What are some good cities for cashflow?

General Real Estate Investing
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What are some good cities for cashflow?

Derek Faller
Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes

So I live in Bend, Oregon and have been doing flipping and rehabbing up here, but getting properties to cashflow up here is really hard. I do have a rental house here that cashflows, along with one in San Antonio that cost me less and brings me more money then my Oregon one. I am looking to pick up a few more rental houses or multi-family units in the near future and am looking to find my best option for location. I was originally planning on getting a few more in San Antonio, but would like to see if there are better options out there.

Anyone have any recommendations on other cities I should look at?

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Jeremiah B.
Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
13y

We're about 1 month from making our first out of state purchase, and have been considering it for around 10 months.

The above list certainly lists several cities with cash flow potential, but keep in mind that cashflow will probably not be your only concern. Or, at least it wasn't our only concern.

Each investor and situation is unique, but some things to consider include:

  1. Historic/Recent Growth
  2. Future Growth
  3. Affluence
  4. Cost of Living
  5. Economic stability and structure
  6. Appreciation
  7. Vacancy Rates
  8. Crime Rates
  9. Current trends with hedge funds and other investors
  10. Availability of house-type that you're targeting (I'm looking for 3+/2+, newer)
  11. Climate (yes - weather)
  12. Schools

I'm actually going through this process myself - you're welcome to read more in my blog post here. But to save you the 50,000 word post, we are looking in:

  1. Atlanta
  2. Charlotte
  3. Columbus
  4. Memphis
  5. Nashville
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  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    13y

    @Derek Faller

    are you looking to pay cash or finance? How much cash flow are you looking for and what type of property are you looking for -- single family, duplex, small multi, apartment building?

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  • Derek Faller
    OP
    Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes
    13y

    Well, ideally I would probably be looking to finance with about 30% down. I can pay cash depending on the costs of the homes and if the numbers of tying up more money in the homes is worth it.

    I am open to SFR, duplex, or up to 4-plex, it just depends on cost versus rents and if the deal will cost out for me. I don't really want to get into commercial stuff. I would like to get at least one or two multi-family units at some point though.

    As for cashflow, with 70% LTV financing, I would like to see at least $250 per unit, if I can find it.

    1Reply
  • Account Closed
    Real Estate Investor · FL · Member since 2009 · 53 posts · 4 votes
    13y

    @derek Faller I am also doing research for the same, it seems like that memphis, indianapolis, ohio, milwaukee etc come on the top for that ..

    0Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    13y

    Here in Memphis we are selling turn key properties that if you finance with 20% down you can expect on average $300-$325 in monthly cash flow if you only take into account the PITI and property management fee's. With almost 47% of our population as renters, why would anyone consider any another market? Prices are still good here and rents are stable.

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
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  • Haim Mamane Palman
    Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
    13y

    I'm from CA and decided to invest in Memphis for the exact reasons you mentioned. I don't think you can go any wrong with Memphis. From personal experience, with 20-30% down payment you should definitely get more than $250 after paying for PITI and factoring in mgmt. vacancy and repairs.

    0Reply
  • Sharon Tzib
    Real Estate Broker · Cypress, TX · Member since 2013 · 822 posts · 468 votes
    13y

    Well, Chris, crime rate for one:

    http://www.escapehere.com/destination/10-worst-cities-to-visit-in-the-united-states/7/

    Texas still has great cash flows, healthy economy, excellent jobs outlook, and some potential for appreciation. If you already have one property there, it's doing good, and you have a team established, why not continue a good thing?

    Not saying you shouldn't look elsewhere, but I'd be leaning towards SA if I were you.

    2Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    13y

    I agree with Sharon's article about Memphis but understand there is violence everywhere. Make sure your not buying property in high crime areas. Regardless of the article you would have to visit to understand how truly great it is. Memphis is rated among the best places to own investment property. I guess I am a little biased as I live here, sell property and own several properties myself. Atlanta is another hot market.

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    1Reply
  • Joe Delia
    Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
    13y

    hat high of a rental rate? What is the appreciation potential?

    Metro detroit offers good returns and has been rapidly appreciating. How much higher can we go? Your guess is as good as mine. We fell harder than other areas and are rallying faster than other areas.

    0Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    Hi @Derek Faller,

    Welcome to BiggerPockets!

    You're experiencing a common dilemma. As a large number of markets around the U.S. increase in price, their ability to cash-flow or provide favorable rates of return diminish. We've seen markets that had great rent-to-value ratios less that a year or two ago become less attractive "second choices" for many of our clients (i.e. large part of Phoenix, Dallas, even Las Vegas).

    The good news is there are plenty of markets that provide good cash-flow and rates of return. For example, Indianapolis, Kansas City, Atlanta, San Antonio, to name a few. For some additional ideas and food for thought, you can download my "2013 Housing Market Forecast".

