Best market to BRRRR for appreciation?
Investor · Los Angeles · Member since 2022 · 107 posts · 48 votes
Best market to BRRRR for appreciation?
Most Popular Reply
Alfath AhmedBusiness Member
Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votesQuote from @Travis Andres:
Curious to know what everyone's thoughts are on what the best markets are to try to find a BRRRR property that will appreciate quickest.
Hoping to be able to MTR after rehab to get at least some cashflow.
Thoughts?
Thanks!
Hi Travis, I would take a look at the Columbus market due to the growing economic bases, population growth, and strong appreciation. I just helped 3 clients in the last week close single-family's all within 70-75% ARV.
ReafCo | Ahmed Group 55 Reviews
11 Replies
- Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes3y
You are looking at a bit of a conundrum: high potential for appreciation usually means very low inventory and a competitive market. Milwaukee used to be a great market to BRRRR with tons of old houses in need of rehab, strong cash flow, but only slow appreciation. Listings in bad shape would sit around, finally accepting an offer with a reasonable discount for condition. Perfect for BRRRR.
Now Milwaukee is dealing with a chronic housing shortage, extremely low inventory and with that even very dated houses will not get a meaningful discount. Some desperate first time home buyer will underestimate how much it costs to fix up a house, overestimate how much they can do on their own and pay close to full price. And without a discount, no BRRRR.
At this point I am BRRRRed out; we are buying move in ready properties and let appreciation (and inflation) do it's work.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes3y
Don’t invest in any market for appreciation. If your property cash flows with long-term rents, that is true cash flow. Appreciation should be a cherry on top.
- 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
I've gotta disagree- in my experience, cash flow should be the cherry on top. This is very deal and market specific, but if you are trying to scale, the appreciation and equity is what will get you there. I'm not saying you should buy properties that are cash flow negative, but you can make WAY more money with forcing equity and riding the wave of appreciation than you will on cash flow if you know what you are doing and have excellent market comprehension.
Generally, the markets in the West appreciate pretty solidly, the challenge you will have is finding a market like that where tenants don't rule the roost.
I invest in Idaho- excellent appreciation, high quality tenant base and it's one of the most landlord friendly states in the country.
Best of luck!
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
Quote from @Corby Goade:
I've gotta disagree- in my experience, cash flow should be the cherry on top. This is very deal and market specific, but if you are trying to scale, the appreciation and equity is what will get you there. I'm not saying you should buy properties that are cash flow negative, but you can make WAY more money with forcing equity and riding the wave of appreciation than you will on cash flow if you know what you are doing and have excellent market comprehension.
Generally, the markets in the West appreciate pretty solidly, the challenge you will have is finding a market like that where tenants don't rule the roost.
I invest in Idaho- excellent appreciation, high quality tenant base and it's one of the most landlord friendly states in the country.
Best of luck!
@Corby Goade, I would disagree.
Cash-flow is better than equity for a few reasons.
1. Its tax advantaged with deductions for things like depreciation etc.
2. Its PRESENT money not FUTURE money. Money in your pocket today is worth MORE than money in your pocket in the future because of inflation and the opportunity cost of what else you might do with that money.
3. It is EXPENSIVE to access equity. You either need to refinance which isn't free or you need to sell a property and pay commissions, closing costs, and taxes to get your hands on that equity. Remember, its not how much you make its how much you get to KEEP that really matters!
4. You have NO control over market appreciation and predicting it is fairly speculative.
Conversely with cash-flow you can predict it much better and you can manage (control) things to ensure it cash-flows well. So, although you don't have 100% control, you have SIGNIFICANTLY more control of the cash-flow than you do market appreciation.
- 3yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
Quote from @Kevin Sobilo:
Quote from @Corby Goade:
I've gotta disagree- in my experience, cash flow should be the cherry on top. This is very deal and market specific, but if you are trying to scale, the appreciation and equity is what will get you there. I'm not saying you should buy properties that are cash flow negative, but you can make WAY more money with forcing equity and riding the wave of appreciation than you will on cash flow if you know what you are doing and have excellent market comprehension.
