Hottest states to invest in

Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes

What are the hottest states to invest in rental property right now? People seem to moving out of California to Texas, Idaho, and Colorado. Are there any other states that are hot right now?

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Jon Schwartz

Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes

Originally posted by @Michael Bell:

What are the hottest states to invest in rental property right now? People seem to moving out of California to Texas, Idaho, and Colorado. Are there any other states that are hot right now?

Californian here to defend my state!

It seems like Californians are flooding out of CA into Texas, etc., because there are SO MANY OF US! For example, anecdotally, Boise, ID is overrun with Californians. Do you know how big Boise is? 229K people! California's population is 39.5M. So a few Californians moving to Boise make it feel (to residents of Boise) like an exodus.

Another fun fact to illustrate my point: in 2018, 118K Californians left the state for other states. But 188K people moved into California from other countries (source: https://calmatters.org/explainers/california-population-migration-census-demographics-immigration/)

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Jon Schwartz
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
Originally posted by @Michael Bell:
What are the hottest states to invest in rental property right now? People seem to moving out of California to Texas, Idaho, and Colorado. Are there any other states that are hot right now?

Californian here to defend my state!
It seems like Californians are flooding out of CA into Texas, etc., because there are SO MANY OF US! For example, anecdotally, Boise, ID is overrun with Californians. Do you know how big Boise is? 229K people! California's population is 39.5M. So a few Californians moving to Boise make it feel (to residents of Boise) like an exodus.
Another fun fact to illustrate my point: in 2018, 118K Californians left the state for other states. But 188K people moved into California from other countries (source: https://calmatters.org/explainers/california-population-migration-census-demographics-immigration/)
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Michael Bell
OP
Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes
6y
@Jon Schwartz a lot of my friends thought who are in that 35-45 age bracket are leaving. And home affordability doesn’t seem to changing anytime soon for California. What do you think?
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Jon Schwartz
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
Originally posted by @Michael Bell:
@Jon Schwartz a lot of my friends thought who are in that 35-45 age bracket are leaving. And home affordability doesn’t seem to changing anytime soon for California. What do you think?

I don't think home affordability will be changing in CA anytime soon. After a decade of these new ADU law, maybe.
I guess my larger point is that anecdotal evidence needs to be explored before it's taken as gospel. Like I said, net out migration to other states in 2018 was 118K, which accounted for about three tenths of a percent of CA's population.
To answer your question, though, TX has been booming. I think Austin's a smart move. I think you also need to look at MSAs, not states. For example, the Rogers-Springdale-Fayetteville MSA in northwest Arkansas is a great market; it's like the Austin of Arkansas. But as a state, Arkansas is not a hot spot. I'd invest in Rogers, but I wouldn't invest anywhere else in AR.

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Michael Bell
OP
Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes
6y
@Jon Schwartz that’s interesting. I would’ve never thought of a city in Arkansas as a prospective market. I do know some businesses that are moving into that area. I’ll have to look into that.
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Dylan VargasPro Member
Rental Property Investor · Chico, CA · Member since 2016 · 625 posts · 336 votes
6y
@Michael Bell Welcome! Bottom line is 118k people have left the state. Doesn't matter how many flood in from other countries to California with regard to Boise etc. The 118k people is half the size of Boise ID. People will continue to flee California. No doubt about it. This will impact the neighboring states for quality life and lower cost of living. This is not to say @Jon Schwartz is wrong as he is correct with regard to people flowing in to California. California will always have people coming here to live the California dream or whatnot. Many, many states in this great country are great places to invest in rental property. All kids of places. Even California! Just depends on what an investor wants to tolerate or deal with. Good luck and keep us posted.
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Michael Bell
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Investor · Santa Clarita, CA · Member since 2015 · 40 posts · 34 votes
6y
@Dylan Vargas thanks Dylan. Here is So Cal, the prices seem so high though. It seems hard to invest here without a lot of capital. Am I wrong?
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Dylan VargasPro Member
Rental Property Investor · Chico, CA · Member since 2016 · 625 posts · 336 votes
6y
@Michael Bell You are welcome. It does take capital and much of it in Southern California. Not all areas but many. Beaches, San Diego, LA etc yes but not Inland Empire and Desert towns. Cost of investing and hottest state to invest in are two different issues and you will have to do what you are comfortable with. I am tempted every day when I see out of state properties that are great cash flow, cheaper cost to acquire etc. Each to his own but Southern California has some inexpensive areas (not midwest like but not Santa Monica like). I am familiar with Santa Clarita and would look at Lancaster and Palmdale as a starting point. Once you get rolling its good to be close to home though. A couple deals and you will have the money to stay local.
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Elisabeth Lernhardt
Member since 2019 · 55 posts · 39 votes
6y
In order yo be a cash flowing real estate investor, you have to do the math. And when you do that you realize that you will not have positive cash flow on a financed property above a certain prize just around 250k in most markets/ Also if you are willing to go with higher down payment your ROI will be lower. If you bet on market appreciation you are gambling. The other side is how much rent growth does the local market allow. You do not want to own the mansion that rents for 6k in Omaha, but it may be a valid rent in San Francisco.
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Jon Schwartz
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
Originally posted by @Michael Bell:
@Dylan Vargas thanks Dylan. Here is So Cal, the prices seem so high though. It seems hard to invest here without a lot of capital. Am I wrong?

