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

Question

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

Any input is greatly appreciated and anticipated :)

HAPPY HOLIDAYS BP ... Cassandra

Aaron K. · Answer

You might be missing the point of the task, I would think it is to teach you how to analyze properties to determine the answer for yourself not just ask people.

Dan H. · Answer

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

Rob Bergeron · Answer

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

Mark Gliebe · Answer

@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.

Mike D'Arrigo · Answer

@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.

Jonathan Greene · Answer

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.

Mark Gliebe · Answer

@Cassandra Sifford I invest in Nashville/Middle Tennessee area and Louisville, KY areas.  I am a big fan of Clarksville, TN Knoxville/Chattanooga/East Tennessee and Lexington, KY markets and learning more about those.

Dan H. · Answer

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 · Answer

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.

Caleb Brown · Answer

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 :)

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