BEST market to build buy and hold portfolio?!

31 Replies

I'm sure this question has been asked many times on the forums, but I'm curious what market people think is the best market to build and buy and hold portfolio in?

As a bit of background on myself, I am from long island, NY and currently in physician assistant school outside of Philadelphia. Once I am out of school, I can go and get a job just about anywhere due to the increasing demand for PAs(especially in smaller markets and rural areas) and am single so nothing is really holding me back from doing so. I plan to house hack and continue living frugally as I save to allow me to aggressively build a portfolio. I love the idea of the BRRRR strategy and plan to incorporate it as much as I can with finding properties in need of rehab. With that being said, ideally I would want to pick a market with strong returns, multi-family inventory, and solid demographics. I wouldn't be opposed to staying in the philly area, however the returns and inventory of Ohio markets such as Cleveland, Cincinnati, and Dayton intrigue me. I love the demographics of Atlanta and some Texas markets, but wonder if they will soon be too hot to find the kinds of returns I would find in mid-west cities. I know eventually I may not want to live in one of these markets long term, but spending 5 years or so developing relationships and boots on the ground before going to a coast seems like my plan as of right now.

So if you love the market you currently invest in, or would pick a different one if you could do it all over, I would love to hear it and why. While I understand I should focus on my primary career first(which I can literally do anywhere in the US), which I have every plan of doing, any other thoughts on strategy or mindset of building a buy and hold portfolio to achieve financial freedom would also be greatly appreciated.

Well I used to live on Texas (Dallas area) and invest in Memphis and Cleveland.

Each market has its strengths and weaknesses. Texas is probably the strongest economically but has very high real estate taxes. The multifamily inventory will be more plentiful in the Ohio markets and the taxes vary greatly depending where you are. Economically I think cincinatti is interesting and Cleveland certainly is improving quickly.

Memphis is probably best described as “stable” and could explode in the near future but it has been like that for a while now, so I wouldn’t bank on that. I also have gone the Turnkey route a bit so far and Memphis has a good infrastructure for this. Cost wise, the Ohio markets are probably cheapest and Texas the most expensive, in general.

None of this is meant to say where is best or five specifics, just some things to consider.

Finally, someone close to me (and well off, but doesn’t do REI) stated to me Texas is awful place to build wealth, mainly due to the high property taxes. Just something to think about

Good luck!

I’m a big fan of San Antonio right now for buy and holds. We’re getting really good appreciation in rental neighborhoods. You do need to do your research because you need to invest in up in coming areas not the hot ones. But because rents have gone up so much here more neighborhoods are popping up with great returns if you buy right.

Most people will give you one of two answers

1. Their Market

2. It depends

I fall into the camp of the second, what are you looking for most, in a buy and hold? short term cash flow, long term cash flow, rent appreciation, property appreciation?  Most will be a combination of these factors but will be wildly different depending on where you go.

Its funny to hear people say that they think texas has high property taxes. What exactly do you consider high? Aren't texas property taxes like 2 or 2.5%? Try coming to Illinois and talking to us about property taxes. :-)

I'm in some towns where the taxes are 4 and even 5%.  And I'm not talking about their crazy 1/3 multiplier silliness. The rates are technically 12 to 14.5% in some of my towns (crete, monee, beecher, etc).

As far as buy and hold. I would like for any area where the state economy is good. Where price to rent ratios are solid. Where school districts and the area itself is good. And then try to find something with enough of a population base so you're farm area will offer enough of an opportunity for growth. I'd also look at landlord laws. 

Those are the things that are going to determine how much success you have.

Personally, I would stay out of areas like memphis that have such a high renter population. Might be ok for cash flow, but I don't see how appreciation can really hit there.  And stay away from the 30k houses. 

I would want to be in an area that your portfolio can return you money in all the ways real estate makes you money. Equity capture on the purchase. Rental profits. Principal paydown (there is none on 30k houses), and appreciation.

