Best Cities in the Country for cashflow

32 Replies

Hi All, 

I live in Seattle and am looking for the best cities in the nation for houses and small multifamily units that are sub 100k and that have the best cashflow potential that are not complete ghettos or tear downs. I have been looking at St. Louis, MO Springfield, MO Gary, IN Memphis, TN to name a few. I really need the cheapest houses that i can find that aren't in gang ridden areas. I don't really care too much about appreciation at this point because my goal is to replace my 6 figure income with cashflow. 

Hey @Jordan Tinning , I’m an agent in Springfield, Mo. I would be happy to be a resource for you here. It’s possible to hit the 1% rule here under $100k but the areas generally aren’t going to be great. We don’t have a lot of gang activity here but there are some relatively rough areas.

If you want to be in a decent area and hit the 1% rule, your best bet is the $140-160k range.

Let me know how I can help.

@Jordan Tinning

Indianapolis. A lot of people say the ship has sailed in Indy, but I think there’s still quite a bit of opportunity. Multi family has gotten competitive. Single family homes that meet the 1% rule are fairly plentiful. You just have to move quick.

@Jordan Tinning I have been investing in Memphis, TN and Little Rock, AR for 5+ years now.  Both markets very ideal for steady cashflow.  Price points are great, markets can attract the 1% rule or just above, both are landlord friendly, and low property taxes to name a few benefits.  

@Jordan Tinning Be very careful if you want cash flow all you have to do is get into the cheaper areas in any of the cities that are going to be recommended to you. Understand that great cash flow is going to be compromised with headaches and headaches in real estate cost money.

I would focus on where can I find the best balance of Realtor, Property Management and property. I would say the PM is going to be the most important. If you focus on cash flow it may not end up flowing into your pocket.

@Edwin Williams yes I understand the dangers of the Lower cost properties which is why I created this post, to find out where other investors are having success. I don’t want to be a slumlord but do want to invest in working class neighborhoods that don’t cost an arm and leg and that can produce enough cashflow to help free me from job. I’m interested in learning which markets others are successfully investing in, then will go about asking for property management/agent referrals once I’ve identified the market I want to invest in.

@Jordan Tinning that's a really good question. I'm a cash flow person too. 5 years ago it was Memphis, Cleveland, Indy, KC a bunch of mid west cities. Today we can all get into those markets but where are we in the cycle of those markets, it's maturing and everybody is in. I have some places in Columbus that I bought a few years ago because I was trying to get into a market where it was still early in the cycle and find places a property manager would manage. Today Columbus is HOT I don't know as an out of state cash flow investor if you can get a real deal that maximizes cash flow. The investors with boots on the ground are going to pick those deal immediately. If you have some cash find a place that needs a little TLC and maybe you can find a deal.

You are getting some suggestions here on this forum explore them all because it easy to verify what you are offered at if it pans out jump in. All the best happy hunting!!

Originally posted by @Jordan Tinning :

Hi All, 

I live in Seattle and am looking for the best cities in the nation for houses and small multifamily units that are sub 100k and that have the best cashflow potential that are not complete ghettos or tear downs. I have been looking at St. Louis, MO Springfield, MO Gary, IN Memphis, TN to name a few. I really need the cheapest houses that i can find that aren't in gang ridden areas. I don't really care too much about appreciation at this point because my goal is to replace my 6 figure income with cashflow. 

Welcome aboard. Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cincinnati, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.

One thing to note when looking at the individual markets, you can make or lose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
Originally posted by @Jeff Filali :

You can find a lot of 1%+ B class under $100K in Tulsa and Oklahoma City markets.  

I call it C class, but so many out of state investors come in and laugh at what I'm calling C class ha! 

 

Originally posted by @Jordan Tinning :

Hi All, 

I live in Seattle and am looking for the best cities in the nation for houses and small multifamily units that are sub 100k and that have the best cashflow potential that are not complete ghettos or tear downs. I have been looking at St. Louis, MO Springfield, MO Gary, IN Memphis, TN to name a few. I really need the cheapest houses that i can find that aren't in gang ridden areas. I don't really care too much about appreciation at this point because my goal is to replace my 6 figure income with cashflow. 

