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.
I have found, the more cash flow / ROI the bigger the headache. Low cash flow, low drama. High cash flow, high drama. I have rentals in Detroit, but lots of drama, but when they are rented, GREAT ROIs!
I invest in the Wilkes barre Scranton area of Pennsylvania. Their is good cash flow to be had. Properties you can acquire between 40-150k ranging from single family up to 4units.
I have a triplex that I cash flow 750 a month on and I pay a property manager.
People say so many bad things about the area but don't go look for themselves. I see Tons of big business, a handful of colleges and more. I'm not expecting to see any appreciation any time soon but right now I'm cash flowing and my house is being paid for by tenants.
Can't complain
I have found, the more cash flow / ROI the bigger the headache. Low cash flow, low drama. High cash flow, high drama. I have rentals in Detroit, but lots of drama, but when they are rented, GREAT ROIs!
Kyle is absolutely right. I have one property I'm making more than 50% COC, but my God is it ever high drama. I've got another property that's making about 11% COC, and there's zero drama.