Which markets still cash flow positive?

23 Replies

Hi BP world! I am looking to purchase my first residential multi-unit investment property, would prefer a tri-plex or 4-plex, but would be open to more units. I am located in the San Francisco Bay Area, and there is literally (close to) nothing that will cash flow positive right off the bat. I'd like to start investing, but I don't want to play the market timing game and potentially wait years until we see a dip in prices locally.

I have considered Fresno, Sacramento, and Phoenix because I am familiar with all of those areas. Any thoughts on those? What other markets should I be considering? Thanks in advance!

@Dan P.

The West Coast is untouchable right now, so is the East Coast. So if 2 opposing sides are untouchable, be like King Solomon and split it down the middle. In other words, the Midwest. They were devastated by the housing crash of '08-'09, so the housing stock is relatively cheap. I see multi-families going for 30-60K, that's unfathomable in either coasts. Look up big cities in Ohio, Indiana and Illinois. If anything, contact @Engelo Rumora to find out how well he is cash flowing in that region. 

Originally posted by @Brian Adzadi :

@Dan P.

The West Coast is untouchable right now, so is the East Coast. So if 2 opposing sides are untouchable, be like King Solomon and split it down the middle. In other words, the Midwest. They were devastated by the housing crash of '08-'09, so the housing stock is relatively cheap. I see multi-families going for 30-60K, that's unfathomable in either coasts. Look up big cities in Ohio, Indiana and Illinois. If anything, contact @Engelo Rumora to find out how well he is cash flowing in that region. 

Thanks Brian,

I'm like a kid in a candy store lol

I won't get out of bed for anything less than 15% net ROI

Much success

Nearly every single property in every single market can cash flow positively if they are not leveraged.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635
Originally posted by @Dan P. :

Hi BP world! I am looking to purchase my first residential multi-unit investment property, would prefer a tri-plex or 4-plex, but would be open to more units. I am located in the San Francisco Bay Area, and there is literally (close to) nothing that will cash flow positive right off the bat. I'd like to start investing, but I don't want to play the market timing game and potentially wait years until we see a dip in prices locally.

I have considered Fresno, Sacramento, and Phoenix because I am familiar with all of those areas. Any thoughts on those? What other markets should I be considering? Thanks in advance!

Try branching out and speaking with professionals in the Midwest. You can get an amazing ROI there.

Tom Ott, Real Estate Agent in OH (#2016003865)
440-749-4043

@Brian Adzadi the Midwest was about the least affected market by the housing crash although many rust belt markets have been in decline well before the crash

Fresno. You can receive positive cash flow. Cap rate 5-6%. 200-280K SFH in a decent neighborhood. Have a steady of supplies of listings as my broker just bought a brokerage sharing same lender in SFBA(Campbell).

Some are short sales and possible PM. Sacramento is tougher now. Not best neighborhoods. Most purchases are made in cash.....

Sam Shueh

Thanks all! What midwest cities would you put at the top of your list?

Originally posted by @Dan P. :

Thanks all! What midwest cities would you put at the top of your list?

 Well, I do not know about other cities, but I know Cleveland has been performing very well for the last few years!

Tom Ott, Real Estate Agent in OH (#2016003865)
440-749-4043
Originally posted by @Tom Ott :
Originally posted by @Dan P.:

Thanks all! What midwest cities would you put at the top of your list?

 Well, I do not know about other cities, but I know Cleveland has been performing very well for the last few years!

 I am looking online at deals in Cleveland... am I missing something? There are multi-family units under $100k in pretty decent shape. How are these not snatched up right away? I can't imagine how they WOULDN'T cash flow!

Originally posted by @Dan P. :
Originally posted by @Tom Ott:
Originally posted by @Dan P.:

Thanks all! What midwest cities would you put at the top of your list?

 Well, I do not know about other cities, but I know Cleveland has been performing very well for the last few years!

 I am looking online at deals in Cleveland... am I missing something? There are multi-family units under $100k in pretty decent shape. How are these not snatched up right away? I can't imagine how they WOULDN'T cash flow!

 For those, I would just be careful. You have to wonder WHY they are so affordable. Most likely they are in a rough area that will be hard to get your rent. Do some research on the neighborhood.

Tom Ott, Real Estate Agent in OH (#2016003865)
440-749-4043

All markets can be cash flow positive and in some markets it is much easier to get that initial higher cash flow. That does not mean that the easier to get CF market equates to more total profits than a lower initial CF market. There are other forces at play along side any cash flow. It is those other factors one might consider as much as the higher initial cash flow. 