Detroit Michigan is without a doubt the number one city in the country for positive Cash Flow, best rent to value ratio, biggest bang for your investor buck! Not to mention the appreciation bonus that was just announced as the highest it’s been in 20 years. I saw some of the other investors discussing 1% rule well many Detroit investors including ourselves and our clients are all enjoying the 2% and above rule! Yes Detroit is one of the very rare cities that can comfortably deliver on the 2% rule. I highly recommend you don’t wait to much longer to test the waters on the rule. Get in while the getting is good! We’ve been extremely busy this winter and Detroit is having some of the best winter numbers we’ve seen in over a decade. I can only imagine the price jumps that will be coming with the warmer weather. And I implore you not to buy into what the haters always say and have been saying about Detroit for the last 8 years while the properties that were selling for $500 bucks appreciated to $30,000 plus or the properties that just a few years ago were $30,000 and are now selling with Detroit A+ renovation packages for $250,000 plus in our better areas. We do tours every month and will gladly show you around and get you up close and personal with the gorgeous ginger bread brick properties and lovely frame houses that are offering monster cash flow returns comparatively speaking with the rest of the country. Now I’m not saying Detroit doesn’t have its own separate set of pitfalls as do many cities and some can even be devastating to a novice or even an experienced investor but with a large and awesome boots on the ground support team the city becomes your oyster along with the high positive cash flow as well as the other benefits for you to lavish in. Don’t let the skeptics deter you. As I said, just think about all the money investors have made in Detroit since the crash and look at where Detroit’s economy and market are right now compared to than. The recovery truly has been amazing. To quote one of our clients who is purchasing his fifth property with us “Detroit is being reborn like a rising Phoenix from it’s own Ashes.” We definitely encourage our investors and all other investors to do their own due diligence and as part of that due diligence meet in person with the boots on the ground leaders as well as other members. If you are investing in rehabs or buying rehabs, meet their contractors, see their work. Do a deep dive into who will manage your properties. Get solid references, visit their office, if your boots on the ground team has had an operation in Detroit for 5 or 6 years then they should have a long list of happy clients they should be able to refer you to. Heck, take a quick trip to our big bold beautiful city as do many people and investors from around the world everyday. It’s not just the positive cash flow that is plentiful in Detroit, we offer some of the best food in the world. Downtown Detroit is totally amazing. A great mix of modern and brick. Romantic, boutique hotels like the Shinola, The Foundation, The Detroit Club Hotel are plentiful. The modern casino’s are also fun especially when you win. And let’s not forget about the Great Lakes, water ways, and rivers that are all at your finger tips not to mention Detroit’s abundance of stunning and glorious architecture. The other big factor that plays into Detroit’s big positive cash flow wins are the enormous amounts of renters desperately looking to move into properties. Ask any Detroit investor, wholesaler, realtor, contractor, PM, Inspector, title and escrow company etc and they will all tell you the same thing. Renters are literally lined up around the block to rent a nice renovated property with a little curb appeal. So not sure what the actual published numbers are this month but market rent is way up and pushing the envelop at every turn. GO DETROIT GOOOOO !! :)))

 

Originally posted by @Alyssa Dyer :
Originally posted by @Jeff Filali:

You can find a lot of 1%+ B class under $100K in Tulsa and Oklahoma City markets.  

I call it C class, but so many out of state investors come in and laugh at what I'm calling C class ha! 

C class would be the areas most seasoned investors won’t touch.  The areas you don’t go without at least two guns, and never at night...think in OKC: Flatiron District, Research Park, Capital Hill, lots of SW OKC; and in Tulsa: north of Pine/east of Yale, 61st-68th S Peoria area, Eastside near 21st Garnet/129th E ave/145th E ave areas.  There’s a lot of C Class in those areas. 

(Class Descriptions below copied from Realty Mogul)

CLASS A

These properties represent the highest quality buildings in their market and area. They are generally newer properties built within the last 15 years with top amenities, high-income earning tenants and low vacancy rates. Class A buildings are well-located in the market and are typically professionally managed. Additionally, they typically demand the highest rent with little or no deferred maintenance issues.

CLASS B

These properties are one step down from Class A and are generally older, tend to have lower income tenants, and may or may not be professionally managed. Rental income is typically lower than Class A, and there may be some deferred maintenance issues. Mostly, these buildings are well-maintained and many investors see these as "value-add" investment opportunities because the properties can be upgraded to Class B+ or Class A through renovations and improvements to common areas. Buyers are generally able to acquire these properties at a higher CAP Rate than a comparable Class A property because these properties are viewed as riskier than Class A.

