Top RE Markets - What state are you investing your funds in?

20 Replies

Hello BP fam!!!  I've been working with a mentor and he's tasked my partner and I with doing market research on areas to invest in for multifamily properties.  I found a list of top RE markets to invest in through 2020 on one of my favorite IG pages, but was wondering what areas our community are investing in with good cashflow / returns and what areas you're looking forward to investing in in the coming year.

Any input is greatly appreciated and anticipated :)

HAPPY HOLIDAYS BP ... Cassandra

I don't understand the mentorship. Where do you live? How many properties do you have where you live? What's the point of cyber-evaluating markets from a computer? You won't learn about those markets and how to get the best deals in out-of-state markets until you visit them and get the block flow and which is the next "it" area. Until you've mastered your local area and the up-and-coming spots around it, what kind of mentorship sends you to sit at your computer and scroll through lists online of what's good. Hint: if something is listed online as the best place to invest, it was good to invest a year ago.

@Aaron K.  Hola! I'm not missing the point.  I was simply asking what areas people are investing in.  My partner and I listen to podcasts, read articles/books, contact development committees for paths of progress, requested info on building permits, etc. and have various friends / family across the country to inquire about how things are looking in their neighborhoods.  We're fairly new so researching different areas and making connections is apart of our growth.

@Jonathan Greene Hello!!  I'm in DE, but there aren't a lot of small multifamily opportunities.  The ones that are here are being kept.  Our concentration are smaller units for now.  He didn't send us to sit at a computer and scroll through lists.  He told us to reach out to development committees and see what's happening in their area and ask various questions for evidence of potential investing markets.  

I'm sorry to say, but that is the worst advice I've ever heard @Cassandra Sifford . What is a development committee and what do you have to add value to them for them giving you information on the best areas to invest near them? It doesn't make sense, but I hope it works out for you.

Originally posted by @Cassandra Sifford :

@Aaron K.  Hola! I'm not missing the point.  I was simply asking what areas people are investing in.  My partner and I listen to podcasts, read articles/books, contact development committees for paths of progress, requested info on building permits, etc. and have various friends / family across the country to inquire about how things are looking in their neighborhoods.  We're fairly new so researching different areas and making connections is apart of our growth.

@Jonathan Greene Hello!!  I'm in DE, but there aren't a lot of small multifamily opportunities.  The ones that are here are being kept.  Our concentration are smaller units for now.  He didn't send us to sit at a computer and scroll through lists.  He told us to reach out to development committees and see what's happening in their area and ask various questions for evidence of potential investing markets.  

I'm investing in Texas, Kentucky, and the Carolinas. Great net migration, job growth, and rent growth numbers. 

I attended UD some years ago, I wouldn't give up on the northern Delaware area so easily. 

Louisville, KY, Cincinnati, OH, Northern Kentucky, Southern Indiana, Lexington, and Indianapolis! I love the entire region! 

@Cassandra Sifford This al depends on what your objectives and criteria are. If it's cash flow, the Midwest is good. Personally  I think Indianapolis and Kansas City are the two best markets for that. Unlike many of the other popular cash flow markets. Indy and KC has a good combination of not just cash flow but also strong economic and demographic fundamentals such as a growing population, strong job growth and a modern diverse economy. I would recommend checking out both. Like any market though, it has good areas and not so good. You have to be familiar with the neighborhoods. 

I think for virtually all newbies the best market for them to invest in is their own market; no more than an hour drive, ideally less.

The worse market for the newbie to invest in is the historically zero appreciation, high projected cash flow, OOS market.

I preach what I say.  All our current properties are no more than 30 minute drive from our home.  They are all in San Diego County.

Good luck



Originally posted by @Dan Heuschele :

I think for virtually all newbies the best market for them to invest in is their own market; no more than an hour drive, ideally less.

The worse market for the newbie to invest in is the historically zero appreciation, high projected cash flow, OOS market.

Hi Dan.  And why is it the worst move? Also, what if the area where one lives is unaffordable and doesn’t cash flow well.  Let’s say you can drive an hour in every direction from New York City and you have 0 chance to find a $100k property. 