Consider the top 3 cities in the nation for total profits including cash flow, since 2000 are LA, SF and San Diego. These on average usually have very low initial cash flow and overtime that might grow into much higher cash flow. Sometimes this future cash flow growth part gets overlooked when investors discount the locations future dynamics. In the 3 city example above some rents (cash flow) doubled to tripled since 2000 for example. 

Today, any monkey can find better initial cash flow in 60 seconds vs LA, SF or San Diego etc. Although there are usually pretty darn good investment reasons two identical properties (3/2s) might have an actual and future value difference in the millions. 

With that mobile homes might have the highest initial cash flow if that is the goal. 

Good luck! 

How much is your down payment percent hurdle? We all know that impacts the cash flow dynamics of every property.

Originally posted by @Russell Brazil :

Nearly every single property in every single market can cash flow positively if they are not leveraged.

 ANYTHING will cashflow w/ big enough down payment haha

I am able to hit the 1% or maybe little better w/ value add in KC .... pretty easy. Little harder to do w/ MF though and even more so on tri/quad (more rare). Too many "investors" are seeking out MFH  driving the prices up.... 

When you start talking midwest and asking for suggestions, I would have to put Indiana near the top. I live in Illinois and I would tell everyone to run and not look back at Illinois. Chicago is in Cook county and that is one of the worst counties around you'll find in terms of landlord laws. 4 to 6 mos for an eviction is not unheard of - thats the norm. 

Add in crime (in the city) and then the huge financial strain both at the state and local levels and Illinois has to be one of the riskiest states in the midwest to invest in.

Property taxes are running in the high 3's to high 4's in most of the towns I'm in.

So for a 150k house, you may be paying 6k in taxes. Thats what its like here.

Which is why I think indiana is one of the best around. Good landlord laws. Evictions in 3 to 6 weeks? Property tax caps - max property taxes are set at 2% for investors. Owner occupants max taxes are 1% of the assessed value. Huge difference.

And they seemingly have some good things going on with their economy as well. Add in the fact that their home prices are reasonable and rents are up there and you have a real nice ratio opportunity there.

@Brian Adzadi

All due respect of course. You really can't find anything with positive cash flow in your area? Or were you just exaggerating? I believe we are in similar markets and I have no issue.

@Chris Connery  

I am investing in my hometown of Allentown. Its not that I am not finding any positive cash flowing properties in my area but I would suggest to any investor seeking to get great ROIs to look in the Midwest. I plan on getting properties in the Midwest after I attain a second property here in my hometown. For someone like @Dan P. who is starting out and wants or triplex or quadplex, the Midwest just seems like a great starting point. 

@Dan P. Hey, I am a wholesaler here in Indianapolis and as long as we have the properties to sell, investors are buying them up. Indy is still a hot market, renter friendly, and investors are doing well here. I don't know how far you want to invest from where you are, but I think it is worth researching. We are buying a higher than usual, but are investors are still buying from us because they are able to get great cash flow.

This is gold, guys, love the input!

@Dan P. I keep hearing people say "run from Chicago and Illinois" and I don't quite get it. I've been investing in Chicago for the last 6 years and have been very happy with it. Depending on your price range and ROI requirements, Chicago or the surrounding areas and towns may work for you. There is a lot of "noise" regarding investing in Chicago but when you learn to drown it out and focus on finding quality properties at quality prices, it can be a very good market.

There are two things that are crucial to real estate investing. 1. Your Mindset. 2. Your expectations. Once you have those under control you have a chance to succeed anywhere in the country.

If the Cash flow is to good to be true, appreciation may not be an option. Invest in a low income area and your ROI could be higher based upon the low cost of the unit. Don't expect the unit to skyrocket in value unless we are about to have another bubble. Sold over half of our units just before the bubble burst in the high 50s low 60s. Now they are running $20 K back where they were when I originally bought them in the 90s. HOWEVER, the CASH FLOW is great!

In a high end location we have owned the same unit since 97.Paid $170 about to sell for $300 to $335 K . 

A good neighborhood will appreciate. A low income neighborhood will stagnate until something huge comes along.

Where do you want to be? Answer that and you are half way there.

Student Housing around Southern Illinois University Carbondale has always cash flowed. Illinois REIA member Megan Webb is a Property Manager. She works that area and could help you.

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