Investor · Baltimore, MD · Member since 2014 · 163 posts · 51 votes
What is everyone's view on rentals in big cities vs out in the suburbs? Which would present more opportunites or would be easier to grow? What are the advantages/disadvantages of each.
Real Estate Investor · Springfield, IL · Member since 2015 · 22 posts · 9 votes
11y
I think the choice depends on what your financial situation and goals are. Buying in a city center tends to be more expensive. The upside however is a larger pool of tenants and the potential for huge appreciation (depending on the local market). There are downsides to renting in the city but are mostly dependant on the local laws and economy.
The suburbs can be a huge plus as well. You can purchase more properties for the same ammount of money (thus limiting your risk somewhat). This is a double edges sword as rents are generally lower so you have to manage more tenants to get the same profits. The pool of possible tenants will be smaller in the suburbs. This is another double edged sword. You can pick better neighborhoods in the burbs that will attract better tenants. You may also have longer periods of vacancy.
So really both choices are great options for investment. It mostly depends on your preferences and what you are willing to spend. I would advise you stay clear of bad neighborhoods and ghettos even if the potential returns look great. There is money to be made in those areas but it takes a seasoned and thick skinned investor to be successful in those areas. I plan someday to invest in low income areas (there are too many slum lords who mistreat people in my area) but not until I am completely ready and educated.
Herndon, VA · Member since 2014 · 1k+ posts · 324 votes
11y
As a very broad generalization I think suburbs will give you more appreciation and cities more cash flow. I think one driver(of many) of this is that land appreciates but does not generally increase rents.
Chapel Hill, NC · Member since 2015 · 74 posts · 29 votes
11y
It's going to be highly market specific. Our MFH properties in NYC generate fairly good cash flow and over the past 5 years have appreciated *significantly* (75-100%) - but that's a function of the time and the neighborhood.
By comparison, our MFH properties in the suburbs outside Raleigh, NC are not likely to ever appreciate in any meaningful way, so it's purely about cashflow (which is also pretty good...)
Long-winded way of saying it's not a just comparison to make until you're at the point of comparing specific markets to each other.
Real Estate Investor · Springfield, IL · Member since 2015 · 22 posts · 9 votes
11y
I think the choice depends on what your financial situation and goals are. Buying in a city center tends to be more expensive. The upside however is a larger pool of tenants and the potential for huge appreciation (depending on the local market). There are downsides to renting in the city but are mostly dependant on the local laws and economy.
The suburbs can be a huge plus as well. You can purchase more properties for the same ammount of money (thus limiting your risk somewhat). This is a double edges sword as rents are generally lower so you have to manage more tenants to get the same profits. The pool of possible tenants will be smaller in the suburbs. This is another double edged sword. You can pick better neighborhoods in the burbs that will attract better tenants. You may also have longer periods of vacancy.
So really both choices are great options for investment. It mostly depends on your preferences and what you are willing to spend. I would advise you stay clear of bad neighborhoods and ghettos even if the potential returns look great. There is money to be made in those areas but it takes a seasoned and thick skinned investor to be successful in those areas. I plan someday to invest in low income areas (there are too many slum lords who mistreat people in my area) but not until I am completely ready and educated.
Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
11y
I also think it's easier to see trends of appreciation and development in the city verses the suburbs. At least in my market I know certain areas that are becoming drastically more expensive due to the area developing. Land availability is what causes appreciation in the city more-so than suburbs. If land is limited builders have to build tighter (townhomes/condors) and more upscale to get the greatest returns which drives the overall market to be more expensive. Whereas suburbs have so much land builders can build standard builder grade houses and make money because land is cheap comparatively. This doesn't even factor that my generation wants to live in the city so demand will increase as we decide to buy.
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
11y
Yeah it depends on your market. In Jacksonville over the last few years the urban core has appreciated tremendously (because it started at such a low point) through gentrification and a general interest in urban living. That said, Jax is a very different animal as "urban core" isn't very urban compared to most cities across the country and also, in Florida, land is cheap so suburban development is plentiful.
Our general model for investing at this moment is primarily urban core because there's limited supply for the folks who want to live there, whereas there are tons and tons of new construction all over the Jax suburbs...making it a bit more of a gamble imo.
Honolulu, HI · Member since 2015 · 214 posts · 49 votes
11y
I think it comes down to what you can afford to buy. Bottom line.
Obviously more potential pool of tenants, faster appreciation, and higher rents in the city, but that's all negated if the property is over one's budget.
Here's another thought. Try to find the "burb" that's possibly the next "city." Here in the Silicon Valley, unless you're old money or Mark Zuckerberg, its very difficult without mucho capitol. But now that the dot.commers are growing again, the burbs are beginning to become their own cities.
What is everyone's view on rentals in big cities vs out in the suburbs? Which would present more opportunites or would be easier to grow? What are the advantages/disadvantages of each.
Thanks in advance.
The concern here may be which area is likely to have a stronger demand for rental housing and where are you likely to experience a higher vacancy rate at? The available inventory of rental units in both areas, growth rate in rental and housing prices in the specific areas, are also factors to look into.
Investor · Bowie, MD · Member since 2015 · 53 posts · 16 votes
11y
I believe it really depends on your market. I prefer to invest in DC because of the rapid appreciation caused by so much new development. But again it really all depends on your market.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
11y
This is all market specific. It may be easier to track trends in cities because the volume of properties (and sales data) is higher than suburbs due to the higher concentration of parcels.
Bedford, NH · Member since 2012 · 2k+ posts · 1k+ votes
11y
Within a decade, two at most, self-driving cars will be a reality.
There is already much fretting about that fact in New Urbanist circles. How it will cause sprawl, etc.
I think that fretting is justified (assuming you buy into the New Urbanist worldview.) Self-driving cars are a game changer, that will lead to even greater suburbanization.
Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
11y
Like the others have said, the question is really market-specific since you'll find income/appreciation on both sides, or on one or the other, depending on the area. The value of either comes down to your strategy and goals. It sounds like you're just starting out, so spend some time researching/reading about different tactics and figure out what interests you. That'll point you to your market/niche most reliably since everyone has their own answers, but you seem to be in the process of finding your own.
What is everyone's view on rentals in big cities vs out in the suburbs? Which would present more opportunites or would be easier to grow? What are the advantages/disadvantages of each.
Thanks in advance.
It largely depends on what city we are talking about. For example the city limits of Kansas City, Missouri is nearly 350 square miles and in 4 different counties and 13 different school districts. There is everything from urban, suburban, and even rural farmland in the city limits.