Best Metros for Low Cost & Growth?

Question

Hey folks,

I'm in South Florida, so dealing with pretty crazy insurance costs in general, and thinking of branching into other states.

What are your top 3 markets when considering all of the following factors?

1.Low Property Taxes

2.Low Insurance Costs

3.Good rental demand/price growth.

Jared Trindade · Answer

For some NC reading, I will link some of the cities that Pat mentioned to you related to market data research. Hopefully there is some value in those for you if you decide to look into NC.

https://www.biggerpockets.com/... -Fayetteville

https://www.biggerpockets.com/... -Raleigh

https://www.biggerpockets.com/... -Winston-Salem

https://www.biggerpockets.com/... -Charlotte

If you ever want to chat, let me know!

Hope that is helpful,

Cheers!

Kyle Spearin · Answer

@Tiyu Wang I recommend starting with the 3rd part and working backwards. I've heard really good things about the research triangle in North Carolina in regards to #3. If the area interests you, I recommend talking to locals who have boots on the ground experience and see the trends unfolding in live time.

Bryce Jamison · Answer

What are you doing Pat I don't need more competition in Alamance County!? Just kidding!

Alamance County is great. I'd add that although there are some C/D class, cheaper homes, that do see good cashflow, because of the huge growth of RTP and low inventory in the area there are also A/B class homes that see cashflow and have long term appreciation upside. Those are exactly the homes I'm targeting. If you go on Zillow and look at homes for rent in the area you'll see areas where there might literally be 4 total houses for rent (South Graham, Haw River, West of Whitsett). You'll notice the few houses in this area are renting for much higher than comparable houses just a few miles away in areas like Mebane.

Pat Lulewicz · Answer

North Carolina will great for all 3 of those points, @Tiyu Wang, however your strategy will effect barrier to entry. Charlotte and Raleigh are fantastic long term appreciation growth markets and will continue to see income, price and rent appreciation. It is extremely challenging, however, to see any Y1 cash flow on LTRs. MTR and STR are good strategies, but have to watch different regulation on whether a specific home can or cannot be used for those strategies.

Secondary markets like the Triad (Greenbsoro, Winston Salem and High Point) are fantastic and where I and most of my clients are currently looking for cash flow and continued growth in the market.

Other markets such as Alamance (Burlington, Mebane and Graham) and Fayetteville are solid cashflow markets.

Ace Kaspar · Answer

I would basically ring what @Kyle Spearin mentioned.I live here in the NC area and always happy to talk to people who are looking in the area. Do you own research as well and there are other areas that are growing outside of NC too.

Sam McCormack · Answer

@Tiyu Wang

Cincinnati/Northern KY come to mind?

Landlord friendly, lower property taxes, cash flow, appreciating areas, etc. DM me if you are interested!

John Clevenger · Answer

Think Indianapolis is a good shout for your needs on this. I am obviously biased being born and raised in Indy as well as working here, however I do believe in it's potential. Personally I believe it will see tremendous growth over the next decade and we are at the very start of transition (probably year 2 at this point). Below I've outlined some key points about Indy that may help others see why Indy is so good.

• - Indianapolis has rent rates currently climbing at one of the fastest rates in the nation (+8%)
• 
• - Median sale price is 230k as of Feb 
• - Unemployment rate of 2.2%
• 
• - IU Healthcare (near Northside) announced in January a 4.3B expansion
• - Mayor Joe Hogsett announced in January $80M to Indianapolis parks. And $190M in facility upgrades
• - 16 Tech Innovation District
• A mix-use 60-acre development project with advanced technologies innovation district, including offices, research laboratories, parking garage, housing and retail space plus parks, walking paths and other amenities
• - Elanco (Animal health Leader) building their new $100mil headquarters just south of the zoo
• - Indy Eleven Investing over 1 Billion in the development of their new Eleven Park. A mixed use development project including their new soccer stadium (over 20 acres)

• A mix-use 60-acre development project with advanced technologies innovation district, including offices, research laboratories, parking garage, housing and retail space plus parks, walking paths and other amenities

This list is only just the beginning too... I can share more if needed.

To @Eric Fernwood's point, it is growing and expanding outward from the city as our highway system is terrific an allows you to pretty much be anywhere in under 30 min. However, The homes within the city and I-465 in general, will be impacted by the major development and see underlying saftey and growth from all of the ongoing plans at the core of Indy.

I'm happy to chat through this more privately and see if Indy will be a good fit for your long term goals. Regardless, hope to see you succeed in the coming years! Good luck!

Melissa Nash · Answer

Here are my thoughts..... why are you investing in the property in the first place? Just cashflow alone? Growth? Are you buying a lifestyle asset that you can use to? Or is this just for the cashflow, just math? What is your budget-- don't even look in markets you can't afford- no point. Start there first, then everything else will fall into place.

Eric Fernwood · Answer

Hello Tiyu,

The location is the most critical investment decision, not the property. There are more considerations than just property taxes and insurance costs.

Below are the location criteria I followed, along with the necessary resources. The overall process is to eliminate locations that are unlikely to provide long-term dependable passive income. The cities that remain after eliminating unlikely locations are worth further investigation.

• Metro Population >1M - There are thousands of locations to consider; too many to evaluate. So, start with metro areas with a population >1M. Small towns may rely too much on a single business or market segment. Wikipedia - https://en.wikipedia.org/wiki/...
• Both state and metro populations are increasing - Do not consider investing if the state or metro populations are static or decreasing. Wikipedia - https://en.wikipedia.org/wiki/...
• Low crime - Cities with high crime levels and long-term profitability are incompatible. People and businesses avoid areas with high crime. The result is a lack of job opportunities and investment. Never invest in any city on Neighborhood Scouts' list of the 100 most dangerous US cities. https://www.neighborhoodscout....
• Low operating costs - High operating costs can turn what appears to be a profitable property into a money pit. The two most apparent overhead costs are property taxes and insurance. Look for stats with low taxes and insurance. Insurance - ValuePenguin https://www.valuepenguin.com/a..., Metro Property Taxes - LendingTree https://www.lendingtree.com/ho...
• Limited urban sprawl - Many cities in the US, including Phoenix, Memphis, and Indianapolis, have large open areas surrounding them, enabling unlimited expansion through urban sprawl. This leads to a slow or stagnant increase in property prices and rents in established areas as people move further out and rent or buy newer homes.
• Natural disaster risk - Natural disasters such as tornadoes, hurricanes, and earthquakes destroy communities. While insurance might rebuild your property, the bigger issue is the loss of jobs, local businesses, and essential amenities. Until the community is rebuilt, you will have an empty property, but mortgage payments, taxes, insurance, and other expenses will continue, with no income to offset these costs. The cost of homeowners insurance is the best indicator of the likelihood of a natural disaster in an area. Insurance - ValuePenguin https://www.valuepenguin.com/a...
• Metro rent and price growth rate - To have the additional dollars you need to pay for inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. If historical rental data is unavailable, you can use the rate of appreciation in the area as a proxy, as rents tend to follow prices. However, COVID-19 distorted markets, so only consider data from 2013 to 2020. Zillow research data https://www.zillow.com/researc...
• Landlord/tenant rules and regulations - Some locations have laws that limit how much you can raise rents, making it nearly impossible to keep pace with inflation. Similar regulations can also make it difficult to choose reliable tenants and evict non-performing ones. Don't invest in places with these restrictions. To find out if a place has these laws, talk to local property managers.

The metro areas that remain are the ones to investigate further.

If you follow the above process, your odds of selecting a location that will get you off and keep you off the corporate treadmill are very high.

Best Metros for Low Cost & Growth?

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