Investor · Portland, OR · Member since 2013 · 133 posts · 88 votes
So I am in the planning stages of starting my real estate investing career and obviously a very important piece is planning the right market to start in. My strategy is to buy and hold small multifamily units that are cash flowing and, ideally, appreciating as well. I have looked at some markets and realized that they are flooded. I want to get into a market that is profitable - that is affordable, with high rents. My starting range is properties in the 100-120k range. Does anyone have suggestions?
The markets I was originally looking at were Phoenix, Houston and LV. However, it seems like they are very competetive markets. For me to be successful out of the gate, I'm thinking I need a market that isn't as busy. I have a couple other ideas, but I would love to hear what ya'll think.
Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
13y
Tyson
Welcome.
See list below Top Emerging Markets.
Paul
Top Large City Emerging Markets
1) Houston, TX 6) Los Angeles, CA
2) Washington DC 7) Phoenix, AZ
3) Dallas TX 8) Atlanta, GA
4) Philadelphia, PA 9) Chicago, IL
5) NYC, NY 10) Riverside, CA
Top Small City Emerging Markets
1) Logan, UT 6) Lebanon, PA
2) Bismark, ND 7) Fargo, ND
3) Morgantown, WV 8) Iowa City, IA
4) College Station, TX 9) Longview, TX
5) Ithica, NY 10) State College, PA
Investor · Portland, OR · Member since 2013 · 133 posts · 88 votes
13y
THanks @Paul Timmins, I appreciate the quick response. I have looked initially at Houston, but noticed it's super competetive right now. I also like Atlanta, I think the rents are pretty decent there. Any idea on Pittsburgh?
Zach Schwarzmiller unfortunately I live in the Bay Area, in CA so my market is way too expensive for my budget at this time. The only place that is affordable and close is Sacramento, which I don't think is the best option. If I am going to make it, I have to start out of state. This is a risk I am willing to take. But ultimately I am going to be ultra conservative. Thanks.
Real Estate Investor · Chicago, IL · Member since 2013 · 6 posts · 0 votes
13y
Tyson,
In your price range you could try and identify some great multi family units on the Southside of Chicago. I see at least 4 or 5 new deals go up everyday on the MLS, and because the area isn't as stable, they are normally only about 10 or 20k a unit. People aren't attaching to get these pieces,
so if you have faith in the market staying strong, that could be a good place to start.
Tyson Cross I am newbie and live in Bay area, CA too. I'm targeting midwest. I don't see big jump in property appraisal but at least get decent rent with some cash flow.
I agree with you on Sacramento, I was initially looking into this area but considering my budget same as you, could not find nice neighbourhood.
Real Estate Consultant · Brighton, MI · Member since 2013 · 607 posts · 251 votes
13y
Pete Tam
Tyson Cross
Michigan has gotten a bad wrap over the past few years but the truth is it has LOADS to offer. Prices are already rising on investment and residential properties. Investors are gobbling them up while they are still great deals to be had. For instance, a SF fully tenanted and cash flowing with an excellent property manager in place can be obtained for $32K (or 5 for $28K each). Rents range from $700 - $750, expenses $270, giving you a net return of around $550 monthly. Giving you an ROI around 14%. There are always pitfalls to be aware of, but that's what I try to help investors get avoid all together.
Landlord · Flat Rock, MI · Member since 2011 · 179 posts · 26 votes
13y
I agree with Annette that Michigan and especially the southeast part of it, has a lot of opportunity. Not sure if it fits for you, considering you are in CA, but just putting it out there.
Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
13y
Don't buy in Chicago, it's not an emerging market...we don't want CA money to increase prices here (joking only).
Seriously, Chicago is getting hotter indeed and finding a good deal is becoming more difficult. But as always, within a market, there are submarkets. For example, Dupage county is HOT but watchout though: within Dupage county, there are cities you should NOT buy in.
If you want to know what these submarkets are, contact a real estate investor local in that area.
Top Large City Emerging Markets
1) Houston, TX 6) Los Angeles, CA
2) Washington DC 7) Phoenix, AZ
3) Dallas TX 8) Atlanta, GA
4) Philadelphia, PA 9) Chicago, IL
5) NYC, NY 10) Riverside, CA
Top Small City Emerging Markets
1) Logan, UT 6) Lebanon, PA
2) Bismark, ND 7) Fargo, ND
3) Morgantown, WV 8) Iowa City, IA
4) College Station, TX 9) Longview, TX
5) Ithica, NY 10) State College, PA
What is the source for this list? Its a year old now.....any update?
