I keep seeing and hearing the midwest is the new hot spot

Investor · Gilbert, AZ · Member since 2016 · 42 posts · 25 votes

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

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Eric Gerakos

Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes

Almost all of the talk about investing in the Midwest is from Midwest real estate agents. Tread cautiously....

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Aristotle Kumpis
Specialist · Long Beach, CA · Member since 2011 · 879 posts · 398 votes
2y
As always, it depends on where you are looking at. For example, Lees Summit in Kansas City is a really nice area. But other areas of KC might not appreciate as much compared to Lees Summit. Most of the midwest is considered linear so you won't usually see much growth and appreciation compared to the sunbelt areas. You can either buy in a linear market, where you can purchase an older home for $150K, get excellent cash flow and see an average of 3% appreciation. Or you buy in a growth market, where you can purchase a home for $350K, get very little cash flow (usually), and see an average appreciation of 6%. I work with investors who buy in both, so that's always a strategy.
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Samuel DioufBusiness Member
Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
2y
Columbus, OH, is seeing a lot of appreciation. There are multiple billion dollar companies dumping money into the city, such as Intel, Google, Honda, and Amazon. This is causing a huge influx of people moving here for jobs. And a lot of start-up companies are migrating to this city as well because of the OSU campus that has thousands of talented students graduating and looking for positions locally.
[email protected]614-662-1652
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Alex Olson
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
2y
If you are looking at KC area and lees summit I have some good data for you. Low taxes, low cost to entry, landlord friendly. Can send on if you want to see more
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Evan HoppleBusiness Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
2y
@Ryan Dunn

But how do you guys see the midwest for appreciation in the next 3-8 ish years? - select markets will be stronger than others. Columbus, OH has seen strong growth and has steady population, business growth to sustain it years down the road.

The rents are still close to the 1% rule - mainly seeing this in C location multifamily in Columbus

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Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
2y
Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

Hi Ryan, a lot of out-of-state investors are seeking more cash flow opportunities here in the Midwest. Columbus OH is a prime example, we're still seeing deals here that hit the 1% rule. My clients love it here because of the strong macroeconomics, growing population, and job market. Anything you purchase now here in Columbus will absolutely appreciate like crazy in the next few years. Happy to connect and answer any questions you have!
[email protected]614-300-7535
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Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
2y
Yes, the midwest is cheap yet compared to most of the country. And yes, there has been some good appreciation.
But you're late to the game in most places (e.g. Columbus and Cleveland).
Here is the median list price for Columbus, Cleveland, and Detroit for the last 5 years.
Which one sticks out to you?
I believe both Columbus and Cleveland will do ok in terms of appreciation going forward. But my money is (literally) on Detroit to grossly outperform both markets.
Hard to beat that momentum!
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Patrick DruryBusiness Member
Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
2y
@Ryan Dunn
On average about 58 people move to Columbus every day. Columbus has a lot of job opportunities and population growth, especially with Intel coming to Columbus as well as Hyperion, which is a company that makes hydrogen fuel cells. Recently Amgen a leading biotech company invested 365M to open a new manufacturing site in Columbus. Forsee Power is set to have its North American headquarters in Columbus. They are a French EV battery maker. Columbus is home to the HQ of Wendys, White Castle, L-Brands, Hunnington, and the finance HQ of Chipotle. Columbus is also home to OSU, which constantly develops real estate, employs lots of jobs, and attracts students from the US and internationally to attend.

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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
2y
Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

It's mad dope yo.
4 Reply
Ryan Dunn
OP
Investor · Gilbert, AZ · Member since 2016 · 42 posts · 25 votes
2y
Quote from @Jimmy Lieu:

Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

Hi Ryan, a lot of out-of-state investors are seeking more cash flow opportunities here in the Midwest. Columbus OH is a prime example, we're still seeing deals here that hit the 1% rule. My clients love it here because of the strong macroeconomics, growing population, and job market. Anything you purchase now here in Columbus will absolutely appreciate like crazy in the next few years. Happy to connect and answer any questions you have!

