Best cities and districts to invest in 2017 / 2018
Investor · Miami, FL · Member since 2014 · 80 posts · 32 votes
Best cities and districts to invest in 2017 / 2018
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Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
9yI have 109 front doors in Euclid, Painesville, Cleveland Heights, Shaker Heights, and Akron. Dayton may be another. I truly believe that these areas are an emerging market and the price is right. Be careful about RE taxes in these areas. Read David Lindahl's Emerging Markets book and you will see why. I also love his Multifamily Millions book too.
Swanny
44 Replies
- Investor · Miami, FL · Member since 2014 · 80 posts · 32 votes9y
What you are suggesting is that the market is perfect and provides equal combined yields to investors through appreciation and rental incomes anywhere in the country. While that may be true in some extent, the market is far from being perfect, otherwise nobody would make money, and the very concept of opportunistic investment wouldn't even exist.
A smart investment is to buy low and sell high with a calculated risk, and i find that very few understand that simple concept.
The reason why large cities have so low cap rates, is that domestic and foreign investors mostly focus exclusively on these overhyped cities and speculate on endless appreciation despite poor fundamentals, low yields and overpriced assets.
Actually, the Detroit area for example yielded an average 18% appreciation + 17% average cap rate for the past 12 months; That's a combined 35% over the year, and the market still has a long way to go given the ridiculous price to income ratio and price per sqft, and the demographics and economy are steadily recovering since the past 5 years
On the other hand the LA market gained about 8% and an average rental yield of 6%; the market is grossly overpriced and incomes aren't growing
Smart investors should head were recovery is underway and distressed assets are, not where the hype is
- Wholesaler · Kansas City, MO · Member since 2016 · 129 posts · 25 votes9y
It looks like you've been through this or have been doing your homework and know exactly what you're wanting. That's great! I would definitely have to recommend Kansas City and I would love to share with you why. Please feel free to give me a call and mention BiggerPockets. I would love to discuss further what makes the Midwest, but more prominently, Kansas City, a great place to invest!
Wishing you all the best in your search!
- Investor · New York, NY · Member since 2017 · 40 posts · 5 votes9y
Originally posted by @Andrew Johnson:
As @Account Closed says, I'm a big believer in pick some area where you have some kind of connection. Just someone to tell you where the "wrong side of the tracks" are. You don't have to be a real estate investor to know what areas you won't drive through a 2:00 a.m. on a Saturday. But guess where the best projected pro-formas are? You don't *need* that data to make a decision but newer investors on BP seem to put a lot of weight in 8% vs. 10% cash-on-cash returns. They don't go through the next step of determining what that actually means (in dollars) at the end of the year. If you have $25K to invest in a down payment (for the arbitrary $100K house) that works out to ~$40 per month.
So you're basically talking about two pizzas a month determining a "good" vs. "bad" investment. Focus on the area, the pizza money (in this case, LITERAL PIZZA MONEY) will work itself out over the long-term.
I agree with Tyler that the focus between 8% and 10% CoC is too strong in many cases. It all depends on your comfort level. It's easy to find proformas that are returning 12% or more but they are in C neighborhoods. Some people are able to handle that type of risk though.
I just closed on my first turnkey property in KCMO. I have no connections there, but before I bought there I spoke to a lot of people on BP and then I flew over myself to take a look at properties. After meeting face to face with inspectors and turnkey providers, it gave me the comfort level I needed to go for it.
I like Indianapolis and KCMO, but I've heard good things about Memphis as well. - Real Estate Consultant · Whitestown, IN · Member since 2014 · 549 posts · 933 votes9y
@Brandon Leong I work in Indianapolis and several of my clients are in KC and Memphis as well. All are strong midwest investment markets. I think the most important thing is to have the right team to ensure that you are purchasing quality assets and that they are managed properly.