David, Socal is expensive, but low-down-payment FHA loans make househacking a smart move.
What strategy are you hoping to pursue?

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Jon Schwartz
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
Originally posted by @Elisabeth Lernhardt:
In order yo be a cash flowing real estate investor, you have to do the math. And when you do that you realize that you will not have positive cash flow on a financed property above a certain prize just around 250k in most markets/ Also if you are willing to go with higher down payment your ROI will be lower. If you bet on market appreciation you are gambling. The other side is how much rent growth does the local market allow. You do not want to own the mansion that rents for 6k in Omaha, but it may be a valid rent in San Francisco.

Elizabeth, where are your properties? Where mine are located, appreciation is a bet worth making.

And where do you get $250K as an upper limit for financed cashflow? I find cashflowing properties, and I'm not looking at anything under $1M (though I'm only looking at multifamilies).

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Ryan KellyBusiness Member
Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
6y
@David Bell I would take a look at sunbelt states from Texas to Florida. Lower overall taxes, warm weather, and markets with good job prospects.
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Twana RasoulBusiness Member
Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
6y
@David Bell doesn’t get hotter than CA for investing in my biased and objective opinion ;). It is not for everyone though.
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Kaustubh Johri
Investor · Atlanta GA · Member since 2018 · 188 posts · 71 votes
6y
I'd say a lot of CA money is coming into NC, GA, TN. With a dismal 3-4% cap rates, Californians are looking eastwards for a better cap rate.
Although Atlanta has become more expensive lately, I'd bet my money in Raleigh, Charlotte markets. Booming markets, still affordable, educated demographics and has a good potential for an upside.
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Kay Kay Singh
Rental Property Investor · Fort Wayne, IN · Member since 2016 · 258 posts · 177 votes
6y
@David Bell Texas is a really good state to move. Dallas, Houston, Austin and Sant Antonio are the good cities to move to.
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Bonnie LowPro Member
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Ryan Kelly I have a question about investing in the sunbelt states. A lot of those same states are prone to severe weather events like tornadoes, hurricanes and flooding. How much are you factoring that into areas you're investing in?
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@Bonnie Low I’d say not true unless it’s on the immediate coast or extreme western end in tornado alley. You can’t go wrong in the state of TN!!!
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@Jon Schwartz and how many of those 188 thousand are legal and contributing positively to the California economy? Whether you want to argue on the % of Californians moving out, the bottom line is 10’s of thousands are moving out likely mostly due to many economic and political factors. Seeing it now on the east coast where people have had it with skyrocketing costs and declining quality of life in places such as NYC.
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@David Bell I don’t blame anyone for moving out of places like California or the higher priced and higher populated states on the east coast as long as they don’t move to those lower priced states and vote for the same policies that ruined the states they are fleeing from.
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Bonnie LowPro Member
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Jeff Piscioniere maybe our definition of "sun belt" states varies...?? But flooding in TN is definitely an issue just based on looking at the FEMA maps. Can you recommend TN areas where this is less of a problem?
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@Bonnie Low East TN in the mountains. Rains a lot but unless you buy in a river basin no issues. TN is a huge state. I find it hard to believe FEMA maps would make you write off an entire state.....?
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Bonnie LowPro Member
Lender · Asheville, NC · Member since 2016 · 1k+ posts · 1k+ votes
6y
@Jeff Piscioniere FEMA maps are NOT making me write off an entire state. Not sure why you're assuming that. In fact, I'm VERY interested in TN in particular, which is why I'm asking the question. One investor in TN shared that flood insurance ends up costing approx $100/month in her area so it really eats into cash flow. That's priceless info and that's the whole purpose of asking questions.
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@Bonnie Low I have a wildly successful vacation rental in Gatlinburg. I’ve spoken with many people who have had success in some of TN’s smaller cities and Nashville is super hot, maybe almost too hot. I’ve personally done some research on turnkey buy and hold rentals in and around Memphis that cashflow well. Outstanding cost of living in the state.
4 Reply
Jon Schwartz
Realtor · Los Angeles, CA · Member since 2018 · 952 posts · 1k+ votes
6y
Originally posted by @Jeff Piscioniere:
@Jon Schwartz and how many of those 188 thousand are legal and contributing positively to the California economy? Whether you want to argue on the % of Californians moving out, the bottom line is 10’s of thousands are moving out likely mostly due to many economic and political factors. Seeing it now on the east coast where people have had it with skyrocketing costs and declining quality of life in places such as NYC.

