what state is worthy investing?

Market Trends & Data
3yFollow

what state is worthy investing?

Tom Hall
Member since 2023 · 29 posts · 34 votes

How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...

5Reply
24 views

Most Popular Reply

Eric FernwoodBusiness Member
Realtor · Las Vegas, NV · Member since 2014 · 992 posts · 1k+ votes
3y

Hello @Tom Hall,

You will not buy in a state. You buy in a specific city. So you want to select the city.

Fortunately, there is a straightforward process for selecting a city that generates reliable passive income. But what exactly is a reliable passive income? A reliable passive income meets three requirements:

  • Inflation compensating: Rental income increases faster than inflation, compensating for rising prices. If your rental income does not keep pace with inflation, your financial freedom will be short-lived.
  • Persistent income: Your income will last, you and your spouse won't outlive it.
  • Reliable income: Your income continues even in difficult economic times.

There are too many cities to evaluate so I recommend a different approach. Start with an initial set of candidate cities and then eliminate ones that fail any of the additional requirements.

  • Start with metros with a population greater than 1M**.** Small towns may rely too much on a single business or market segment. Wikipedia

  • Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia

  • Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.

  • Inflation compensating - Every time you go to the store, the same basket of goods costs more and more dollars. In order to have the additional dollars needed to pay inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents tend to lag behind prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research

  • Low disaster risk - Natural disasters, such as tornadoes, can destroy entire communities, including jobs, shopping, and housing. If a tenant loses their home, they will immediately move to a new location with jobs and a place to live, instead of waiting one year or more for the property to be rebuilt. Even if your insurance covers the cost of rebuilding, it may be difficult to find new tenants because people have already moved away. Communities hit by natural disasters may take years or never fully recover. Meanwhile, your expenses, such as mortgage, taxes, insurance, and maintenance, will continue. To avoid this, choose a location with low-cost homeowners' insurance, which indicates a lower risk of natural disasters. Insurance - ValuePenguin

  • Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.

  • Low operating cost - It’s not how much you gross, it's how much you net. You must consider all major recurring costs when selecting an investment location. As an example, below is a comparison of operating costs in Florida, Texas, and Nevada. (Remember that these are state averages, and individual cities may impose additional taxes.)

Information sources:

To show the impact of taxes and insurance I compared overhead costs on a $400,000 property in the three states.

What does this mean to you as an investor? A property with lower cash flow in a city with lower overhead costs may generate a higher net cash flow than a property with higher cash flow in a city with higher overhead costs.

Tom, this is your financial future. Do your own due diligence based on facts; do not bet your future on someone else's opinion.

[email protected]702-358-8884
FERNWOOD Team, KW VIP Realty520 Reviews
WebsiteView Page
10Reply
See this reply in the discussion

25 Replies

Jump to latestLatest
  • Kerry Noble JrPro Member
    Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    its all relative but check out central IN

    1Reply
  • Benjamin AakerPro Member
    Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes
    3y

    Hey Tom, welcome to BP! A lot of that is luck and not foresight. It's easy to look at appreciation that has gone on over the past few decades and most places look like a great buy. Buying real estate is like planting a tree, the best time to do it is 30 years ago. If you can't do that, then buy today. Make sure you have your criteria nailed down and know what value you can purchase. The location is less important. 

    7Reply
  • Brandon P.
    Lakeland, FL · Member since 2018 · 242 posts · 148 votes
    3y
    Quote from @Tom Hall:

    How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...

    I would agree with @Benjamin Aaker, the best thing to do is to ultimately get in the game and off the sideline, in 20-30 years people will be saying to you, "you were smart to buy that place..." 

    1Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y

    Post like these will get you a lot of Realtors saying their market is the best. Take it with a grain of salt.

    When I decided to move money assets out of California, I looked at the following:

    1. Landlord Friendly States

    2. Price point I felt comfortable in

    3. Went to HowMoneyWalks.org and pick counties within the state where people were moving to.

    4. Looked at cities with a population of at least 100,000. I wanted to make sure there was a big enough pool of tenants.

    Hope this helps!

    9Reply
  • Emily Holbrook
    Investor · Cranston, RI · Member since 2023 · 34 posts · 31 votes
    3y

    3. Went to HowMoneyWalks.org and pick counties within the state where people were moving to.

     Hi @Rick Albert - Should this be HowMoneyWalks.com? I'm on that site now and clicked on "explore the data" and it's a wealth of information!

    3Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y
    Quote from @Emily Holbrook:

    3. Went to HowMoneyWalks.org and pick counties within the state where people were moving to.

     Hi @Rick Albert - Should this be HowMoneyWalks.com? I'm on that site now and clicked on "explore the data" and it's a wealth of information!


     You are right, good catch!