- Investor · Lansing, MI · Member since 2017 · 22 posts · 21 votes9yHi Cedric, I applaud your diligent use of demographic indicators in your search for expansion. Mainly, I think that, after looking over the Fitch site and the Len Kiefer site, you may be missing an important indicator of demographic health: wage growth. Nevertheless, I'm here to bring your attention to Lansing, Michigan. The city of Lansing itself is experiencing everything you've heard about Michigan and I don't know that I could recommend it to anyone confidently (at this time) because the turnaround that I am seeing is in the beginning stage (at best) and might just evaporate completely. But, there are places just to the periphery of Lansing that might warrant a closer inspection from yourself and other data-driven investors. In Lansing's case, the periphery includes East Lansing and Haslett to the east, Grand Ledge to the west, and Holt and Okemos to the south. Myself, I made a recent investment in Haslett. Stats, 2014 to 2015 (median income/wage growth/job growth): Compared to Lansing (35.5k/-0.31%/1.8%) and East Lansing ($33k/-0.25%/-0.33%), Haslett boasts stats of 58.9k/3.0%/-0.25%. Okemos, a small, neighboring city to the south, has better performance ($75k/4.7%/4.0%). In addition to the basic economic indicators, Haslett has strong tourist potential (if you ever AirBnB) being so close to Michigan State University (football/basketball game weekends) and strong recreational potential in terms of green space and Lake Lansing. More so, the main potential exists in Haslett because the school districts are second to none in the state. Thus, there is a strong trend for people to migrate from the rest of Michigan into the Haslett/East Lansing area. Interstate, this trend extends also to people from outside MI who are relocating to jobs in Lansing, Flint, Dearborn, and even farther away from Haslett, in Detroit. Further anecdotal confirmation of this is the fact that I am looking for work in Detroit and plan to live in my appreciating house in Haslett while I do that. Risks exist but are few in Haslett: -Lake Lansing could fill in or become polluted -(but it was recently dredged and inlets are monitored closely) -MSU could become less popular in sports -(but it's hard to hard to imagine that happening because the University is very supportive of its athletic programs, MSU alumni are numerous in the area, and MSU is in the B10 conference). -Property values might decline and drag rents down too -(but Haslett is supported by retirees as well as its best-in-state schools) -The entire state economy might convulse as it did during the automaker exit and Great Recession -(but Michigan is still in early recovery from its major declines so it has very little space to fall further and Haslett weathered that storm quite well - using Zillow Home Price as a measure) Returning to your original two sources, the housing stock in Haslett is growing very, very slowly due to smart but strict regulation while the demand for housing is continuing to grow faster. So, all things point to growth in this tiny REI area which is best known perhaps for the Lake Lansing coastline of which supports houses ranging from 250K to 1.5M (and were these lake houses built almost anywhere in Los Angeles they would fetch prices 5 to 10 times as high - they are that great). Good luck and thanks for sharing on BP! Ben
- Douglasville, GA · Member since 2017 · 8 posts · 7 votes9y
Out in the Atlanta area, it is a booming market. We are seeing high ARVs in different pockets in Atlanta. If you would like to JV on a few deals, reach out to me
- Rental Property Investor · Los Angeles Ca · Member since 2016 · 13 posts · 1 vote8y
This is an awesome thread, thank you for all the contributions
- Investor · USA · Member since 2017 · 22 posts · 10 votes8y
Lot of good info in here, Thank you all. I am interested in some areas in Cleveland but really concerned about the population going down. Any idea why the Cleveland population is going down?
- Engineer · Monmouth Beach, NJ · Member since 2016 · 132 posts · 25 votes8y
Cleveland is basically a more developed Detroit. I predict the population exodus will flatten out eventually. You have all these people from the overpopulated mid atlantic region heading to the midwest
Originally posted by @Ali Boone:
Of your list, I like Indy better than Detroit and Cleveland. Not a fan of their market fundamentals. Pitts could be decent but I don't know much about it as far as what it can offer. I definitely prefer more proven demographics and basic market fundamentals.
Some info on things I look for-
https://www.biggerpockets.com/renewsblog/2014/02/2...
Hope that helps!
Hey @Ali Boone, great article! Very informative. I am curious on your opinion on Dallas for out of state investors. Lots of pros, but Texas property taxes are pretty insane. Since you're involved in turnkey operations, do you personally recommend out of state investors to stay away from Texas and go towards more tax-friendly environments? Or is the tax consideration a pretty small piece of the pie?
@Neel P. Hey Neel! Well, my thoughts on Dallas actually come from factors other than taxes. I used to work with Dallas pretty heavily, as I did Houston as well, but prices have skyrocketed there so much--they are now higher than they were pre- 2009 crash--and therefore the returns squeezed, that I just don't deal with it anymore. Inventory got freakishly low at one point too, so there wasn't even much left. If you look at individual market cycles- infancy stage, growth stage, matured stage- Dallas is very much in the matured stage right now. The appreciation boom already happened. So now you'll pay peak prices, see minimal returns, and you shouldn't expect much for appreciation anymore because it already happened. With that said, it's not the worst place to invest either as there is still cash flow. But like you say, the taxes are high, insurance is often high, and I just believe there are less-matured markets out there (meaning more room for appreciation/equity-build) with significantly higher cash flow. So with all of that...I really haven't even gotten as far as tax-specific debates for whether to go forward in the market or not :)
- Investor · Cypress, TX · Member since 2016 · 170 posts · 139 votes8y
https://www.houston.org/assets/pdf/economy/Employm...