By scaling up and being in areas that will produce returns from all four ways, you should be able to build some truly generational wealth.

btw: I'm a big fan of the smaller towns myself. You have to spread yourself out to a handful of ones. But if you can get them in a nice cluster and find them where the price/rent ratios are still good, I think you'll have a better chance of scaling.  Trying to scale in some of the more populated areas can be tough because you're competing against some really deep pockets these days.  But those deep pockets don't tend to venture into mayberry towns because they can't scale big enough fast enough there.  But if you can fit say 7 or 8 small towns within a 30 min radius, you'll be surprised how well you can scale as an individual. :-)

The areas I would pick based on what I've read/listened to: Indiana (low taxes, good landlord laws, state economy strong), Cinci (price to rent ratios seem strong, landlord laws), Texas (landlord laws, state economy, growth).

I don’t honk there is a best market it depends on a lot of variables and my best market might not be your best market and visa versus. The trick is finding area that will be a booming market. By the time it is well known it won’t be as potentially profitable to buy there.

@Bill Goodland Hey Bill, it is really awesome that you have that autonomy to live anywhere in the US.

I've been to San Antonio, TX a couple of times, and I think it is a really strong market with population growth and poised for strong employment drivers in the coming years. 

Also, as a side note, I think you should buy a 4-unit as your first house hack. If I were to go back in time, that's what I would have done instead of buying a duplex for my first acquisition. 
Other than that, I think educating yourself on MINDSET and technical knowhow both fall in place when you are ready to start investing.

Hope this helps. Good luck. Thanks! - Ola  

@Bill Goodland If I were in your shoes I'd be focusing a little more on career aspirations and that growth will likely drive your income (and ability to invest that income) for the foreseeable future.  Picking Midland over San Antonio (to choose random places in Texas) might give you a hypothetical 12% cash-on-cash return vs. 8% but what does that really amount it on an annual basis?  If you put $20K down it's basically an $800 per year difference.  Or, when looking at your "day job" it's 38 cents per hour.  So if San Antonio jobs in your field are $25 per hour and in Midland they are $22 per hour...well...you get my point.  When you're starting out and going to have a W2 position for the foreseeable future I'd optimize around that.  That gives you the capital to fund your real estate acquisitions that should give you your financial freedom sooner.

I think there is a lot of opportunity right now in Dayton.

Originally posted by @Caleb Heimsoth :

Well I used to live on Texas (Dallas area) and invest in Memphis and Cleveland.

Each market has its strengths and weaknesses. Texas is probably the strongest economically but has very high real estate taxes. The multifamily inventory will be more plentiful in the Ohio markets and the taxes vary greatly depending where you are. Economically I think cincinatti is interesting and Cleveland certainly is improving quickly.

Memphis is probably best described as “stable” and could explode in the near future but it has been like that for a while now, so I wouldn’t bank on that. I also have gone the Turnkey route a bit so far and Memphis has a good infrastructure for this. Cost wise, the Ohio markets are probably cheapest and Texas the most expensive, in general.

None of this is meant to say where is best or five specifics, just some things to consider.

Finally, someone close to me (and well off, but doesn't do REI) stated to me Texas is awful place to build wealth, mainly due to the high property taxes. Just something to think about

Good luck!

 Sorry for the delayed response but thank you for your input. I completely agree that the cash flow available in Memphis is attractive but I tend to have the same sense you do that it seemed to be waiting to take off for years. I really like Texas from a growth perspective, but have never heard someone refer to it as an "awful place to build wealth" due to the high taxes but I will take that into consideration. From what I gather, property taxes are just something I am going to need to factor into my expenses and make offers accordingly. If anything, higher property taxes I would think may indicate better schools in the area and potential for appreciation. I personally think I value the simplicity and lack of red tape in Texas state government and landlord friendly laws unlike New York where I'm from.