Thanks. Yes i see the same thing. I think Coumbus is a good market
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Ryan Dunn
OP
Investor · Gilbert, AZ · Member since 2016 · 42 posts · 25 votes
2y
Quote from @Patrick Drury:

@Ryan Dunn
On average about 58 people move to Columbus every day. Columbus has a lot of job opportunities and population growth, especially with Intel coming to Columbus as well as Hyperion, which is a company that makes hydrogen fuel cells. Recently Amgen a leading biotech company invested 365M to open a new manufacturing site in Columbus. Forsee Power is set to have its North American headquarters in Columbus. They are a French EV battery maker. Columbus is home to the HQ of Wendys, White Castle, L-Brands, Hunnington, and the finance HQ of Chipotle. Columbus is also home to OSU, which constantly develops real estate, employs lots of jobs, and attracts students from the US and internationally to attend.

Wow i did not know that much was going on in Columbus.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @James Wise:

Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

It's mad dope yo.

mid west rust belt areas have been the hot spot since I started BRRRR lending in 2002 in Detroit.. nothing has changed.. Detroit actually when I started there prices were higher than they are today.. then it crashed big time as we know.. and its crawling back but still not to 2002 levels. Just pick areas that have the best schools you can afford that will keep you safe.. you go just for cash flow you will end up with Trash flow..
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Milton ChamberlainPro Member
Real Estate Agent · Kansas City, MO · Member since 2019 · 236 posts · 107 votes
2y
True 1% rule properties are becoming increasingly rare and often come with management challenges, typically found in markets with lower appreciation potential. Generally, the further you go from a city's center—about 20+ miles—such properties become more common. Examples around Kansas City include Orrick to the northeast, Leavenworth to the northwest, and Belton and Odessa to the south (to name a few). However, these areas tend to sacrifice appreciation potential.

Parts of the Kansas City metro are currently experiencing significant investment from major corporations. For instance, De Soto, KS, has Panasonic's $4 billion EV battery plant, while the Northland is seeing a $1 billion Google data center, and Meta is developing an $800 million data center between Gladstone and Smithville. Beyond these projects, there’s extensive mixed-use and large-scale development happening all across the metro area, both in urban and suburban zones.

Given Kansas City's comparatively low market prices (compared to the national average), there's little concern about substantial price softening. Rent rates continue to appreciate strongly, with a consistent 7% market (3% in some sub markets, 10%+ in others) appreciation over the past few years. interest rates have decreased in the last few months, and with the latest bunk job report correction and current trends indicated from the feds regarding 'inflation,' we are being prepared to expect more mortgage rate decreases. Right now for owner occupants, I have recently seen low 5's for 30 year terms.
we might expect solid appreciation (7%+) in single-family residences (SFRs) and small multi-family properties over the next 3-8 years, though predicting beyond a few years is more uncertain.

I've seen many local investors successfully increase rent rates over the past few years. One friend raised rents from $1,075 to $1,600 in two years without any cosmetic updates on a 3 bed 2.5 bath in Liberty. Another local investor I worked with took two 2-bed, 1.5-bath units in a Raytown duplex from $1,100 market rent to $1,500 each after investing $25,000 (and sweat equity) in updates, resulting in an annual income increase of $9,600. Not bad.
[email protected]573-356-1607
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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y
Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?

