High cash flow markets?

25 Replies

We went to the big island of Hawaii a few months ago because my husband had a conference there. Our kids loved it so much we were thinking about investing in a vacation property there. But after analysis, it turned out to be low cash flow, even if purchased free and clear. 

Does anyone know about how to find high cash flow properties and in which markets they might be located?

Thanks so much!! 😊😊

Sarah

Hey Sarah! Ha...I tend to second the bit about Detroit. Unless you are an adrenaline-junkie. 

In terms of markets, there are quite a few out there. They all offer different things in terms of cash flow, entry prices, property types, etc. Any idea on your budget or interests? I'm happy to suggest some markets.

I live in LA and have always bought in other markets.

I think there are great cash flow markets everywhere! It sounds like the reason the vacation home didn't make sense because the cash flow was to low.

Cash flow is created by calculating annual rental income - annual expenses = annual cash flow

If you are buying strictly on a cash flow basis you will eventually need to establish your personal comfortable level of how much risk you are comfortable taking.

For example: Class C properties (row homes) are usually better cash flowing than Class A single family home on average. But you are dealing with a different tenant class and might have higher turn over rate.

Class C properties tend to be more risky but cash flow better than Class A properties on average.

That's my 2 cents :)

@Sarah McConnell Hi, my wife and I love Hawaii and dream of owning property there, but never as a cash flow investment.  There are many places on the continent where you can do very well on cash flow with low entry points (although I'd avoid the really low).  A few I really like now include Jacksonville Fl,  NW Indiana ( a suburb of Chicago) with lower taxes, Indianapolis and Kansas City.  But it can really depend on what areas you like, and might like to visit once in awhile.  I encourage you to at least visit any area that you are seriously considering investing in.

Originally posted by @Sarah McConnell :

We went to the big island of Hawaii a few months ago because my husband had a conference there. Our kids loved it so much we were thinking about investing in a vacation property there. But after analysis, it turned out to be low cash flow, even if purchased free and clear. 

Does anyone know about how to find high cash flow properties and in which markets they might be located?

Thanks so much!! 😊😊

Sarah

 Hi Sarah,

Welcome to Bigger Pockets. Jacksonville Florida is a great cash flow market. I would love to share more information about it.

As others have mentioned, there are quite a few good cashflow markets around the country. HousingWire recently wrote a top 10 article  that can be found at

http://www.housingwire.com/articles/35574-here-are-the-top-10-investment-markets-for-single-family-rentals

Originally posted by @Manly Souza :

@Sarah McConnell

Buy wherever the numbers make sense and you're comfortable with is the motto I go by.

@Ali Boone

Can you expand on why not Detroit unless you're an adrenaline junkie? 

 Detroit is an excellent market. Higher cash flow than anywhere AND higher appreciation, i just don't recommend Turn Key type of investing as there is a big disparity in prices.

I'm buying properties for $2000 that on the same block the Turn Keys are trying to sell for $45,000.

One of my favorite plays is buying after TK investors give up.  I have an Out of the Country investor offering me four properties now.

Detroit is a different market, partner with a local instead of buying properties that you paid a premium of $30,000.

I think that actually is the better way to go in all the Turn Key markets.

When I'm buying for 5 cents on the dollar and bragging about the appreciation, is your result going to be the same if you're buying for $1.20 or $1.30 on the dollar?

@Manly Souza

Haha. Sure. I wrote this article a couple years ago, so not positive how accurate it still is (haven't reread it), but it will give some info as to what my thoughts back then were about it in more detail.

https://www.biggerpockets.com/renewsblog/2013/09/2...

But other than that, in short...I don't feel confident yet in the upward movement of Detroit yet. Not saying I will never, but it's not there for me just yet.

My favorite quote

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

― Warren Buffett

The moment you feel confident in Detroit let me know so I can start my exit strategy.

Sarah,

I have had much success with properties in Indianapolis when it comes to cashflow. They are extremely investor friendly, the property tax is favorable, the economy is robust and diverse, the population is growing, and the entry price is wonderful.

Cannot go wrong inside the 465 beltway but I would stay away from the war zones such as Brightwood (above 70), Northwest of the 65/70 junction, far east of downtown, and other smaller pockets scattered around.

Attached is my "red zone" map for my wholesalers and partners to avoid. Good rule of thumb but always do your due diligence.

Happy hunting and remember to get a good team around you any time you are investing outside your backyard.

Cheers!

Since your question seems to be tailored to vacation rentals, I would look up what the most popular vacation destinations are and the demographics of who is most likely to rent a vacation home in that destination.    I live a couple hours away from branson mo and I know its one of the most popular places in the Midwest.  I then logged onto the cities tourism website and  found that 3/4 of the year the largest demographic is baby boomers who are retired.  Then I would google to see what baby boomers most want while traveling/ renting a vacation rental. I also learned that baby boomers who travel have more money then the average person, so I would avoid limited service properties, properties which have stairs etc.   these statics will be different for every destination, but I think are important to consider when purchasing a vacation rental.    Also who wants a vacation to detroit? Just because a city might have great cash flow possible doesn't mean its great for the type of real estate you're looking for, every asset class is different. 

Detroit has a bad rap, but so does other areas! Bad news spreads further than good!

Trust me, Detroit will make many Investors wealthy over the coming years! 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you