    I see these everyday. If you're looking in the right markets, and I don't mean depressed markets, you can find $250 per door assuming a 25% to 30% down-payment.

    @Sharons article about the crime rate in Memphis is fairly broad and cannot be used to judge an entire city as a potential market to invest in. Every market has it's good and bad neighborhoods. You will always find higher-end, low crime areas as well as lower-end, high crime areas in every market over 100,000.

    Continues success!

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    $250 shouldn't be too hard, Derek. There are quite a few where you can hit that. I personally don't like Memphis because I think there are plenty of markets that hit the same cash flows with a lot higher growth potential. I'm not a fan of renter-heavy markets, contrary to the logic that says renter-heavy would be a good thing. I also don't go for Detroit, even if it is "appreciating". The population has been declining there for way too long for me.

    Chicago has the best cash flows I work with, the Texas cities are always a good bet but their cash flows are a little hindered by higher property taxes but they should still work, Phoenix is a no-go, Atlanta is still good but financing can be tricky unless you have enough cash to make up for a low appraisal (sounds like you do), Charlotte is good, Memphis is good just not my pick, and Indy and KC are always cash flowers but little appreciation potential.

    If I were to buy tomorrow, it would be Chicago, Atlanta, or the TX cities.

    1Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    Whoops, hit "post" too quick...

    One last note, you can definitely find cash flow in a lot of places. You just have to decide what kind of areas you want to invest in. Lower-income areas will always advertise higher returns, but whether those pan out are another story. Have to know your cash flow minimum, but your opinions on other factors as well.

    Good luck!

    1Reply
  • Patricia Franciulli
    Las Vegas, NV · Member since 2012 · 251 posts · 9 votes
    13y

    Go anywhere but Vegas.. Tenants here are hard to deal with. Turn over is high and the rental market is soft. Prices are high.. I see a bubble here coming sooner.

    0Reply
  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    13y

    @Derek Faller I have been wrestling with the same concerns myself. The states I like best atm are Indiana, PA, Texas, Ohio, and MS. I am sure there are opportunities all over but those are my finds. Texas has the best appreciation, but lower return rate, but their market is so strong I think its a good long term bet. It appears Georgia and Arizona and Nevada have increased in price to the point cash flow has suffered. I have not bought out of state yet but plan to by next summer. Please send me a PM if you do well and have any advice.

    1Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y

    @Jerry W.: It's a very common concern. At least you've narrowed down your markets to a few good states. Keep in mind that's still very broad -- you have to take it down to the city level economically, then to the neighborhood level before selecting specific properties.

    Continued success!

    1Reply
  • Jeremiah B.
    Investor · Portland, OR · Member since 2012 · 266 posts · 128 votes
    13y

    We're about 1 month from making our first out of state purchase, and have been considering it for around 10 months.

    The above list certainly lists several cities with cash flow potential, but keep in mind that cashflow will probably not be your only concern. Or, at least it wasn't our only concern.

    Each investor and situation is unique, but some things to consider include:

    1. Historic/Recent Growth
    2. Future Growth
    3. Affluence
    4. Cost of Living
    5. Economic stability and structure
    6. Appreciation
    7. Vacancy Rates
    8. Crime Rates
    9. Current trends with hedge funds and other investors
    10. Availability of house-type that you're targeting (I'm looking for 3+/2+, newer)
    11. Climate (yes - weather)
    12. Schools

    I'm actually going through this process myself - you're welcome to read more in my blog post here. But to save you the 50,000 word post, we are looking in:

    1. Atlanta
    2. Charlotte
    3. Columbus
    4. Memphis
    5. Nashville
    6Reply
  • Derek Faller
    OP
    Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes
    13y

    Thanks for the suggestions, it gives me some more cities to look at. I am planning on getting a few more rentals in Texas because it is doing well for me, but wouldn't mind picking up a few elsewhere also to diversify. I have looked into Atlanta in the past, but Indiana and Memphis are new suggestion that I will look into. I do like places that have potential for good appreciation, but a steady consistent market with good employment rates is more important to me.

    @Ali Boone I do like Chicago, but I think it might be out of my preferred price point. Ideally I am looking at Price points of $150k or less for good middle class SFRs or higher for good multi-unit places. It looked like Chicago prices might be a little higher then that. Is this correct or are their good rental homes there for less then $150k? I don't really want to buy in lower end areas.

    @Jeremiah B. That is a great blog post you got. I didn't see it before. I am definitely looking at all the other factors beside cashflow, and have eliminated a lot of places for various reasons.