That should tell you everything you need to know. Avoid.
4 Reply
Eric Gerakos
Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
2y
Almost all of the talk about investing in the Midwest is from Midwest real estate agents. Tread cautiously....
8 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2y
In Chicago class A/B neighborhoods you can still get .8% rent to purchase ratios. Solid areas that appreciate and see annual rent increases with multiple applicants for each vacancy. Be careful of the cheap midwest areas. A lot of these are nightmares with crap tenants and old high cap/ex houses.
2 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2y
Here in Chicago we have class A/B areas that hit .8% rent to purchase with rents that go up each year and multiple applicants per a vacancy. Many think of midwest as cashflow but there are gentrifying areas that see rapid appreciation such as Albany Park, Rogers Park, Avondale, Pilsen, etc. I personally own a 4 unit Rogers Park and seen rents go from $1200 to $1600 over last few years.
0 Reply
Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
2y
Just wait untll global warming raises ocean levels on the coasts...
[email protected]248-209-6824
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Peter W.
Member since 2020 · 351 posts · 329 votes
2y
The benefit of the midwest is that the cost of older homes is significantly less than the cost of new builds. I live, invest, work, play in the Rochester, NY market. Older homes in good neighborhoods will sell for 200k. A new build costs 400k. There is going to be no new builds (for single family homes) at the starter home or middle class level. In my city we saw below inflation level below appreciation from 2002 (or whenever Kodak started going in decline) until 2019-2020. The past couple of years as L3Harris has begun to move production/engineering from California to the area (cost cutting measure, not political), we have been seeing 10% appreciation yoy or so. I expect that to continue, but much less until new builds are more in line with either income levels or cost of older homes.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Milton Chamberlain:

True 1% rule properties are becoming increasingly rare and often come with management challenges, typically found in markets with lower appreciation potential. Generally, the further you go from a city's center—about 20+ miles—such properties become more common. Examples around Kansas City include Orrick to the northeast, Leavenworth to the northwest, and Belton and Odessa to the south (to name a few). However, these areas tend to sacrifice appreciation potential.

Parts of the Kansas City metro are currently experiencing significant investment from major corporations. For instance, De Soto, KS, has Panasonic's $4 billion EV battery plant, while the Northland is seeing a $1 billion Google data center, and Meta is developing an $800 million data center between Gladstone and Smithville. Beyond these projects, there’s extensive mixed-use and large-scale development happening all across the metro area, both in urban and suburban zones.

Given Kansas City's comparatively low market prices (compared to the national average), there's little concern about substantial price softening. Rent rates continue to appreciate strongly, with a consistent 7% market (3% in some sub markets, 10%+ in others) appreciation over the past few years. interest rates have decreased in the last few months, and with the latest bunk job report correction and current trends indicated from the feds regarding 'inflation,' we are being prepared to expect more mortgage rate decreases. Right now for owner occupants, I have recently seen low 5's for 30 year terms.
we might expect solid appreciation (7%+) in single-family residences (SFRs) and small multi-family properties over the next 3-8 years, though predicting beyond a few years is more uncertain.

I've seen many local investors successfully increase rent rates over the past few years. One friend raised rents from $1,075 to $1,600 in two years without any cosmetic updates on a 3 bed 2.5 bath in Liberty. Another local investor I worked with took two 2-bed, 1.5-bath units in a Raytown duplex from $1,100 market rent to $1,500 each after investing $25,000 (and sweat equity) in updates, resulting in an annual income increase of $9,600. Not bad.

keep in mind Data centers other than the build out employee very few people.. Although KC has been a great market for us as a Lender.
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Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
2y
Be VERY careful of the cheap midwest houses. I have toured many and they tend to be janky and your few hundred in cashflow will get eaten by cap/ex.
3 Reply
Chris Barrett
Investor · Madison WI · Member since 2021 · 176 posts · 103 votes
2y
No, stay away.
0 Reply
Chris Barrett
Investor · Madison WI · Member since 2021 · 176 posts · 103 votes
2y
:-D But it depends on where you are looking in the Midwest. College towns are often always booming and have a lot of demand. In Madison WI you'd be looking at .5% rule, and investors have no problem buying at those prices because demand is always there.
0 Reply
Matt McCurdyBusiness Member
Real Estate Broker · Cedar Rapids, IA · Member since 2019 · 143 posts · 56 votes
2y
Quote from @Ryan Dunn:

Is the midwest looking to you guys as a great new place to look? I know the cost is on the low side for houses. BP podcast has talked about it a ton in the last few months. The rents are still close to the 1% rule. But how do you guys see the midwest for appreciation in the next 3-8 ish years?
Ryan,
These "top investment lists" are getting a bit out of hand. I wouldn't follow the lists/pundits and follow the data and what your personal goals are from an investing standpoint. What the Midwest is: 1) AFFORDABLE 2) Cashflows.  What the Midwest isn't: 1) An appreciation bell cow, but it also doesn't dip like the coasts either (think more stable) 2) Sexy

I see some questioning if the Midwest is truly legit, because RE agents are chiming in here trying to get business. Here's a RE broker's perspective: I get plenty of investors wanting to invest in Iowa all days of the week, but I'm not worried about trying to get out of state investors to invest. The way I see it, those investors have a set criteria.  Either the market fits them or it doesns't.  There doesn't need to be any salesmanship.