Top Large City Emerging Markets
1) Houston, TX 6) Los Angeles, CA
2) Washington DC 7) Phoenix, AZ
3) Dallas TX 8) Atlanta, GA
4) Philadelphia, PA 9) Chicago, IL
5) NYC, NY 10) Riverside, CA
Top Small City Emerging Markets
1) Logan, UT 6) Lebanon, PA
2) Bismark, ND 7) Fargo, ND
3) Morgantown, WV 8) Iowa City, IA
4) College Station, TX 9) Longview, TX
5) Ithica, NY 10) State College, PA
What is the source for this list? Its a year old now.....any update?
Welcome Tyson! College Station, TX is still a stupidly hot rental market. 1,400 sqft rentals that are nothing special are going for almost $2k/month. With the continued growth of the TAMU research endowments, I expect it to remain super profitable, as grad students with families continue to need off campus housing. One of my partners lives in College Station and is an active member of the Association of Former Students. We plan to focus most of our buy and hold acquisitions in College Station.
Also, exceptionally hot is the Richardson ISD, which includes Richardson & parts of North Dallas and Garland, along with the Grapevine/Colleyville ISD. Richardson is ranked as one of the top 25 ISD's in the entire country, and Grapevine Colleyville is in the top 100. The city of Richardson is the home for the Texas "Telecom Corridor" and boasts impressive job growth in a number of sectors with State Farm currently building an uber headquarters there. Both school districts provide at or near private school quality education with public school costs. Rental prices are increasing, because the DFW Metroplex is experiencing at or near record lows in inventory for sale. Add that to the fact the Dallas area simply doesn't have the number of available private schools you find in other major areas, people are climbing over each other to get into these areas.
Specifically, in Richardson, the neighborhoods that feed into the 3 highest rated elementary schools seldom have rentals that reach the open market. Most of them are renting in the $2k+ range and are rented via word of mouth, before ads even get placed. There are large areas of Richardson with houses in the price range you are looking to purchase. Less inventory for that price range in Grapevine/Colleyville, but that is a reasonable range for the DFW area in general. It will get you into a safe, blue collar neighborhood. Some of the other suburbs in the area are comprised in large part of homes in that range.
I'm focusing my wholesaling efforts in the Richardson & Grapevine/Colleyville areas and would love to work with you, if you are interested in partnering up to find properties. I am working with an experienced realtor who is very investor friendly and lives in Richardson, so he gets it!
Again, welcome and let me know if there is anything I can do for you.
The following is the latest list from April. The list comes from a review of several large broker firms recommendations and our research. Remember a market emerges for several years two key identifying markers are job growth and local govt support for that job growth.
Real Estate Investor · Richardson, TX · Member since 2012 · 113 posts · 27 votes
12y
@Hattie Dizmond I love the optimism! I am seeing tons of job and population growth and a really tough time to buy but do you really see appreciation in these markets?
I know Richardson pretty well but I think there a lot better school districts better than Richardson ISD. I am looking for a rental maybe near Greenville in Richardson and maybe near 635 and Coit. I am also very interested in Carrolton / Farmer Branch and maybe Garland but I have heard a few bad things about that area.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Okay everybody, it needs to be clear that just because a market is "emerging" doesn't make it advantageous for investors. Price-to-rent ratios may prevent cash flow altogether, some of those markets would be fine for SFRs but not MFRs (Houston), some wouldn't give you a good property at all for the $100k-120k range, etc. A market that is emerging is extremely beneficial to investors, provided everything else works out in the equation. So while that list is helpful, I think it can also be extremely misleading. Half of those large emerging cities won't give you a penny for cash flow. The smaller ones you have a better chance in, but keep in mind why they are smaller- make sure they have industry to support growth and the price-to-rents aren't already too high.
Tyson, of Phoenix, Houston and LV: Phoenix tapped out a couple years ago for the most part. It was great there for a bit but so many people came in and ate up the inventory, prices soared and now you would be lucky to find much where the numbers work out. Houston is great for SFRs, but you will doubtfully find MFRs that cash flow well, if at all. LV is a bit of a different animal. There is a lot of transient tenants there because of the entertainment industry, as well as the issue of entertainment being the only industry there so when the economy sinks, so does LV. The issues with LV are simply my own and why I stay out of there, but LV has issues and a lot of investors won't touch it because of those issues.