@Jonatan Barbera Thanks for the input. I like what I've seen in San Antonio as well and may try to do a clinical rotation there next year or another Texas market like DFW. Would you be able to provide a couple examples of hot neighborhoods and potential up and coming neighborhoods that you think have strong rental buy and hold demographics currently? I always like to keep my eye on inventory in markets I'm interested in because researching and learning REI is literally my enjoyable break from school lol

We’re in Prince George’s County, MD, which is the county just to the East of Washington, DC. Average home values are $270,000, and average net rental income (after mortgage payments and property manager) is around $1,000.00/month.  Not sure if this constitutes “best”, but I’ve found very few markets this good...

@Aaron K. I know it completely depends, but ideally I would like an area that is close enough to a metropolitan area that a 25 year old can enjoy, househack, focus on cash flow from the beginning to replace my income, and once I no longer feel the need to work full time(who knows I may want to, but we all want freedom to not have to right?), I think I will then feel comfortable enough to invest for more appreciate potential or work more on a business given strong security of monthly cashflow.

Originally posted by @Ola Dantis :

@Bill Goodland Hey Bill, it is really awesome that you have that autonomy to live anywhere in the US.

I've been to San Antonio, TX a couple of times, and I think it is a really strong market with population growth and poised for strong employment drivers in the coming years. 

Also, as a side note, I think you should buy a 4-unit as your first house hack. If I were to go back in time, that's what I would have done instead of buying a duplex for my first acquisition. 
Other than that, I think educating yourself on MINDSET and technical knowhow both fall in place when you are ready to start investing.

Hope this helps. Good luck. Thanks! - Ola  

 Thanks for the reply and insight! Any submarkets or zip codes you would recommend keeping an eye on in San Antonio?

And I totally agree, a 4-unit would be ideal, however inventory in a lot of markets is tight and I feel that although I would most likely jump at the opportunity for a 4-plex in a decent area at the chance, I may end up going with a property that has the most value-add potential when there isn't a ton to choose from. I totally agree mindset is huge. Even if I can't surround myself with 5 successful investors every day, listening to every BP podcast among others and reading nearly 2 dozen books on real estate/wealth building/mindset has given me the confidence to take steps in the right direction.

@Andrew Johnson thanks for the input and I totally agree. I am going to take the best offer that I get out of school that fits the area of medicine I want to practice in. My point was that I can apply anywhere, and PA salaries often have an inverse relationship with cost of living due to lack of supply in areas like Texas compared to NYC.

@Sherman Ragland Thanks for the tip. I am assuming you're saying 270k properties are getting $1,000 in cash flow per month? What are actual rents going for there? It seems hard to believe that house is beating 1% rule but I could be wrong.

Rents are $2,700 to $3,200. ARV is $270, but once you know what you are doing, you can get for less.

Welcome! My company is involved heavily in the Memphis, Tn market. I do invest in Detroit as well, but I have not seen a market that offers such heavy returns as Memphis! The buy and hold, cash on cash returns just make so much sense!

Happy hunting!

from my little corner of the world If you live in a no income tax state like Texas invest there..

super high tax's in some markets retard appreciation.. not enhance it..

but if your in the landlording game most of these markets are interchangeable and its all about quality of tenant and not buying in the hood with very difficult to manage tenant base.. that is what kills you.

@Jay Hinrichs Texas is definitely strongest economically of most of these markets mentioned and if you buy in the “path of progress” along or near I-35 you’re likely going to see appreciation due to how much growth there in that area.

My gf’s dad showed me a photo of him as a kid in north Dallas and it was all cornfield, now it’d all skyscrapers and big houses. I don’t think that’s going to change anytime soon.

That being said price To entry will be higher and so will your taxes be than those other places.

@Bill Goodland I’m an active investor in the Philadelphia/Bucks county area. I am currently investing in SFH and MFH in the croydon/Bristol area. I have 3 full time contractors that work for my company. We purchase dilapidated properties, “BRRRR them” and 9 out of 10 times pull all invested the capital back out of them. With still having 30% equity in the property, and hitting the 2% rule.

Originally posted by @Caleb Heimsoth :

Jay Hinrichs Texas is definitely strongest economically of most of these markets mentioned and if you buy in the “path of progress” along or near I-35 you’re likely going to see appreciation due to how much growth there in that area.

