Which Major Urban Market

17 Replies

My wife and I have done a fair amount of investing in cheap cash flow markets. Aside from two condos in NoVa, the second of which was sold earlier this year, we have no experience in high appreciation markets. We wish we didn't have to sell them, particularly the second one that was ideally located by a metro station in Arlington, but it was probably necessary. 

Anyway I'd like to be able to get back into a similar market for the simple reason that a decade (or more) from now I'd like to have a property in a desirable, urban neighborhood of a major American city. I'd love to have a place that we can live in, or at least vacation in, if it makes sense as an investment. That's the key. If not, we can always just rent. But boy would it be nice to find something that we can get in on early and enjoy when we want to for many years to come. 

So what kind of market/neighborhood am I talking about? Imo, today, I'm interested in NYC, Boston, DC, San Francisco, Los Angeles, Chicago, Philly or Seattle. A vibrant, walkable neighborhood in a diverse, cultured, major metropolis. (Yes Seattle is a bit borderline and kind of is a gateway to the next tier) What kind of property? Really anything is fine as long as it fits into the type of neighborhood described above. 

I'm assuming Chicago and Philly are my only realistic options for finding a sensible long-term hold...something that isn't already overvalued, overheated, and can possibly cash flow. But happy to hear any thoughts from anyone who has experience in these metro areas. Also open to thoughts and speculation on cities that could become what I've described. Thanks!!

Well, there are a couple hiccups you're going to run into with the criteria you've laid out. 

  • The biggest one is--you aren't going to be getting in "early" on much right now. All of the cities you mention are pretty well-boomed already. Especially if you are talking about investing in something you may want to live in later. You'd either have to buy something more expensive (the more desirable the place to live, the more expensive), or take a total guess as to a random area within those cities that might gentrify. So not only are you literally talking about some of the most expensive markets in the country just in general, but the real estate economy is much more at peak prices now than not. So "early" would require diving as deep as finding little tiny niche micromarkets that many people haven't discovered. 
  • Another thing you said- live in or vacation in, as long as it makes sense as an investment. See above about desiring the most expensive markets in the country. The only two cities in that list that even pretend to cash flow are Chicago and Philly, and even within those, the cash flow areas aren't necessarily going to be the areas you want to live in, and certainly not vacation in. Investing for vacation houses is called "lifestyle investing" and is distinctly different because the premise of it is that it's more about the vacation-ability and desirability of the house over the cash flow.
  • For buying your own house versus renting, check this article out- https://www.biggerpockets.com/renewsblog/2014/01/1... May give you some extra ideas.

I would just really look at the options and see which of your criteria you might be willing to let go. It's just not an option, in my opinion, to hit anything in those cities in neighborhoods you might want to live in that also makes sense from an investing standpoint. If we were at a bigger dip in the real estate economy, sure. But just about everything is at peak right now, and getting worse. Personal opinion though!

@Maxwell Lee As @Ali Boone mentioned, getting in early is going to be tough.

Here in the Boston market, downtown Boston has been out of sight for a long time.  Close in neighborhoods like Charlestown, Jamaica Plain and Fenway have too.

As to what gentrifies next, I'd look at historic high-crime areas in Dorchester, Mattapan and Roxbury.  Some of these are starting to accelerate price-wise already, but I think there's still room to grow.

few options. I think Vegas has some legs.. also Portland Oregon... you can buy a nice home with a ADU

use said ADU for your vacations. prices are half of SF or more and 20 to 40% less than seattle.. rents are solid.

@Ali Boone @Charlie MacPherson Thanks for your replies!! 

I think "early" is relative, yes they've matured already but 20 years from now we might look back at this time as "early" if they boom again. Also, I am asking this question now so I can keep certain areas on my radar and track their progress, but not cause I'm buying there now. I'm happy to wait for another major downturn, if it comes, as I am in no hurry whatsoever. 