    0Reply
  • Matt Mason
    Investor · Los Angeles, CA · Member since 2013 · 231 posts · 260 votes
    13y

    @Derek Faller

    The concerns I would have about Chicago are that it is starting to look like other Midwestern cities with lack of population growth in both the City and Cook County and its high violent crime rate (45 people were shot a few weeks ago in just 48 hours as an example). Of course, the crime issue is highly segregated, so it is a matter of neighborhoods, but you really need to do your homework especially if you are in the city at your price points.

    Finally, the state of Illinois is a complete mess fiscally and the city of Chicago is as well (although not quite as bad as the state). The sales tax is the highest in the US, and they have already raised the income tax quite a bit a few years ago, so I imagine they might look to property taxes next.

    Given that, it may be a good time to get in on a dip in outlook there (as it has always been the jewel in the Midwest and attracted a lot of college grads), but there are challenges.

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    Of all the markets I mentioned, Chicago is the only one that teeters the location lines of 'lower end'. Chicago is unique in that it is very micro-pocketed. The properties I know of there are all south side, which is closer to the bad areas, but these are strategically picked around the bad areas. You won't read great statistics about the areas, but everyone I know who has gone to check them out has ended up buying since they feel comfortable. So no, it's definitely not higher-end Chicago where you can get the returns. But again, it goes back to the lower-end = higher returns. I'm a huge advocate about not buying in low-end areas just for supposed returns because you are likely to not actually see those returns, but I would buy in these areas. If that tells you anything.

    0Reply
  • Joe Delia
    Involved In Real Estate · Rochester Hills, MI · Member since 2010 · 812 posts · 178 votes
    13y

    Everythings great in chicago until you need to get a tenant out. You may end up like @Will Barnard in cali.

    0Reply
  • Account Closed
    Real Estate Investor · Chicago, IL · Member since 2008 · 1k+ posts · 218 votes
    13y

    Very interesting thread. Lots of discussion about what Chicago is like, but none of it from anyone that lives here.

    Chicago has good areas and bad areas. Chicago PROPER (the city itself) has great areas and really scary areas. Yes our crime/murder rate is scary high, but most is kept in certain areas. TO over generalize would be bad.

    Now please note, I said Chicago PROPER, meaning the city itself. The Chicago Metropolitan area (surround suburbs etc) actually has a larger population than the city itself when combined. Much larger.

    If Chicago is scary for you (and yes @Joe Delia is dead on the money about evictions, but it isn't just the city but the COOK county). We call it CROOK County. Anyway, if Chicago is scary, check the surrounding areas. I play in those areas personally, and I live in Chicago Proper.

    1Reply
  • Wendell De Guzman
    Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
    13y

    I totally agree with @Account Closed: over-all Chicago is a good place to invest. Property values are not that expensive, the job market and the economy is stable and therefore there is cashflow and even some potential for appreciation.

    Having said that, as Ryan said there are some bad areas - which is true for many cities. The crucial thing is to really learn the area wherever you invest.

    0Reply
  • Stephen Masek
    Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
    13y

    We're in escrow on a nice one built in 1997 in a great rental neighborhood (jobs, shopping, commuting, ethnically diverse) in Indianapolis. $115,000 and it should rent for $1,200.

    We bought one in Las Vegas at the end of 2011, but the prices there now are way too high compared to the rents. Phoenix is even worse (we should have bought there in 2009...).

    It seems to be a contest between Los Angeles and Chicago to see which will be the next big city to go Chapter 9. Both have massive unfunded pension obligations. Who knows the effect on rental property?

    0Reply
  • Stephen Masek
    Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
    13y
    Originally posted by Ali Boone:
    Of all the markets I mentioned, Chicago is the only one that teeters the location lines of 'lower end'. Chicago is unique in that it is very micro-pocketed. The properties I know of there are all south side, which is closer to the bad areas, but these are strategically picked around the bad areas. You won't read great statistics about the areas, but everyone I know who has gone to check them out has ended up buying since they feel comfortable.

    My wife is Lithuanian. Are some of those good southern Chicago areas the ones with large Lithuanian populations?

    0Reply
  • Erin Weiss
    Charleston, SC · Member since 2011 · 72 posts · 2 votes
    13y

    @Stephen Masek

    where in Indy?

    0Reply
  • Marco Santarelli
    Specialist · Orange County, CA · Member since 2008 · 2k+ posts · 623 votes
    13y
    Originally posted by Stephen Masek:

    It seems to be a contest between Los Angeles and Chicago to see which will be the next big city to go Chapter 9. Both have massive unfunded pension obligations. Who knows the effect on rental property?

    My bet is Los Angeles will file for BK before Chicago only because of the history of political corruption that festers in "Crook" country will end up keeping it alive as long as it possibly can. ;-)

    0Reply
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