    0Reply
  • Emily Holbrook
    Investor · Cranston, RI · Member since 2023 · 34 posts · 31 votes
    3y

    @Rick Albert It seems like they aren't updating stories on that site any more (last was 2019 it looks like). The data being used is from 2021. Do you know if that's the most recent data available?

    0Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 992 posts · 1k+ votes
    3y

    Hello @Tom Hall,

    You will not buy in a state. You buy in a specific city. So you want to select the city.

    Fortunately, there is a straightforward process for selecting a city that generates reliable passive income. But what exactly is a reliable passive income? A reliable passive income meets three requirements:

    • Inflation compensating: Rental income increases faster than inflation, compensating for rising prices. If your rental income does not keep pace with inflation, your financial freedom will be short-lived.
    • Persistent income: Your income will last, you and your spouse won't outlive it.
    • Reliable income: Your income continues even in difficult economic times.

    There are too many cities to evaluate so I recommend a different approach. Start with an initial set of candidate cities and then eliminate ones that fail any of the additional requirements.

    • Start with metros with a population greater than 1M**.** Small towns may rely too much on a single business or market segment. Wikipedia

    • Both state and metro populations are increasing. Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia

    • Low crime - High crime and long-term appreciation and rent growth are mutually exclusive. Do not invest in any city on Neighborhood Scouts’ list of the 100 most dangerous US cities.

    • Inflation compensating - Every time you go to the store, the same basket of goods costs more and more dollars. In order to have the additional dollars needed to pay inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents tend to lag behind prices, so you can use the appreciation rate if you do not have historical rental data. Zillow Research

    • Low disaster risk - Natural disasters, such as tornadoes, can destroy entire communities, including jobs, shopping, and housing. If a tenant loses their home, they will immediately move to a new location with jobs and a place to live, instead of waiting one year or more for the property to be rebuilt. Even if your insurance covers the cost of rebuilding, it may be difficult to find new tenants because people have already moved away. Communities hit by natural disasters may take years or never fully recover. Meanwhile, your expenses, such as mortgage, taxes, insurance, and maintenance, will continue. To avoid this, choose a location with low-cost homeowners' insurance, which indicates a lower risk of natural disasters. Insurance - ValuePenguin

    • Rent control - Some states and metro areas have implemented various kinds of rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control.

    • Low operating cost - It’s not how much you gross, it's how much you net. You must consider all major recurring costs when selecting an investment location. As an example, below is a comparison of operating costs in Florida, Texas, and Nevada. (Remember that these are state averages, and individual cities may impose additional taxes.)

    Information sources:

    To show the impact of taxes and insurance I compared overhead costs on a $400,000 property in the three states.

    What does this mean to you as an investor? A property with lower cash flow in a city with lower overhead costs may generate a higher net cash flow than a property with higher cash flow in a city with higher overhead costs.

    Tom, this is your financial future. Do your own due diligence based on facts; do not bet your future on someone else's opinion.

    [email protected]702-358-8884
    FERNWOOD Team, KW VIP Realty520 Reviews
    WebsiteView Page
    10Reply
  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    3y
    Quote from @Emily Holbrook:

    @Rick Albert It seems like they aren't updating stories on that site any more (last was 2019 it looks like). The data being used is from 2021. Do you know if that's the most recent data available?


     That is the latest so far but I would imagine it is fairly accurate. You can also search specific cities from there and see population growth. I wouldn't want to invest in a city with a declining population (like SF).

    2Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    3y

    @Tom Hall the best place to invest in near you. The better you know your market the better you can find and evalutate deals. The easiest markets to get to know, are close enough to drive to. 

    It is a lot easier to find what is a good deal now then to pridict what might look like a good buy in 5 years. 

    4Reply
  • Emily Holbrook
    Investor · Cranston, RI · Member since 2023 · 34 posts · 31 votes
    3y

    Thanks, @Rick Albert! Great source of data. 

    1Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    3y

    @Tom Hall Property Taxes are one of the first things I look at when I consider a property. In my area for example if you could still find one a $100K house could have taxes of $1700 or it could have taxes of $3800. And like all states we do have a system to fight your taxes but for the most part the local towns have spent a LOT of money and time over the past 10 years making sure that existing building measurements and building materials inside homes are accurate so there’s really not much wiggle room to fight your taxes. Our towns are small and our operating budgets don’t fluctuate like larger towns do so it’s really not likely that your taxes are going up more than $2-300 any given year.

    My family on the other hand lives in two larger cities in Texas. And I say avoid Texas to have property in. For the past 5-7 years in both cities they have raised their operating budgets by hundreds of millions of dollars and increased the tax assessments on my relatives personal homes and rental portfolios by an average of 50% year over year. This is leading to anywhere from $1500-7000 in tax increases every year depending on the property. It’s just not worth investing in a place like this where you struggle to cash flow $200 per month and then your taxes increase $175 per month.

