What Markets to look at now and post Pandemic?

Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes

I'm located in NY and have been waiting on the sidelines for a few years now educating myself and waiting for the cycle to end. Now seems like the right time to test the market and make lower offers. I'm interested in Florida and Texas. I understand it's still a bit early and there is no certainty anywhere. Despite that, who here would like to give me their perspective and let me know how they feel about Florida and Texas (markets within). I'm concerned with the collapse and effect of the oil refineries in Texas and the cruise industry in Florida.

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Ujwal Velagapudi

Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes

@Jeff D. I've lived in Dallas for about a year, but have not invested in any RE here. I have spoken to a few broker & agent friends in the community, as well as folks who've lived here all their life. As I've gathered more data in Texas and more locally my Dallas market, you can see how big of a boom has taken place. It's crazy. I remember reading on BP about TX cities blowing up the last few years, but I see now a market that has really risen the past decade.

Houston and Dallas have been your #1 and #2 highest growth cities for the past decade, and Texas has been #1 as a state in total population growth. It seems the no income tax, great weather, big roads, etc. entice people? I do hear quite a few of the local neighborhoods being taken over by ex-Californians or ex-New Yorkers seeking a cheaper place, especially ones in the tech community that can work remotely. There has also been a lot of growth in terms of businesses moving here that are transplanting workers from higher cost of living cities. Agents have told me especially the Cali/SF buyers will purchase sight unseen, no negotiation just because the $.75M cost for a large home in Dallas would barely be an entry level home in SF.

It's funny but I myself was literally thinking last night the two states I would probably want to settle down in are either Texas or Florida. I have not seriously looked into making any investment purchases here, but was in the market briefly for condos before feeling like they were a bit overpriced. But in my research and insight from people in the market, I would consider going slightly outside the main cities and speculate future (inevitable?) growth. It seems tiny outskirt towns just outside the main city have been prime for developers and are being plotted for expensive homes and slowly expanding more and more outward. Texas has a lot of land though, and I see new construction literally everywhere, which is the one thing that would worry me - a surplus of supply.

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Alex Olson
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
6y
@Jeff D. You can make money in any market if you buy right. But you are trying to build wealth over time not instant riches. Both of the places you mention are dependent on oil and cruise lines as well as travel and hospitality. I would encourage you to look at the midwest. Will you hit a home run on every purchase? maybe not but your investment will be safer because it is shielded from being dependent on one industry, one employer, or one type of product. I am partial to KC which has everything - tech, regional travel, many different product offerings and is progressively growing. Plus both Cheifs and Royals have been world champs in the last 5 years :)
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Jeff D.
OP
Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Alex Olson I agree with you. I chose Florida and Texas because they seem to be a bit more landlord friendly than NY; one of the key markers in deciding what states to operate in. Home run on very purchase in Kansas City? I'm from NY. When I think of Mid-west, the naivete in my thinks of small town America that's mostly dependent on large commercial farms and Dollar Generals. Send me a home run deal! I'd love to see what it looks like in Missouri:)