Thanks 

 

Originally posted by @Yulia M. :


Originally posted by @Dan Heuschele:

I think for virtually all newbies the best market for them to invest in is their own market; no more than an hour drive, ideally less.

The worse market for the newbie to invest in is the historically zero appreciation, high projected cash flow, OOS market.

Hi Dan.  And why is it the worst move? Also, what if the area where one lives is unaffordable and doesn’t cash flow well.  Let’s say you can drive an hour in every direction from New York City and you have 0 chance to find a $100k property. 

Thanks

Your description describes my market (San Diego county) to a T. Note price reflects return/risk. There is a reason NY City has high RE prices and it is because of the historically high return and low risk.

Conversely, the zero appreciation markets are so cheap because they have a history of not producing great returns or are high risk. It is my opinion that the 50% rule is too aggressive in low rental price markets but lets say you find an RE in a fairly good area, zero appreciation (meaning historically the appreciation is below inflation) that the 50% shows has cash flow of $200/month. What is it going to have 10 years, 20 years, 30 years from now? Well we know because it is a zero appreciation market that it will be no more than $200 in today equivalent dollars. So now try to scale it in low unit count RE. 10 would produce $24K/year, 50 would produce $120K, never to have the cash flow per unit increase. Effort is exerted to create and maintain the team with the only way to increase return is to increase unit count. That is a lot of RE to find, purchase, own. What is the best case scenario; I think what I indicated is pretty close to the best case scenario. What is the worse case. You purchase in an area that was advertised as B- but is really D+. The projected cash flow you were presented had no cap ex allowance (this seems to be the case for almost every Midwest projection by sellers). All revenue was exaggerated and all expenses were minimized. The property looses money starting on day 1 and will never have any appreciation to change this.

The reward does not justify the risk to purchase OOS in zero appreciation markets.  Leave those markets for the locals who are in a much better position to succeed in those markets.

Ask yourself another question.  Which way do you see RE investors pivot?  How often do high appreciation market RE investors pivot to low appreciation markets in the same category (I do see some small unit count pivot to cheap multifamily in zero appreciation markets but they are changing investment category to MF)?  How often do you see the vice versus of OOS zero appreciation market pivot to appreciation markets?  This is the only direction I see investors that are staying in the same investment category pivot.

Good luck

@Jonathan Greene   It's probably a bad idea because you don't know what a development committee is (since you asked).  In DE they're called a planning and development committee.  I've been in contact with a city planners, license & inspection and the director of the city committee.  They give their thoughts and figures of where things are headed.  It's their job to let you know what's happening in the city for revitalization and where the path of progress is in where city funding is going.  It's not to give me information on the best areas to invest near them.  I bring value in buying these properties so there aren't as many boarded up homes in neighborhoods that are in the revitalization path.

@Taylor L.   Thank you so much for responding!  The outskirts of Nashville are on my market research list.  I haven't given up on Northern DE, I'm just looking into different markets as multifamily units seem to be held very closely.  These owners aren't giving them up easily.

@Rob Bergeron   Thank you for your input!  My partner has Cincinnati, OH on his list to research.  Our mentor told us don't sleep on the midwest LOL  We'll have to do some further research as time goes on.

@Mike D'Arrigo Thank you and I appreciate your insight!  We're looking for at least three areas that are going to drive these particular markets that includes job growth that can help population increase, gov't planning, various entertainment to bring in revenue, technological advancements (just to name a few).  Hope to connect :)

@Dan Heuschele   Thank you for you response!  I too find that being able to drive to my properties is best.  DE has more SF inventory than MF and that's why we're interested in researching other markets.  We're making connections with local brokers, realtors and have connected with our local wealth league for more networking potential.

Originally posted by @Cassandra Sifford :

@Jonathan Greene   It's probably a bad idea because you don't know what a development committee is (since you asked).  In DE they're called a planning and development committee.  I've been in contact with a city planners, license & inspection and the director of the city committee.  They give their thoughts and figures of where things are headed.  It's their job to let you know what's happening in the city for revitalization and where the path of progress is in where city funding is going.  It's not to give me information on the best areas to invest near them.  I bring value in buying these properties so there aren't as many boarded up homes in neighborhoods that are in the revitalization path.