Generally, the markets in the West appreciate pretty solidly, the challenge you will have is finding a market like that where tenants don't rule the roost.
I invest in Idaho- excellent appreciation, high quality tenant base and it's one of the most landlord friendly states in the country.
Best of luck!
@Corby Goade, I would disagree.
Cash-flow is better than equity for a few reasons.
1. Its tax advantaged with deductions for things like depreciation etc.
2. Its PRESENT money not FUTURE money. Money in your pocket today is worth MORE than money in your pocket in the future because of inflation and the opportunity cost of what else you might do with that money.
3. It is EXPENSIVE to access equity. You either need to refinance which isn't free or you need to sell a property and pay commissions, closing costs, and taxes to get your hands on that equity. Remember, its not how much you make its how much you get to KEEP that really matters!
4. You have NO control over market appreciation and predicting it is fairly speculative.
Conversely with cash-flow you can predict it much better and you can manage (control) things to ensure it cash-flows well. So, although you don't have 100% control, you have SIGNIFICANTLY more control of the cash-flow than you do
It's all good, we can agree to disagree. I would argue that cash flow is maybe less predictable than equity.
There will always be risk in any investment in a market regardless of what kind of due diligence you do. That being said, higher cash flow markets are typically much more volatile. Lower quality properties and lower quality tenants,l. Your proforma will fall apart the moment your tenant stops paying rent or you need a new roof.
Even when they perform well right out of the gates, Those higher cost lower cash flow properties Outperform the high casual properties in nearly every situation 5 to 10 years down the road. Much better cash flow plus equity over time.
If you are trying to start with very little cash, It's nearly impossible to scale without forcing equity or riding appreciation.
It's a really difficult concept For new investors, because it's much less scary to that on what your spreadsheet says today rather than 5 years down the road, But almost every time, you will do better if you spend more and focus on Equity and b or better areas.
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes3y
Quote from @Corby Goade:
Quote from @Kevin Sobilo:
Quote from @Corby Goade:
I've gotta disagree- in my experience, cash flow should be the cherry on top. This is very deal and market specific, but if you are trying to scale, the appreciation and equity is what will get you there. I'm not saying you should buy properties that are cash flow negative, but you can make WAY more money with forcing equity and riding the wave of appreciation than you will on cash flow if you know what you are doing and have excellent market comprehension.
Generally, the markets in the West appreciate pretty solidly, the challenge you will have is finding a market like that where tenants don't rule the roost.
I invest in Idaho- excellent appreciation, high quality tenant base and it's one of the most landlord friendly states in the country.
Best of luck!
@Corby Goade, I would disagree.
Cash-flow is better than equity for a few reasons.
1. Its tax advantaged with deductions for things like depreciation etc.
2. Its PRESENT money not FUTURE money. Money in your pocket today is worth MORE than money in your pocket in the future because of inflation and the opportunity cost of what else you might do with that money.
3. It is EXPENSIVE to access equity. You either need to refinance which isn't free or you need to sell a property and pay commissions, closing costs, and taxes to get your hands on that equity. Remember, its not how much you make its how much you get to KEEP that really matters!
4. You have NO control over market appreciation and predicting it is fairly speculative.
Conversely with cash-flow you can predict it much better and you can manage (control) things to ensure it cash-flows well. So, although you don't have 100% control, you have SIGNIFICANTLY more control of the cash-flow than you do
It's all good, we can agree to disagree. I would argue that cash flow is maybe less predictable than equity.
There will always be risk in any investment in a market regardless of what kind of due diligence you do. That being said, higher cash flow markets are typically much more volatile. Lower quality properties and lower quality tenants,l. Your proforma will fall apart the moment your tenant stops paying rent or you need a new roof.
Even when they perform well right out of the gates, Those higher cost lower cash flow properties Outperform the high casual properties in nearly every situation 5 to 10 years down the road. Much better cash flow plus equity over time.
If you are trying to start with very little cash, It's nearly impossible to scale without forcing equity or riding appreciation.