@Jay Hinrichs Vegas has always been very intriguing to me for retirement, but I just don't think it's gonna reach the level I'm seeking in a decade. Portland is borderline as well, but definitely something to think about! It could be the "affordable" bastion on the west coast. I wanted Sacramento to be that but while it is nice, after spending some time there I decided I'd rather shell out for the Bay area than settle for Sac. Might be a similar dilemma in Portland lol. 

@Maxwell Lee

If this is not about investment, then buy wherever you want, but if this is about investment I would look in areas with the most opportunity.

Dallas and Houston are already larger in population than DC, Philadelphia and Boston. Not only that but their growth is faster.

If you just want a vacation home, buy somewhere you enjoy visiting.

Pittsburgh isn't on your market but I would take a look at it as an up and coming major market. Additionally, I think your goal of  buying an investment which at the same time could serve as a vacation home or something to move into one day is not the best approach. The better idea would be to grow a great cash flowing portfolio that gives you the money and choices to buy a second home anywhere you want in the world. Think bigger and make it happen! Cheers!

Originally posted by @Maxwell Lee :

My wife and I have done a fair amount of investing in cheap cash flow markets. Aside from two condos in NoVa, the second of which was sold earlier this year, we have no experience in high appreciation markets. We wish we didn't have to sell them, particularly the second one that was ideally located by a metro station in Arlington, but it was probably necessary. 

Anyway I'd like to be able to get back into a similar market for the simple reason that a decade (or more) from now I'd like to have a property in a desirable, urban neighborhood of a major American city. I'd love to have a place that we can live in, or at least vacation in, if it makes sense as an investment. That's the key. If not, we can always just rent. But boy would it be nice to find something that we can get in on early and enjoy when we want to for many years to come. 

So what kind of market/neighborhood am I talking about? Imo, today, I'm interested in NYC, Boston, DC, San Francisco, Los Angeles, Chicago, Philly or Seattle. A vibrant, walkable neighborhood in a diverse, cultured, major metropolis. (Yes Seattle is a bit borderline and kind of is a gateway to the next tier) What kind of property? Really anything is fine as long as it fits into the type of neighborhood described above. 

I'm assuming Chicago and Philly are my only realistic options for finding a sensible long-term hold...something that isn't already overvalued, overheated, and can possibly cash flow. But happy to hear any thoughts from anyone who has experience in these metro areas. Also open to thoughts and speculation on cities that could become what I've described. Thanks!!

 I think that is a grand idea and a way an investment can add much more personal value. As far as profitable historically the top 3 in the nation for total returns ( cash flow + equity) since 2000 are LA, SF and San Diego. It could be said these all boomed in the 60s and 70s so I don't see how that matters longer run. LA or SD might have some options and San Diego could be much cheaper to get something near the ocean. Vegas too and maybe more of the consolation prize culturally speaking. 

Good luck with your search!

@Brie Schmidt Thanks! I know you are a Chicago expert I've enjoyed reading much of the info you share. It seems likely that my answer will be to study and track the Chicago and Philly markets and wait for an opportunity. Considering I used to live in Chicago and my wife prefers it, there's probably a greater chance of that winning out (although I always like to let the opportunities dictate what happens)

@Anthony Gayden  @Rob Beardsley  Because of my own experience, it is tough for me to separate my own desires from a good investment, but I hear what you're saying. The thing is, if it never is a good investment I will simply rent. No qualms about that at all. Even with more than enough resources to afford exactly what we want to buy, I'd still probably put that money to use elsewhere if it makes more sense to rent. Certain life events could change that outlook, but for now as far as I can tell we have no desire to own if it's not also a good investment long term. Re: Pittsburgh...I love Pittsburgh! Probably my favorite place among its peers. But it's not really at the level of what I'm looking for. Dallas and Houston are much better possibilities, if they continue to urbanize and expand mass transit (which looks promising on both fronts) then I could really see that. 