Jeff, your first question is actually two questions: how many foreign immigrants are legal? And, separately, how many foreign immigrants are contributing positively to the California economy?
I don't know how many foreign immigrants are legal. Obviously, thousands aren't.
As far as positive contribution to the California economy, I'd say the overwhelming majority are positively contributing to our economy. These stats are from 2018: California farms produce $50B (that's a "B" for "billion") of income annually. California farms produce a third of American's vegetables and two thirds of America's fruit (source: https://www.cdfa.ca.gov/statistics/).
Now let me ask you a question: what do you think the racial makeup of California farm workers is?
Not to mention the foreign immigrants who flock to Silicon Valley and pump, geez, billions more into our economy.
As to the rest of your points: percentages absolutely matter. You can't neglect the percentage outflow from California when more than 1 in 10 Americans is a Californian. We're the biggest state by a mile!
As for net out migration from Connecticut, you're seeing more of it than I am because CT has 3 people leaving for every 2 leaving CA (source: https://yankeeinstitute.org/2019/11/12/connecticut-has-6th-highest-outmigration-rate-in-the-country/). That's a number I got to by looking at the *percentages* of net out migration.

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Ebi Amiri
Investor · San Diego CA, United States · Member since 2019 · 33 posts · 7 votes
6y
As a San Digan, I should say I agree that investment in CA needs more capital but the long term reward is much bigger. You can get a crappy cheap duplex in TN with a cash flow of $100 and small appreciation OR get a CA single unit apartment with $200 cash flow (and rent appreciation) and very solid appreciation. CA is the best place someone can dream of living in, but what about TN? Have you ever seen someone saying they dream of living in TN or Idaho?!!
and Yes, a lot of people move out of CA but they are usually very low-income people whose move-out does not really affect the real estate or business market. They can't afford to paying rent, let alone buying a house.
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Jeff Piscioniere
Investor · Shelton, CT · Member since 2016 · 218 posts · 225 votes
6y
@Jon Schwartz with a massive geography and literally being the majority of the west coast, naturally the California economy is important to the nation as a whole. But California is diverse and I’d love to see a breakdown of your stats itemized by the big cities/industrial centers vs the rural blue collar areas. Like is the case with so many things, the big cities are the tails that wag the dog whether intended or unintended.
As for my state, CT is dying. Horrible economy, high taxes and regulations, landlord unfriendly, and almost completely the blame of the politicians and their ideologies. Lots of us have an exit strategy.
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