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Ken Jernigan
Wilmington, NC · Member since 2017 · 132 posts · 70 votes
6y
@Jeff D. I'm dealing with a few investors now that are backing out of deals. It takes a few months for the business effects to work their way though the economy, but I don't think there's any doubt customer facing businesses will get whacked pretty seriously. Most of these are sole props with very little in cash reserves and I don't think the government is capable of mounting a meaningful rescue effort for them. I saw the same thing in 2008.
This will back up quite quickly into smaller strip centers that are not grocery-anchored. It will create lots of short sales and foreclosures. Banking consolidation will accelerate and portfolios will get dumped. Now is the time to identify likely properties, not the time to make offers. Asset values will come down. Start making your list.
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Ujwal Velagapudi
Investor/Agent/Entrepreneur · Dallas, TX · Member since 2016 · 464 posts · 564 votes
6y
@Jeff D. I've lived in Dallas for about a year, but have not invested in any RE here. I have spoken to a few broker & agent friends in the community, as well as folks who've lived here all their life. As I've gathered more data in Texas and more locally my Dallas market, you can see how big of a boom has taken place. It's crazy. I remember reading on BP about TX cities blowing up the last few years, but I see now a market that has really risen the past decade.
Houston and Dallas have been your #1 and #2 highest growth cities for the past decade, and Texas has been #1 as a state in total population growth. It seems the no income tax, great weather, big roads, etc. entice people? I do hear quite a few of the local neighborhoods being taken over by ex-Californians or ex-New Yorkers seeking a cheaper place, especially ones in the tech community that can work remotely. There has also been a lot of growth in terms of businesses moving here that are transplanting workers from higher cost of living cities. Agents have told me especially the Cali/SF buyers will purchase sight unseen, no negotiation just because the $.75M cost for a large home in Dallas would barely be an entry level home in SF.
It's funny but I myself was literally thinking last night the two states I would probably want to settle down in are either Texas or Florida. I have not seriously looked into making any investment purchases here, but was in the market briefly for condos before feeling like they were a bit overpriced. But in my research and insight from people in the market, I would consider going slightly outside the main cities and speculate future (inevitable?) growth. It seems tiny outskirt towns just outside the main city have been prime for developers and are being plotted for expensive homes and slowly expanding more and more outward. Texas has a lot of land though, and I see new construction literally everywhere, which is the one thing that would worry me - a surplus of supply.
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Alex Olson
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
6y
@Jeff D. What are your return requirements and purchase price?
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Jeff D.
OP
Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Alex Olson Flying solo I can comfortably put down up to 300K out of pocket for a down payment. I'd like to see 12% or greater return at this point. A light value add opportunity would be great.
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
6y
@Jeff D. your very own market is not a bad choice.
I'd definitely make the non-volatility, high cash flow play right now. I don't know how deep real estate prices could go, but if you can manage to buy at a moderate discount due to the panic now (what we're doing) I don't think values would go much deeper than your basis if you're in dealing in working class assets in cities that don't tend to appreciate or depreciate very heavily as the market cycles. My favorite play right now is in midwestern and southern secondary markets where I can get the highest possible cap rates, while enjoying the same level of rental demand the oversaturated neighboring hubs do. I like IN/WI/KY/AL/NC/AR for this. You can get 20% cash on cash in these markets fairly reliably... just maybe not on the 300k down/ 1.5MM property scale because those trade on almost a national cap rate basis. But 4-8 unit properties can be had well above your cash flow criteria.
I think it's too soon for Florida and Texas. They're overvalued. Not to the degree of CA/NYC are, but I don't measure a bad buy on a relative scale. If this market does end up digging deeper into values in some major and more volatile locations I would shift more of my acquisitions into FL and maybe TX, and other similar markets that have the potential to take a beating. This isn't happening today, though. It takes time for the cities that will suffer devaluation to bottom.
I'm targeting 2 years out before shifting away from the high yield minimal crash assets into appreciation plays.
Why didn't you mention Buffalo in your search???
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Jeff D. Any reason you don’t invest in Buffalo? Are you managing properties locally?
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Jeff D.
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Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Ujwal Velagapudi Good point about the new construction and surplus.
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Jeff D.
OP
Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Matthew Irish-Jones. No, I'm not actually managing any residential properties locally. I'm actually a facilities director not a property manager. I started out in the healthcare field and switched to the media field six years ago ( a lot less stress). I now manage two PBS and NPR locations (Buffalo/Toronto).
I've looked at a few places in and around Buffalo. I tired to pull the trigger on a small 6 unit on Potters RD by Cazenovia Park in South Buffalo last fall but got out bid. I looked at the 16 unit on Jewitt parkway and a few others in the area. Nothing really seems like a good deal. One broker said to me last fall "There are no good deals in this market anymore". Plus with all the New York tenant laws changing, it seemed more advantageous to look at states more favorable to landlords.
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Khaled Morad
Lender · Tampa, FL · Member since 2018 · 422 posts · 210 votes
6y
I agree tenant laws are tough in NY. Makes getting your tenants well more important than ever. I still believe there are deals to be had in Buffalo especially with a budget like that. You could do some great value add with that capital or put it in a strong cash flowing building of many units.
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Erin Dorsey RobinsonPro Member
Real Estate Agent · Cleveland, OH · Member since 2020 · 280 posts · 365 votes
6y
@Jeff D. Not dollar stores and commercial farms! Jeff! You are killing me. Lol! I agree with @Alex Olson. A lot of money is being made in the Midwest by people who know where to find and how to structure good deals.
[email protected]
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Jake Silverman
Investor · Jersey City · Member since 2020 · 51 posts · 9 votes
6y
@Alex Olson hey Alex I’m interested in OOS investing. If you have any deals in kc let’s talk
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Jeff D.
OP
Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Account Closed I'm actually still looking in Buffalo. I just haven't come across any "good" deals. The last potential partner in Buffalo I looked at a few deals with (a 16 unit and a 5 unit) said I kept dragging my feet. He keep tagging his emails to me at the end "Remember, there are no more "Good" deals."