It's a really difficult concept For new investors, because it's much less scary to that on what your spreadsheet says today rather than 5 years down the road, But almost every time, you will do better if you spend more and focus on Equity and b or better areas.
Again, I disagree. Higher cash-flow markets are MORE predictable in part BECAUSE of lower quality tenants!
Low quality tenants are predictable because they don't move up and become homeowners and because there are not other good options when times are tough. So, the income is DURABLE! Also, a low quality tenant will qualify for rental assistance programs when they have trouble.
On the flip side a higher quality tenant will move up to become an owner... OR conversely when times get tough they will downsize! Imagine being invested in the nicer rentals your talking about during a serious downturn. Your rent prices will FALL and vacancy will increase, NOT SO for the lower end rentals!
Also, keep in mind I only said "market appreciation". I did not talk about "forced appreciation". I have no issue with forced appreciation.
During certain market cycles and in certain markets, of course you are right that equity can give great returns, but also periodically people just get WIPED OUT! So, 5 years is pointless. Look over 30-40 years and make sure to factor in a couple periods of going bankrupt as well as other less substantial periods of loss into the financial equation and all the while cash-flow chugging along and equity happening at a more gradual rate. - 3yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
good question! I think very tough to answer. if i knew where you could get guaranteed appreciation i'd be going there!
instead, I strongly believe that folks should invest in markets in which they can be hands-on and hold, rather than based on some formula that tells you to invest in Alabama when you're in California or in Ohio when you're in Maine.
but that's just me.
and I get that LA proper might be too expensive but there are lots of other markets 2-4 hours away.
- 3yJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Travis Andres:
Curious to know what everyone's thoughts are on what the best markets are to try to find a BRRRR property that will appreciate quickest.
Hoping to be able to MTR after rehab to get at least some cashflow.
Thoughts?
Thanks!
Hi Travis, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!
Jimmy Lieu, Red 1 Realty4.9120 Reviews - Investor · Los Angeles · Member since 2022 · 107 posts · 48 votes3yThanks Jimmy! Columbus is definitely a market we’re considering, will definitely reach out if we want to start taking a look there.
Quote from @Jimmy Lieu:
Quote from @Travis Andres:
Curious to know what everyone's thoughts are on what the best markets are to try to find a BRRRR property that will appreciate quickest.
Hoping to be able to MTR after rehab to get at least some cashflow.
Thoughts?
Thanks!
Hi Travis, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!
btw, what are the winters like there? Rough? - 3yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Travis Andres:
Thanks Jimmy! Columbus is definitely a market we’re considering, will definitely reach out if we want to start taking a look there.Quote from @Jimmy Lieu:
Quote from @Travis Andres:
Curious to know what everyone's thoughts are on what the best markets are to try to find a BRRRR property that will appreciate quickest.
Hoping to be able to MTR after rehab to get at least some cashflow.
Thoughts?
Thanks!
Hi Travis, I personally love Columbus Ohio and as someone who works with a lot of out of state investors - there's so many catalysts for why you should invest here. Specifically, there's job growth (Intel, Honda, Amazon, Nationwide, etc) and the population is growing (unlike Cleveland or Cincy). I really see Columbus Ohio as an extremely safe bet for the next 10-20 years. Plus, there's still so many positive cash flowing and 1% deals here in Columbus Ohio. As a local investor and agent here in Columbus, let me know if you have any questions or want to connect!
btw, what are the winters like there? Rough?They are not that bad. I am from CT and the winters were way worse there
- 3yAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Travis Andres:
Curious to know what everyone's thoughts are on what the best markets are to try to find a BRRRR property that will appreciate quickest.
Hoping to be able to MTR after rehab to get at least some cashflow.
Thoughts?
Thanks!
Hi Travis, I would take a look at the Columbus market due to the growing economic bases, population growth, and strong appreciation. I just helped 3 clients in the last week close single-family's all within 70-75% ARV.
ReafCo | Ahmed Group 55 Reviews
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