CLASS C

Class C properties are typically more than 20 years old and located in less than desirable locations. These properties are generally in need of renovation, such as updating the building infrastructure to bring it up-to-date. As a result, Class C buildings tend to have the lowest rental rates in a market with other Class A or Class B properties. Some Class C properties need significant reposting to get to steady cash flows for investors. 

Originally posted by @Edwin Williams :

@Jordan Tinning Be very careful if you want cash flow all you have to do is get into the cheaper areas in any of the cities that are going to be recommended to you. Understand that great cash flow is going to be compromised with headaches and headaches in real estate cost money.

I would focus on where can I find the best balance of Realtor, Property Management and property. I would say the PM is going to be the most important. If you focus on cash flow it may not end up flowing into your pocket.

 THIIIIIIIIIIIIIIIIS. I cannot stress this enough as a long-distance real estate investor the key to enjoying real estate and not getting burned out is a solid team. Especially if you have a full-time job! Even if I was a few blocks away from my rental, I'd have a PM. I need to focus my energy on making more from my job and building relationships with realtors, PMs, and other members that will help me be successful. 

Originally posted by @Jordan Tinning :

Hi All, 

I live in Seattle and am looking for the best cities in the nation for houses and small multifamily units that are sub 100k and that have the best cashflow potential that are not complete ghettos or tear downs. I have been looking at St. Louis, MO Springfield, MO Gary, IN Memphis, TN to name a few. I really need the cheapest houses that i can find that aren't in gang ridden areas. I don't really care too much about appreciation at this point because my goal is to replace my 6 figure income with cashflow. 

 Detroit is a great market for this. If you purchase in the right areas (areas that will appraise) you will have great success. 
The key is in the buy. You have to purchase at a price point where you have enough meat left on the bones in case if you wanted To refinance and this way you can pull all of your cash back out and repeat if you’re looking to build and add more. 

Price points are low entry at  door and if you know people like me you can get deals at 60% of market value. 

If you’re interested in ever coming out to the city to check it out and some properties be sure to reach out. 

@Jordan Tinning I would stay away from St Louis based on your criteria. I’m in Joplin, MO about an hour away from Mr. Cantrell in Springfield. Springfield is the 3rd largest economic center in Missouri, Joplin is the 4th.

In general, we can hit the 1% rule quite often at 130k and under. BRRRR opportunities are my personal

favorite; however, being out-of-state, turnkey might work better for you.

Happy to connect this week if you like!

Hey @Jordan Tinning !

There are a ton of great cities out there in the US that cash flow. Generally, the Midwest and the South are good regions, but again, there are so many great cash-flowing markets out there in the US.

I see lots of people get stuck on trying to pick a market so I urge you to NOT get stuck on finding the "perfect market" because it doesn't really exist. When evaluating a market, look into these metrics:

-Population growth

-Job growth with higher wages

-Business-friendly

-Diverse economy

-Strong occupancy rates

-Acquisition price-to-rent ratio

-Landlord friendly

-Infrastructure development

-Lifestyle amenities

-Education

    Then start building your team on the ground and take action!

    Best of luck!

    -Tyler

    @Jeff Filali  As a seasoned investor, I buy most of my personal investments in the research park. If you plan for the curveballs of the area & estimate maintenance appropriately you might not get butterflies when you drive through your neighborhood but my returns are exactly what I'm looking for. Maybe I'm an exception though!

    I see most investors pursuing safer areas with more predictable tenants. I still consider it C class but Midwest City, Del City & further south OKC are the sweet spots between return and risk! 

    Memphis TN I packed up and moved my whole family here because it was such a great rental market. Its had steady appreciation as well over the past three years and lots of economic upswing. The rent to value ratio is still one of the highest on in the country. 

    I would be happy to discuss the Memphis TN market with anyone. 

    @Jordan Tinning

    I have been investing in Memphis, TN myself for 5 years and I have seen some really solid returns. I also assist clients in buying and selling investment deals in Memphis for the past 8 years and the cash flow is really solid. Im happy to answer any of your questions based off my personal investing experience. 

    Best of Luck!