Newbie Wondering Where I Should Invest?
Virtual Assistant · Austin, TX · Member since 2017 · 21 posts · 6 votes
I am currently a senior in college and am giving thought about where I want to live once I graduate in May. I want to invest in buy & hold properties with good cash flow. I have heard Austin is a great place to live, but is the market there already too saturated? I want to pick a good real estate city because I'd love to invest full time. Where would you invest if you could move anywhere?
It may sound a little stodgy to say this but if you tactic is buy and hold then you have to be thinking about tax rates and state income taxes. Tennessee has no state income tax and is one of the absolute lowest property taxing states in America. Add to that the appreciation in the main cities of Knoxville, Nashville and Memphis and the incredible tourist/renter community coming through here and you have a great money making opportunity. I think it is perhaps the best state in America right now for investing in real estate as far as being able to keep most of your money and find deals.
Hope my shameless plug didn't put you off but I whole heartedly believe Tennessee is the way to go if you don't care where you end up after college. My office is choked full of Texans who migrated up!
Jeff Burdick hi and thanks for responding. I'm looking at a 200k budget for this adventure. I would like to house hack and live the property. Area isn't really a big deal, with my career I can kind of move anywhere. I've been also thinking about possibly finding deals near colleges, or universities where there will be a high volume of renters to rent to. I don't know if that's a good idea but feel free to weigh in.
College students can sometimes have good cashflow, but at times, they'll also create a lot of turnover and damage to properties. I'd look into the southwest side. Neighborhoods like McKinley park, Brighton Park, Gage Park.
@David Crutcher Jr. I've heard Nashville is a great place to live, and apparently a great place to invest in as well. I'll look into it more, thanks for your suggestion!
@Austin Fruechting You've made a great point. I've heard of several great real estate markets, but I already know I wouldn't enjoy living in some so I've crossed them off the list. I definitely will not base my move entirely on the real estate market, but it's a good factor to consider, along with many other things!
Jeff Burdick what do you think of my budget?
Its fine for the neighborhoods I mentioned. It would be a challenge to find something in that price range on the north side of the city.
I think as you research markets the rub you will find will be this ... all the great places to live, with high paying jobs, great weather, cool vibes, large and growing populations, etc. are going to be more expensive and not have high cash flow. The markets that cash flow better tend to be depressed economies, smaller and/or shrinking population, crummy weather, etc. ... so not a place that you would likely want to live (sorry, don't mean to offend anyone, but it is true). Then you also have to ask yourself even though day 1 cash flow is high, is it really a good idea and a sound investment long term to put your money in such a market? Then if you try to live somewhere and invest somewhere else, you have to basically give up control and rely 100% on others to make or break your investment for you ... at that point, you might as well buy a REIT and save yourself the trouble.
The good news, though, is that you can make money in RE anywhere really ... just have to adapt and change up your strategies to fit the market dynamics. There are plenty out there that claim that cash flow is the only possible way to make money in this business, and that all others are gambling ... you will hear it all over BP, and frankly I find it to be a ridiculous statement based on the last 15 years of investing in a desirable (but expensive) market ... that is through one of the worst housing recessions since the great depression, BTW. Sure there are speculators in my market just as there are speculators in every market, but that doesn't mean you HAVE to be a speculator to make money ... there are also investors in my market, just as there are also investors in every other market. You just need to find and learn from those investors so that you can become one of them. Good luck!
@Tasha Beal Austin market is also a tough one to break into right now. You can cash flow well if you are willing to take a BRRRR approach. Not many turn key investments that you can cashflow immediately from without a rehab project and some capital to begin. However, the appreciation alone might be worth a minimal cash flow strategy. Austin is one of the best markets right now because millennials are attracted to the atmosphere and that won't slow anytime soon IMO. If you have the opportunity to break into this market via foreclosure or REO that would be the way to go in my opinion. If you see something, run your numbers and don't be afraid to pull the trigger. For those that don't understand the growth Austin is seeing, here is perhaps the best visualization over the last 12 years.
Tasha.
Great question. Austin is a great city but you're right, its too damn expensive and hard to find good CF.
I would start somewhere in Ohio or TN.
@Sezuo Daudu check this Chicago area heat map that was provided here in the forums...This might help you.
Where did you get this map? I don't believe this is at all accurate. East Lakeview, East Lincoln Park, Lincoln Square, Edgewater, Ravenswood, Logan Square, Avondale, and Irving Park are decreasing in value? According to what?!
@Jeff Burdick: I believe this is a map of changes in population.