Since you got me discussing other options I'll say Atlanta, Miami, Minneapolis and San Diego, on their current trajectories, all have a good shot. Also Phoenix, but it's one of the few places I haven't been to multiple times so I'm not speaking from personal experience. Baltimore has an outside shot as well, although it is on the small side so much of that is owed to its connectivity with DC as well as my soft spot for it (from personal history). 

Still though, Chicago and Philly feel the most appropriate. Please continue to share and talk to me if I'm missing something!!

Originally posted by @Matt R. :
 I think that is a grand idea and a way an investment can add much more personal value. As far as profitable historically the top 3 in the nation for total returns ( cash flow + equity) since 2000 are LA, SF and San Diego. It could be said these all boomed in the 60s and 70s so I don't see how that matters longer run. LA or SD might have some options and San Diego could be much cheaper to get something near the ocean. Vegas too and maybe more of the consolation prize culturally speaking. 

Good luck with your search!

 Thanks Matt! I was in SD last month (only my second time) and I felt like without a doubt we've got to live in SoCal at some point. It may not work out to buy something, but I'm confident we will spend a good amount of time there in the next decade  so who knows?

Originally posted by @Maxwell Lee :
Originally posted by @Matt R.:
 I think that is a grand idea and a way an investment can add much more personal value. As far as profitable historically the top 3 in the nation for total returns ( cash flow + equity) since 2000 are LA, SF and San Diego. It could be said these all boomed in the 60s and 70s so I don't see how that matters longer run. LA or SD might have some options and San Diego could be much cheaper to get something near the ocean. Vegas too and maybe more of the consolation prize culturally speaking. 

Good luck with your search!

 Thanks Matt! I was in SD last month (only my second time) and I felt like without a doubt we've got to live in SoCal at some point. It may not work out to buy something, but I'm confident we will spend a good amount of time there in the next decade  so who knows?

 Right on. I think a lot of folks are thinking the same you are with the urban move deal. They even sell out pre construction high rise condos in Tijuana these days and many buyers are priced out San Diegans. Good luck!

Your idea is a smart one. Simply said, cash flow pays the bills, but appreciation is what will make you rich. 

Whichever city you decide is it for you, I'd focus on a gentrifying neighborhood. That's how you will maximize  appreciation, especially if you won't be living it it for a few years. Play that right and you can buy in a so-so hood (for now), which becomes a great hood later (and desireable for your personal use.)

Also give thought to how you'll manage the property. Condos are easiest, but hard to cashflow due to HOA and generally high prices. If you're gutsy, going 2-4 should give you better cash flow (over SFH and condo), and will help with the rent vs personal use equation. Places where these can be converted to condos or sold as TIC fractional interests will give you an even better upside. This can be done in San Francisco, but you'll need some serious coin to buy here. Less expensive cities like Chicago or Philly may be more realistic, but you'll really need to know the city well to peg the right gentrifying hood. (You'll need to nail the gangsta >> craft latte transition well!)

@Maxwell Lee

Have you thought about one of the larger markets in Texas?

Houston, Dallas, Austin, etc. You can get some great cash-flowing deals in those markets and the taxes are low..

I agree with @Van Blackman .  Austin was rated again the top big city to invest in for 2017.  I lived in Southern California for over 15 years and although I miss the weather, I prefer living in Austin and vacationing with all my extra money in California and other spots (during July and August).  Just sold my duplex in Long Beach to buy 4 places here in Austin and double my income.

he wants a walkable urban city, not a sprawling suburban wasteland...so no on TX

@Amit M. Thanks for your thoughts. Yeah I am considering this because I figure if I can identify a neighborhood with the potential then even if it takes 10 years to get past the tipping point I'm still good. Just as long as it's a decent enough C-class to not be a headache in the interim. 

@Van Blackman Yes, I like Dallas and Houston (actually I like Austin and SA as well, it's rare for me to not like a city lol) but it is definitely a projection to assume that they will offer the broad walkable experience that my aforementioned target cities do. I'm considering it but It's another factor to speculate about. 

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