Best strategy for a 30+ year buy and hold?

Question

Hey BP,

I am 27 and have $200k to invest. I currently own a home in Ohio and have used it over the past year to gain some knowledge on being a landlord. I've decided that I want to do this for the long term, and want to take advantage of these historically low interest rates to buy and hold properties for the rest of my life. The question is, which properties and where?

Originally, I had followed the high cashflow model and bought my first house in Cleveland, OH. I later realized that my long-term returns would suffer due to a lack of appreciation, and have since done a metric ton of research on viable cities based on population growth, job growth, etc. The issue is that while the data is useful for a short term investment, I am unsure of how these trends will carry into the very long term future. Deciding on a city to buy and hold for the next 30 years seems somewhat like throwing darts blindfolded.

So, BP members with a super-long-term approach, which strategy and locations do you recommend?

Remington Lyman · Answer

If you have a long term investment horizon I would recommend investing in an area that has an upward renting job and population growth rate like Columbus, Ohio

Ryan Mainwaring · Answer

I second @Remington Lyman on Columbus or a city with similar trends. How far can you predict, great question and I think you nailed it in your original post. It's a bit of going with your gut based on the short term data.

Tyler D. · Answer

I've been looking at doing that in Texas. My question is, how far out can you reasonably predict?

Another thing I'm concerned about is the high property taxes (in both Texas and Ohio) eating into my returns long-term as they scale with appreciation, while the mortgage does not. I'm curious as to whether property taxes are expected to stay relatively static in the future, or if they could change drastically over time. If the former is true it may make sense to buy a more expensive property in a lower tax state.

Robert Ellis · Answer

If you're investing for the long-term SFH under 150k have seen crazy amounts of appreciation.

Andrew Weiner · Answer

I would take into account the net present value of money. I don't hear many people talking about this but it shouldn't be underrated. I would rather cashflow out my full principal in 5-8 years and put that money to use elsewhere now as opposed to having the money in 30 years. I do know that you can refi but that #1 costs money and #2 isn't consistent. This is obviously a personal preference, there is no one "right answer".

Zeke Liston · Answer

With the way Columbus has been growing, I think it's a great market for a long term approach view. You can still cash flow in the market which a bonus @Tyler D'Alessandro!

Remington Lyman · Answer

In Columbus, Ohio there are ways to mitigate the high taxes. You can do drop and swaps which is a tax loophole which attempts to hide the sale from the school boards that try to file claims against the assessed value of your home, you can get a tax abatement in certain areas that will enable you to not have an increase in taxes for a certain amount of time, or you can purchase properties that already have the tax abatement on them.

Michael Noto · Answer

@Tyler D'Alessandro A good tenant pool to pick from is what will sustain a long term buy and hold better than any other single factor in my opinion. Buy in the best area you can given your budget where the numbers work for you.

If you are choosing between option 1 which has solid/acceptable cash flow and a great tenant pool, or option 2 which has better cash flow and an average tenant pool I would always go with option 1.

Best strategy for a 30+ year buy and hold?

Best strategy for a 30+ year buy and hold?

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