@Dhru Das: I'm just starting out in REI and have no clue about things like this. What would be the "lingo" or terminology for this kind of map / research data? Where would I be able to go find it in a given market? For example, I could get title information at a county assessors office, but for population increases, and other market stuff... where would I go? census website? some other public agency?
I'm literally day 5 in my journey into REI! I'm a data nerd so I'm digging in starting the way I know first. :-)
Great to see other younger BP members! Sounds like you are already in a fantastic location and based on your profile it sounds like you have a fantastic resource that you could leverage to network from your internship.
If you check out http://research.realtor.com/reports/hottest-market... you will find where you are is already #9! Deals can be had anywhere, some may be harder to find, but Dallas, based off a lot of other BP members there, seems to be a fantastic location. There are other areas in Texas that are also doing very well for real estate investors.
I would try to network out from your internship and invest full time near where you are.
Best of luck!
Congrats on almost getting through college!
I would echo what a few people said here...live where YOU want and then figure out which model is right for you(TK, BRRRR, flip, multifamily...etc) Stay away from some of the obvious no no's, like CA, NY and NJ(not saying people don't make money there)
The nice thing about the Midwest is that taxes are low and the economy is on a steady incline. I am from Chicago, but never in a million years would want to live there again. With that being said you can move to Northwest Indiana and then be close to 2 "hot" markets in Chicago and Indy. Or move to N. IL or S. Wisconsin and be close to both Chicago and Milwaukee.
I have one property in Eau Claire, WI(which is the best place I ever lived)reasonable size, college town and great schools. And I am closing on two other properties in KC within a month. With those I am using a TK provider.
The nice thing where you are is that you can pick what you want to do right now! I am kinda jealous to be honest! If I could do it all over again I would do exactly what you are doing...but soon I am hoping through enough investments and research I can leave the W2 world and enjoy the financial freedom of REI.
Feel free to send me a message if you have any questions!
Adam
I'm in a similar boat as you--I'm still in college and I am in the initial research phases of investing in my first property with my business partner.
My general line of thought is that my attitude towards real estate investing is the most important factor right now. It's about learning not only the factual information, but also the intangible skills such as determination, discipline, perseverance, etc.
In that regard, I care less about where I first invest and more so simply finding one good deal. That's it. One single property that I can get for below market value, that I can force an appreciation with, and that will generate cash flow for me.
Some people might think that I'm looking at this way too simplistically, and maybe I am. Right now I'm looking to close a deal. The empire will come later, and that's when I will focus more on the location I want to make my permanent residence.
@David Faulkner Thanks for your insight David! I am already starting to see that the great places to live don't cash flow as well as less demanded cities - hopefully I can find a good balance. I'm impressed you've found success in Orange County!
@Kevin Levesque I keep hearing mixed reviews about Austin, so your response was helpful and that's a great picture to visualize it. I am interested in value-add, distressed properties, so maybe I'd have some success. I am also one of those millennials that is attracted to its atmosphere, but I also want to make sure it has a good investing market before moving there.
@Antoine Martel Thank you! You've made a great comment about figuring out which model is right based on the city - I'm sure if I adapt to whichever city I choose, I'll be able to find success. My goal is to skip over the W2 world as much as possible and go right into REI. Good luck with your investing!
@Patrick Anderson Good for you for getting started! Attitude is a very important factor, and it's great that you are focusing on closing a deal now. My big hesitation with buying a property now near UNC is that if I move far away after graduation in a year, I won't be able to manage it - and it'd be too expensive to have a property management team for a SFH. Do you still have a good amount of time left in college, or are you planning on living nearby after graduating? I'd love to hear your thoughts!
@Sezuo Daudu check this Chicago area heat map that was provided here in the forums...This might help you.
Where did you get this map? I don't believe this is at all accurate. East Lakeview, East Lincoln Park, Lincoln Square, Edgewater, Ravenswood, Logan Square, Avondale, and Irving Park are decreasing in value? According to what?!
@Jeff Burdick: I believe this is a map of changes in population.
@Dhru Das: I'm just starting out in REI and have no clue about things like this. What would be the "lingo" or terminology for this kind of map / research data? Where would I be able to go find it in a given market? For example, I could get title information at a county assessors office, but for population increases, and other market stuff... where would I go? census website? some other public agency?
I'm literally day 5 in my journey into REI! I'm a data nerd so I'm digging in starting the way I know first. :-)
Ah okay. That is not necessarily beneficial though because just because an area is decreasing in population, doesn't necessarily mean it is not a good place to invest.
The biggest reason those areas are losing money is because developers are purchasing two flats and three flats(that house 6-8 people) in the 300-600K range and either gut rehabbing them or tearing them down and replacing them with a single family home that would sell for 800K-2 million or even more in places like Lakeview and Lincoln Park(and house 3-4 people). So while the net change in population is decreasing, the property values are rising.