If you really want an MFR, I would look at southside Chicago or Philly. Philly will give you lower purchase prices than Chicago and higher cash flows. If you are okay with SFRs, that opens up more possibilities.
Granted, if you want to avoid other investors completely, you can always go off the beaten path and find deals in any small suburb city of just about any market. But make sure you weigh out how much effort you are willing to put out versus just jumping into the markets that are already known to make sense. A lot of markets can work but I wouldn't go at them myself, I'd stick to letting the pros work them. Chicago being one of them, since it's southside.
@Hattie Dizmond I love the optimism! I am seeing tons of job and population growth and a really tough time to buy but do you really see appreciation in these markets?
I know Richardson pretty well but I think there a lot better school districts better than Richardson ISD. I am looking for a rental maybe near Greenville in Richardson and maybe near 635 and Coit. I am also very interested in Carrolton / Farmer Branch and maybe Garland but I have heard a few bad things about that area.
I definitely see room for appreciation. Richardson ISD is ranked in the top 25 nationwide. But, that's as a whole. Even within Richardson there are some schools better than others. With that said, even the schools on the lower end, by Richardson standards, beat almost all of the Dallas schools. The areas feeding into Berkner are on the lower end of the socioeconomic scale. Mostly blue collar & starter homes with houses available well under the $200k mark. It's not the top flight elementary schools, but it's a ton better than what those same folks can afford in Dallas. Plus, the neighborhoods are safe with relatively low crime stats.
As for Garland, I would - personally - only consider the section of Garland that feeds to Richardson ISD.
DFW is cranking on job growth, particularly north of 635. There are a ton of people who can't afford to live in Frisco and a large portion of Plano. They certainly can't afford Prosper and that area. Anything can happen, but, considering job growth, the continuing decline of the larger school districts (Dallas, Ft Worth, Irving, Mesquite, Arlington, Duncanville, etc.), the lack of inventory for buyers, and mortgage qualifications being tight, I don't see a major pull back in rental rates. Richardson has the added benefit of having the UTD campus, which is a school that continues to grow.
There just are too many reasons to like this area right now. It may be harder to find deals, because of the tight market, but that doesn't mean a good deal isn't a good deal and won't continue to cash-flow.
Are you ok with buying here-n-there? Basically anywhere in the country where you find a good deal, are you willing to go through with it(?) or are you looking for one specfic market?
I don't travel as often to them but it's just about all I work with- properties in whatever investor-friendly markets are big at the time. I far from know about all the markets out there, and can really only speak to the big ones, but at least for those I can say what works and what doesn't.
It's great to see an investor-friendly agent! Not many of you out there :) And you're in a great market for it. If you ever find some good MFR deals (2-4 unit) there, let me know. Been looking for awhile but never quite pinned any down.
Investor · Ukiah, CA · Member since 2014 · 196 posts · 83 votes
12y
Hey @Tyson Cross, I was going to basically post the same question, so thanks for beating me to it, and thanks to everyone who has chimed in with helpful comments. I too am looking at the local CA market and thinking I might do well to look elsewhere. But I'm also wary of going out of state. Most of the owners I know are the types who only invest within an hour of where they live.
One related question I've been pondering is: does it make more sense to go downmarket to stay local, or deal with the challenges/risks going out of state, but have the upside of being able to buy nicer places in better areas?
Laguna Beach, CA · Member since 2013 · 8 posts · 2 votes
12y
About a year ago, I followed a wholesaler whole lives in central US and he set out to PROVE that wholesaling could be done anywhere. EVERYONE would know this guy who frequents these forums or has studied RE for any period of time. He is well respected and well thought of, does lots of deals in his home area. He peaked my interest because he was trying to wholesale virtually in IE, Riverside, area, etc, which is pretty close to me. For months he poured his system into this area, yellow letters, phone calls, lists and on and on and on. In the end he did almost no deals, maybe none, maybe one. This was a bit of a turning point for me because he clearly wanted to PROVE to everyone that wholesaling could be done in this area and he clearly did not. In the end he baled claiming that it made more sense financially to continue in his own area in the central US (which I am sure it did). I have not been on these forums very long but I have yet to see a post from anyone that his successfully wholesaling in IE, OC, Riverside, etc. If you are having success in these areas please let us know.