My gf’s dad showed me a photo of him as a kid in north Dallas and it was all cornfield, now it’d all skyscrapers and big houses. I don’t think that’s going to change anytime soon.

That being said price To entry will be higher and so will your taxes be than those other places.

 I am all about cornfields and buying property in the path of progress .. I bought a 4 acre piece in Rohnert park CA in 1992 for 27k bare land just paid 300 a year in tax's all these years.. no income.. well it was brought into the city limits and I can now build a mix used resi commercial development and value is in the 3 mil range.. no debt.

I have a long term option on 110 acres in Portland I optioned in 07 for 5.5 million when it comes in it will be worth north of 60 million and when that happens you won't see me on BP anymore.  LOL.. I love land and land in path of progress made lots of money with that far more than with all the rentals I owned over the years.

Wow, I just posted a very similar post right before I read this one. The OP's question is pretty much exactly my question. 
I love the answers you all gave but I'd like to piggy back and ask a follow up. What criteria do you use to analyze a market and what resources do you use to look at a markets?

Originally posted by @Brian Lewis :

Wow, I just posted a very similar post right before I read this one. The OP's question is pretty much exactly my question. 
I love the answers you all gave but I'd like to piggy back and ask a follow up. What criteria do you use to analyze a market and what resources do you use to look at a markets?

 I'm sure some more experienced investors can weigh in. But having listened to thousands of podcasts episodes and forum posts read, you will definitely get a decent gauge for some popular markets for things that align with your goals. For example, flipping may be really popular on the coasts(NY,LA,MIA) where buy and hold options are nearly non-existent. Midwest markets like Cleveland, Indy, and Memphis are really popular for cash flow due to low prices and relatively high rents. Markets like DFW, San Antonio, Atlanta etc. however seem to have the best indicators for growth and thus ideally appreciation in the form of job growth, unemployment rates, and population growth. If you have identified a market to invest in and look more closely at for a specific property, I would recommend asking on the forums and looking at their "economy at a glance" on bls.gov. If thats too tedious of a task to look at multiple markets, I believe there are plenty of brokerages that put out newsletters or yearly updates on where they rank certain markets for growth.

Originally posted by @Bill Goodland :

I'm sure this question has been asked many times on the forums, but I'm curious what market people think is the best market to build and buy and hold portfolio in?

As a bit of background on myself, I am from long island, NY and currently in physician assistant school outside of Philadelphia. Once I am out of school, I can go and get a job just about anywhere due to the increasing demand for PAs(especially in smaller markets and rural areas) and am single so nothing is really holding me back from doing so. I plan to house hack and continue living frugally as I save to allow me to aggressively build a portfolio. I love the idea of the BRRRR strategy and plan to incorporate it as much as I can with finding properties in need of rehab. With that being said, ideally I would want to pick a market with strong returns, multi-family inventory, and solid demographics. I wouldn't be opposed to staying in the philly area, however the returns and inventory of Ohio markets such as Cleveland, Cincinnati, and Dayton intrigue me. I love the demographics of Atlanta and some Texas markets, but wonder if they will soon be too hot to find the kinds of returns I would find in mid-west cities. I know eventually I may not want to live in one of these markets long term, but spending 5 years or so developing relationships and boots on the ground before going to a coast seems like my plan as of right now.

So if you love the market you currently invest in, or would pick a different one if you could do it all over, I would love to hear it and why. While I understand I should focus on my primary career first(which I can literally do anywhere in the US), which I have every plan of doing, any other thoughts on strategy or mindset of building a buy and hold portfolio to achieve financial freedom would also be greatly appreciated.

 As a PA,  I might be inclined to go for capital appreciation and just invest locally.  buy good deals on 15 year notes, let them cash flow and near retirement you will have cash cows.

I dont think I would start out investing at a distance.

@Bill Goodland It's been almost a year or so when my wife and I considered moving to SA. 

You might want to find out from someone on the ground in that market.

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