    2Reply
  • Sam YinPro Member
    Los Angeles, CA · Member since 2021 · 583 posts · 738 votes
    3y

    @Tom Hall

    I will agree with @Ned Carey. The areas next to you will be best. You can do all the research in the world, but if you can't see, touch, and feel it often, you have less little knowledge and control over how to maximize your investment. You can lucky, some do, but you can lose bug time, which many do but they just dont talk about it.

    Basically, the best place is everywhere. Your strategy is the key to your decision. If you are the type that do not want hands on or to run into tenants, then invest far away and let others manage it.

    3Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    3y

    @Tom Hall

    You need to narrow down to Cities in a State you are looking to invest.

    Houston, Columbus, San Antonio, Dallas, Kansas City are few cities you can look into.

    Goodluck

    [email protected]832-776-9582Podcast Guest on Show #469
    NETWORTH BUILDERS5236 Reviews
    WebsiteView Page
    3Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    3y
    Quote from @Tom Hall:

    How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...

    Hi Tom, 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!

    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
    WebsiteView Page
    2Reply
  • Anthony L Amos Jr
    Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes
    3y
    Quote from @Tom Hall:

    How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...


     Columbus, OH is looking pretty good. Population growth, job growth, construction growth, low unemployment, etc. 

    1Reply
  • Bruce Lynn
    Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
    3y

    #1...look at population growth.

    #2...look at job growth.

    #3....look at affordability.

    #4....look at what you know....if you don't know it, learn it, study it.

    #5....Take a WAG 

    3Reply
  • Account Closed
    Columbus, OH · Member since 2023 · 427 posts · 254 votes
    3y
    Quote from @Rick Albert:

    Post like these will get you a lot of Realtors saying their market is the best. Take it with a grain of salt.

    When I decided to move money assets out of California, I looked at the following:

    1. Landlord Friendly States

    2. Price point I felt comfortable in

    3. Went to HowMoneyWalks.org and pick counties within the state where people were moving to.

    4. Looked at cities with a population of at least 100,000. I wanted to make sure there was a big enough pool of tenants.

    Hope this helps!

    This is a good criteria. GENERALLY speaking, a lot of midwest states check these boxes. Ohio satisfies this a lot, Columbus less affordable and more appreciation, Cleveland still very affordable, with strong cashflow and minimal population/job growth. 
    0Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 992 posts · 1k+ votes
    3y
    Quote from @Wale Lawal:

    @Tom Hall

    You need to narrow down to Cities in a State you are looking to invest.

    Houston, Columbus, San Antonio, Dallas, Kansas City are few cities you can look into.

    Goodluck

    Hello @Wale Lawal,

    I recommend selecting an investment location based on your financial goals, rather than on others’ opinions. To achieve financial freedom, you need a passive income that meets three requirements.

    • Inflation compensating: Rental income increases faster than inflation, compensating for rising prices.
    • Persistent income: Your income will last, ensuring that you and your spouse won't outlive it.
    • Reliable income: Your income continues even in difficult economic times.

    All three requirements depend on the location.

    What are some of the characteristics of a location that will meet the above requirements?

    • A metro area population greater than 1M**.** Small towns may rely too much on a single business or market segment.
    • Both state and metro populations are increasing.
    • Low crime - High crime and long-term appreciation and rent growth are mutually exclusive.
    • Rent control - Never invest in a location with rent control or similar anti-landlord regulations.
    • Low operating cost - Investors often overlook operating costs when selecting an investment location, so below is an example to illustrate the difference in location costs.
    • Rents keep pace with inflation. Unless rents keep pace with inflation, your financial independence will be short-lived

    Below is a comparison of operating costs for Texas, Ohio, Kansas, and Nevada.

    Sources:

    To put the overhead costs into perspective, here is a comparison of the estimated annual operating costs for a $400,000 property. I did not include state income taxes in this example.

    What does this mean to you as an investor? To have the same net cash flow in Texas as a property in Nevada, the Texas property must generate a $6,192 higher cash flow ($9,736 - $3,544) than a similar property in Nevada.

    I hope this helps,

    …Eric

    [email protected]702-358-8884
    FERNWOOD Team, KW VIP Realty520 Reviews
    WebsiteView Page
    1Reply
  • Eric FernwoodBusiness Member
    Realtor · Las Vegas, NV · Member since 2014 · 992 posts · 1k+ votes
    3y

    Hello @Tom Hall,

    I disagree with the notion that the best place to start investing in real estate is where you live. The ultimate goal of real estate investing is to achieve sustained financial freedom, which requires a passive income that meets three key requirements:

    • Inflation compensating: Rental income increases faster than inflation, compensating for rising prices.
    • Persistent income: Your income will last, ensuring that you and your spouse won't outlive it.
    • Reliable income: Your income continues even in difficult economic times.