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Jeff D.
OP
Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Khaled Morad Deals or Good Deals? Show me some?

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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
6y
@Jeff D. well. Were you dragging your feet? Lol. There are always good deals. I'm surprised you can't find higher cash flow in Buffalo than in Texas/Florida
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Jeff D. Cash in cash returns are 12% on average in Buffalo. The prices are higher than 10 years ago but so are rents so I’m not sure what the broker was talking about. He may have been primarily a residential broker. Investing is a lot different and most agents don’t switch hit.
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Jeff D.
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Rental Property Investor · Albany NY · Member since 2019 · 27 posts · 8 votes
6y
@Account Closed Ha! Well, I guess I could be dragging my feet. That's subjective though. I don't want a 2% CCR out of the gate on a purchase. Some of these deals I've seen close in Buffalo make me scratch my head. I'm still learning this whole deal finding situation though and I admit, this is my weakness.
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Gabe Monroy
Wholesaler · Independence, MO · Member since 2015 · 53 posts · 24 votes
6y
I'm in kcmo and I think it is the best place to buy rentals right now!
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
6y
@Jeff D. A 2% ROI offered by a provider that then calls you a tire kicker? That particular property provider sounds like a joke to me.
We may be comparing apples to oranges here because I tend to like the C+/B- asset class... but I'm looking for a 10 cap in the midwest and southern markets. I have taken a peek at buffalo a few years back and I would imagine something similar is attainable there. Maybe a 7-8 cap if you're looking for a nicer, solid B asset class.
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Jhon Restrepo
Member since 2019 · 56 posts · 22 votes
6y
Think very well before investing long distance, i live in Nj and own a condo in Palm beach; Its not easy to deal with tenants, repair, agents etc etc
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Trevor Ewen
Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
6y
@Jeff D.
Prediction at this point is a fool's errand, so here goes:
I would avoid so-called superstar cities (like where I live). They are expensive, highly regulated, and dealing with state budget shortages that may get very nasty. Granted, this advice was very true pre-pandemic.
As you pointed out with Oil and Cruise industries, you are subject to job market risk in those areas. But it's also important to recognize that oil will come back (although it could be a decade), it is an opportunity to buy at a discount in cities that produce many high-paying jobs in a good market. If you are sitting on those homes at the right time, it can be very lucrative. Just ask Texas investors that bought homes in the 90s.
State budget issues are really where I have focused my attention. A very successful real-estate investor once told me that he only buys buildings and state government bonds. Not advocating that limited strategy, just an insight here: His strategy was to buy bonds for states that had no income tax. This was on the expectation that they could raise them in the future and cover budget shortfalls. The high tax states will have to cut services and reduce quality of life in many cases, mostly due to their long-term obligations and powerful entrenched interests. Low-tax states tend to be affordable already (so the inventory is there), on top of that, I could imagine them seeing better public investment in the future, since they have a chance to raise the money down the line.
I know this is somewhat ironic coming from a New Yorker. But, I don't live here for great governance.
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Isaac S.
Member since 2018 · 563 posts · 562 votes
6y
Wherever there is blood in the streets, even if it your own!
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Marlen Weber
Specialist · Plano, TX · Member since 2020 · 2k+ posts · 861 votes
6y
Great question, Jeff. It's important to say up to date with markets post COVID-19. Following this discussion for more info.
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
6y
@Jeff D. it depends on your objective but if it's cash flow, I'm not a fan of FL or TX. FL has some of the highest insurance rates in the nation and TX has both high insurance rates and property taxes. Run the numbers on some potential deals and see how they come out, but it you want cash flow, there are far better markets. I like Indianapolis and Kansas City a lot.
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