. Perhaps it is just me thinking, but I see areas like that as doubly risky. Evicting a tenant in court may be easy paper wise, but given the climate of the public with law enforcement I would imagine that a sheriff wouldn't be in such a rush to physically remove the tenant from your property. Also, I would imagine that an eviction will lead to the destruction of the unit. That alone could eat a sizable portion of your annual profit.
I agree with your numbers. I found some properties that are up for sale in that area and the cash flow is very enticing, but when the area was described to me, it didn't seem like the risk was really worth it.
I looked at some of the properties you have offered for sale on your site. and they are SFRs. That means one issue with a tenant means that you have 100% vacancy until the eviction happens and repairs are complete. Are these properties that your company owns or are they MLS listings that you are parroting on your site? Are they turnkey? I noticed that you have some amounts listed for repairs. Are you offering management of these properties? How are you making money?