To answer your last question, what do you see from the Midwest for appreciation? No one has the crystal ball to know with certainty. My thoughts are we just saw unprecedented migration from COVID where many people and families moved, because they could go where they wanted to go.  Many of these places are now "unaffordable."  Is it too much to envision people will chase "the American Dream?" Where little Tim and Jenny can get a good education, the family can live in a modest house, and still have enough left over to save for retirement?  I think the only region left in the US that fits this mold is the Midwest.
[email protected]319-450-6447
1 Reply
Randy H.
Rental Property Investor · Chicago, IL · Member since 2008 · 53 posts · 25 votes
2y
I can only report from my market in Champaign, IL where we rent single family homes exclusively. We have seen 25%+ appreciation this past two years in home prices. Our rental market is extremely tight with little availability which is driving rents higher. Many properties are NOT at 1% yet but rents are increasing rapidly with no predictable end in sight. For example, this year we have raised rents from 25% to 50% just to get to the 1% level (which is allowing us to catch up with home price values). My theory is that when the interest rates were very low 2-3 years ago, many investors sold their rental properties to homeowners thus, taking them off the rental market. This produced a shortage of houses available to rent and contributed to the ability of investors to raise rents. I have been a landlord for 53 years and have NEVER seen a market like this before. It is a great time to own single family rental houses.
P.S. Invest in The Midwest! My theory is as global warming drives people away from the coastlines (it is already driving insurance companies away), there will be a migration back to the Midwest where the weather isn't an extreme and prices are more reasonable. This will continue to drive home values and rents higher.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Milton Chamberlain:

True 1% rule properties are becoming increasingly rare and often come with management challenges, typically found in markets with lower appreciation potential. Generally, the further you go from a city's center—about 20+ miles—such properties become more common. Examples around Kansas City include Orrick to the northeast, Leavenworth to the northwest, and Belton and Odessa to the south (to name a few). However, these areas tend to sacrifice appreciation potential.

Parts of the Kansas City metro are currently experiencing significant investment from major corporations. For instance, De Soto, KS, has Panasonic's $4 billion EV battery plant, while the Northland is seeing a $1 billion Google data center, and Meta is developing an $800 million data center between Gladstone and Smithville. Beyond these projects, there’s extensive mixed-use and large-scale development happening all across the metro area, both in urban and suburban zones.

Given Kansas City's comparatively low market prices (compared to the national average), there's little concern about substantial price softening. Rent rates continue to appreciate strongly, with a consistent 7% market (3% in some sub markets, 10%+ in others) appreciation over the past few years. interest rates have decreased in the last few months, and with the latest bunk job report correction and current trends indicated from the feds regarding 'inflation,' we are being prepared to expect more mortgage rate decreases. Right now for owner occupants, I have recently seen low 5's for 30 year terms.
we might expect solid appreciation (7%+) in single-family residences (SFRs) and small multi-family properties over the next 3-8 years, though predicting beyond a few years is more uncertain.

I've seen many local investors successfully increase rent rates over the past few years. One friend raised rents from $1,075 to $1,600 in two years without any cosmetic updates on a 3 bed 2.5 bath in Liberty. Another local investor I worked with took two 2-bed, 1.5-bath units in a Raytown duplex from $1,100 market rent to $1,500 each after investing $25,000 (and sweat equity) in updates, resulting in an annual income increase of $9,600. Not bad.

I keep seeing folks touting these data centers.. keep in mind for the subs building them there is money but long term they employ very few people and do not have a big impact on RE or RE values long term.. just saying.. I do a ton of bizz in KC and like that market a lot.
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