The Partnership’s forecast calls for job growth in 14 sectors: manufacturing; wholesale trade; retail trade; transportation, warehousing and utilities; finance and insurance; real estate; business, professional
and technical services; educational services; health care; administrative services; arts and entertainment; accommodation and food services; other services; and government. Employment will remain flat in
energy. Job losses will continue in two sectors: construction and information. The forecast calls for the nine-county region1 to create 45,500 jobs in ’18.
Houston's economy [high growth] will continue to fuel Real Estate construction. We only have 3.2 month's of inventory and we are one of the fastest growing populations in the Country [for the last decade]. Houston economic growth [2005-2015] 2nd only to San Jose, California [Brookings Institute]. Most diverse population in the Nation [Houston #1, NYC #2] L.A. Times.
There is no better place than Houston to invest in 2018. Cash flow and appreciation.
- Rental Property Investor · Lansing, MI · Member since 2017 · 48 posts · 22 votes8y
@Ben Fraser I am wondering what is turning you off from Lansing. I do agree that people are not really looking at appreciation investment here, however the rental market is strong here because of the students in the area that do not want to pay the high prices of the east lansing rental market (i.e. graduate students/medical student). These make great renters if you do your diligence and find a good tenant (which is important in every market) Also, as far as your stats on the median income in for example Okemos, the median income is 75k but no one in that community that is making near the median income is actually renting (also property taxes are high)
I would personally stay out of the Okemos area and the Haslett area (most of my experience there is that renters there want to live with amenities like a workout room) and put my money east of the capitol and find students and politicians that need 1-2 year housing agreements.... I see the best places to invest along Michigan Ave because there is a legit approach to making this corridor a nice place to live and work.
On the AirBnB front, I did this for a year (Condo Hack). You can get rent every home football weekend and some basketball games. But in the long run, this isn't cash flowing over the course of the year. Summer is super slow and the week days are also. I think I had 5 renters all year during the weekdays. I had a bunch of people that wanted to come and stay for 3 months at a reduced rate (mostly international people working with the university) If that is an area you are willing to do there may be some money there. It just didn't work for me because I was also living in the condo at the time.
I do agree that this area is a great place for investing right now, and if we can pull in a few more major employers it will be even better.
- Rental Property Investor · Ypsilanti, MI · Member since 2016 · 230 posts · 86 votes8y
Ypsilanti, Michigan is the place to be. More affordable than our Ann Arbor neighbor. More hip than nearby Saline, Canton, or Belleville. Extensive work with autonomous vehicle research. We have a university and a hospital. The school district is improving greatly. Tons of opportunity for housing development. Houses are selling for full price within days. Strong rental market.
I'm an investor and agent here. Let me know if you'd like to learn more!
Keri
- Rental Property Investor · Burlingame CA, San Francisco Bay Area · Member since 2015 · 45 posts · 14 votes8y
What do you guys think of Milwaukee?
- Investor · Ann Arbor, MI · Member since 2016 · 71 posts · 56 votes8y
Originally posted by @Ben Fraser:
Stats, 2014 to 2015 (median income/wage growth/job growth):
Compared to Lansing (35.5k/-0.31%/1.8%) and East Lansing ($33k/-0.25%/-0.33%), Haslett boasts stats of 58.9k/3.0%/-0.25%. Okemos, a small, neighboring city to the south, has better performance ($75k/4.7%/4.0%).
Ben, what website did you use to pull these stats?
Thanks.
- Real Estate Consultant · Lansing, MI · Member since 2011 · 356 posts · 306 votes8y
I would agree with @Alex Corrion...the Lansing area is stable, and housing prices have rebounded nicely. Government, education, and healthcare all have a large presence, as does the insurance industry. Houses rent pretty quickly and tenants, for the most part, are good and pay on time. Getting used to the code compliance may take some time, but if you get it situated, you should have no problem doing well in this market. The good deals are rare, and houses are selling quickly (the last rental I sold had an accepted offer within a week). Good luck to all
- Real Estate Investor · Lansing, MI · Member since 2015 · 30 posts · 23 votes8y
Shhh. Would everyone please quit talking about Lansing as a good city to invest in. I want it all to myself :)
Don't forget that Lansing also has a strong automobile manufacturing presence. Lots of high paying hourly jobs in the area. Two of General Motors newest car assembly plants reside here, along with countless other suppliers. This also draws lots of skilled trades and engineering jobs.
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