@Taylor L.  Thank you so much for responding!  The outskirts of Nashville are on my market research list.  I haven't given up on Northern DE, I'm just looking into different markets as multifamily units seem to be held very closely.  These owners aren't giving them up easily.

@Rob Bergeron   Thank you for your input!  My partner has Cincinnati, OH on his list to research.  Our mentor told us don't sleep on the midwest LOL  We'll have to do some further research as time goes on.

@Mike D'Arrigo Thank you and I appreciate your insight!  We're looking for at least three areas that are going to drive these particular markets that includes job growth that can help population increase, gov't planning, various entertainment to bring in revenue, technological advancements (just to name a few).  Hope to connect :)

@Dan Heuschele   Thank you for you response!  I too find that being able to drive to my properties is best.  DE has more SF inventory than MF and that's why we're interested in researching other markets.  We're making connections with local brokers, realtors and have connected with our local wealth league for more networking potential.

 There's no substitute for boots on the ground! If you do decide to pursue the area outside of Nashville, go there early and often! Face time with brokers is very helpful in building those relationships

@Taylor L.   GREAT boots on the ground is essential to having an OOS property.  I've been working on making connections with various brokers in different markets for the insight aspect.  I'm early in the education of market research, but feel I'm in a good direction.

@Avery Carl   Thank you for popping in to say hi :)  With your markets in TN, what legs do they stand on to make the market profitable and a great investment for you?  Are they SF, MF, condos?

2 SF LTR in the outskirts of Nashville, but I bought those at much lower prices. Even the wholesale fixer upper deals I am seeing are going for more than I paid for these off the MLS in 2016. 5 are single family cabin vacation rentals in the Smoky Mtns (G-burg/P-Forge area), and the rest are low income duplexes and single families in a smaller market in east TN.

Originally posted by @Cassandra Sifford :

@Taylor L.  GREAT boots on the ground is essential to having an OOS property.  I've been working on making connections with various brokers in different markets for the insight aspect.  I'm early in the education of market research, but feel I'm in a good direction.

@Avery Carl   Thank you for popping in to say hi :)  With your markets in TN, what legs do they stand on to make the market profitable and a great investment for you?  Are they SF, MF, condos?

Great! You'll stand out with brokers if you make regular trips to the market and get face time with them. It'll demonstrate that you're serious and not just a tire kicker, which they get a lot of.

Any where in the Midwest is a good market. A lot of migration from large cities on the coast and money being poured into Midwest cities. BUT if you can be local do it, try cold calling and doing digging. Off market is the way to go :)

@Taylor L.   I've set my 2020 goals and in 90 days I've set out to make solid connections with at least 5 brokers for off market deals.  I've connected with a few hard money teams and am analyzing deals daily.  I can only do but so much as I work a 9-5, but not for long!

@Mark Gliebe   Thank you for your insight on the Midwest!  I'm reaching out today to connect with a committee in Nashville to get some insight on where their investment dollars are going to and that will be the start of my research for the market.  Why are you interested in that TN market ... entertainment, job growth, deep rooted businesses?

@Caleb Brown   Thank you for stopping in to chat!  I'm still local, but doing research for now.  I'm hopeful to buy my 1st multifamily in the next 90 days.  If it's OOS or local, I'm ready for the challenge! 

@Cassandra Sifford Nashville is a very diversified economy.  It goes beyond the entertainment or tourism, which we learned 11 years ago can be detrimental to cities who rely solely on those industries.  I am attracted to and continue to be attracted to Nashville because of job growth, housing shortage, and diversified economy.  Nashville has auto, healthcare, tech, logistics (Amazon logistics hub), transportation, education (over 8 universities) as well as tourism and music.  We also cannot build  and rehab fast enough for people who want to buy/live here (even 30 miles surrounding Nashville).  Those are the factors that make me confident in Nashville's growth even in a down economy, because we are well insulated with various industries and job growth continues to climb here.