Hey @Tasha Beal,
I'm a newbie, so a lot of my thoughts are pretty basic (and possibly uninformed!) right now. I'm still very enthusiastic about sharing them!
My thinking is that when I'm running the numbers, I will want to run them as if I have a property manager even if I'm managing the property myself. Anything can happen, especially at this time in my life, so I want a deal that I know will still generate positive cash flow with a property manager. That being said, I have heard assertions that property managers generally take 10% off of the rent, though I haven't actually talked to any in person to confirm this. That would be something I want to learn more about.
My business partner seems more interested in managing the property than I am, and since his dad is a construction manager it's better off if it's near him. My thinking is that I don't really care about how this first deal fits into my other deals. This first deal is my tutorial property in a sense. After this deal, I will have gone through the experience and will know much more as far as if I want to continue investing, at which point I will find a location to settle down in.
I have a couple years left until I finish my degree, and will probably leave Charlottesville after. However, anything can happen in two years!
Any find 60-100K populated cities worth investing in? I have several cash investors here....some just stick to Eau Claire, WI and others branch out to flips or rental rehabs in some of the small towns up north as well. I've enjoyed living in Eau Claire for 24 yrs or so and brokering in it 9 years. Money is to be made with our local rehabbing team, Christian standards, and wise buys tho'
initial purchase price has gone for sfh properties from $30Kish
$60-70K or more. Have an 8-plex near my own office here recently on the market for $375K but probably can be gotten for less as that seller has tried to sell it before. No garages like others on that street...$455 etc rents could be raised I'd think too. FYI all.
So what size non-metropolitan cities do you find viable?
Tyler, TX (about 2 hours from you!) it's been stable, growth is conservative so very minimal volatility and big enough to thrive, but still has a small town feel @Tasha Beal
What's your degree going to be in?
Nashville, if you want to know. Ore about the market, message me
@Patrick Anderson I like the idea of your first property being a tutorial - I've always heard the best way to learn is by doing. Good luck investing!
@Beth Stanley Hi Beth, I'm not quite sure what you're asking, but right now I am really only looking at metropolitan cities. I grew up a city girl and love all the opportunities that big cities provide.
@Shea Spinelli I've heard of Tyler, thanks for the suggestion! And I will have a business degree.
@Drew Owens Thanks Drew, I'll reach out to you!
@Lawson Ott
Phoenix has a large population about to expire???? The median age in Phoenix is 32.9; the median age in the US is 37.4.
@David Faulkner Thanks for your insight David! I am already starting to see that the great places to live don't cash flow as well as less demanded cities - hopefully I can find a good balance. I'm impressed you've found success in Orange County!
@Kevin Levesque I keep hearing mixed reviews about Austin, so your response was helpful and that's a great picture to visualize it. I am interested in value-add, distressed properties, so maybe I'd have some success. I am also one of those millennials that is attracted to its atmosphere, but I also want to make sure it has a good investing market before moving there.
It all depends on the way you look at it. I would say that being in an expensive market has been an advantage and is a major part of my success, rather than it being a disadvantage and my success has come in spite of being in an expensive market. I have arranged my investments such that the more expensive it gets, the more I make, but have also successfully hedged my bets so that if it does not get more expensive, I will still do very well ... heads I win big, tails I win small, but the house always wins and I'm the house. If I can't stack the deck in my favor in this way, then I don't play the game.
Bottom line is that there is opportunity and risk everywhere, no matter where you invest or what you invest in ... your duty as an investor is to craft and execute a strategy that meets your goals and compliments the market environment such that the opportunities are maximized and you are protected to a large degree (or avoid all together) the risks. In order to do that, you need to deeply understand how to assess and exploit all of the profit centers of REI throughout the lifetime of the investment (both short and long term). Your total return comes from these profit centers: 1)Cash flow (which can and does change over time), 2)Appreciation (both forced and market appreciation), 3)Mortgage pay down (through loan amortization), and 4)tax savings. There is also volatility and uncertainty around each of these, which is where your risk comes from. Finally these 4 are not independent, they are related and one can trade off of another ... for example markets with high short term cash flow tend to have lower long term appreciation (and visa versa), and the higher your leverage (debt) then the higher your mortgage pay down and tax savings but the lower your cash flow in absolute dollars per property. If you are not considering ALL of these things together throughout the entire lifespan of the investment, then you are likely missing something. The best way IMO to combine them in a single analytical framework is to project out the financials and compute the IRR. More info than you asked for, but at a high level that is how I assess things.