    All three requirements depend on the location. The odds of anyone already living in a location that meets all the requirements are low. And, if you make a purchase in a location that does not meet all the passive income requirements, your time spent being financially independent will be short-lived. Why? Inflation.

    Suppose every time you go to the grocery store, you buy the same groceries. Today, these groceries cost $100. Additionally, I will assume that you plan to hold the property for the remainder of your life, which is at least 30 years. Suppose rents in the location only rise 2% per year and inflation is 5%. What happens to your ability to buy these same groceries over 30 years? I created the following table to demonstrate the decrease in the amount of groceries you can purchase in 5-year intervals.

    As you can see, each year you have to reduce your grocery purchases by 3% (5% inflation - 2% increase in rent). In just 10 years, $100 will only be worth 74% of what it can buy today. This is why I said that if you do not invest in a city where rents keep pace with inflation, your financial independence will only last as long as you can continually reduce your standard of living.

    Another consideration is knowing what, where, and how to buy a property. Everything you learn in seminars, books, podcasts, or websites is general knowledge. Valuable, but nothing is applicable to any specific location. You need hyperlocal knowledge, years of experience, and access to the right resources. The only source for this is an experienced local investment team. Working with an experienced investment team is not only free in most cases, but also saves you time, money, and risk. Plus, you will learn from experts how to invest in real estate the right way for the specific location.

    Does remote investing work? We’ve delivered over 480 reliable passive income properties to over 180 clients, worldwide. I believe only 8 clients were local. All the rest lived in other states or countries. And, we know remote investing works because we have >90% repeat business rates.

    In summary, live where you like but invest where you can make money.

    “Live where you like but invest where you can make money.”

    [email protected]702-358-8884
    FERNWOOD Team, KW VIP Realty520 Reviews
    WebsiteView Page
    4Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    3y
    Quote from @Tom Hall:

    How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...


     Ohio. Cincinnati, Cleveland, Columbus. Each has their own personality. Cleveland, cash flow. Columbus, appreciation. Cincinnati, a mix of the 2. Let me know how else I can help if you have any questions!

    [email protected]859-443-4952
    Sam McCormack Realtor
    View Page
    1Reply
  • Jake AndronicoBusiness Member
    Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
    3y
    Quote from @Tom Hall:

    How to figure it out what state is worthy investing? i know it is a board question, what I mean is look at Brooklyn NY people bought houses 15-20 years ago dirt cheap and now they are millionerds or Jersey city NJ people used to avoid it, now the value has increased significantly. How to predict what's gonna be next Brooklyn Hoboken ...

    There are investors making money in every market. 

    Single Family Homes is the largest asset class in the nation. 

    I think Rick Albert has great advice. 

    I would add, WHY do you want to invest? What does YOUR life look like and what do you need to feel financially free? 

    For some people it's $5k per month, for some it's $50k, 500k, etc. 

    It's much easier to work backwards from your end point. Don't get caught up in what other people are doing, but REALLY think about it for yourself and YOUR life. 

    Has helped me tremendously. I chose Reno, NV because of the exact reasons Rick was saying. 

    415-233-1796
    1Reply
  • Zachary Ware
    Member since 2022 · 405 posts · 455 votes
    3y

    I think it really boils down to the growth and stability of the state. Below are 3 influential factors. 

    1. Demographics: States experiencing population growth present excellent investment opportunity and is likely going to lead to property appreciation. Growing populations drive demand for housing, both rental properties and homeownership. 

    2. Economic Growth: States with strong and diversified economies, low unemployment rates, and historical stability tend to be more attractive for real estate investment. Economic growth and stability create a positive environment for job opportunities, population growth, and increased demand for housing. Again, this leads to an appreciation in property value and rental rates. 

    3. State Policy: States with pro-business policies and landlord-friendly laws are going to be favorable in terms of the investment process, protection of property rights, and efficient legal courses for eviction. A supportive regulatory environment will encourage investors and non-investors to enter the market. 

    1Reply
  • Charles Landon
    Realtor · Las Vegas NV · Member since 2023 · 2 posts · 1 vote
    3y

    Las Vegas NV 

    2 Movie Studio's relocating here.

    Oakland A's, Raiders, Knights, and soon NBA 

    F1 committed to 10 years 2 annual NASCAR races

    Stats about Vegas.

    • #6: Markets with the most employment growth projected for the next 5 years
    • #10: Markets with a high proportion of residents who rent their homes
    • #14: Markets with the most population growth projected for the next 5 years
    • #15: Markets with the most household growth projected for the next 5 years
    • #17: Markets where renting is more affordable than owning a home
    • #19: Markets with the most employment growth in 2022
    • Check out the Methodology section for details on each of these rankings.
    2Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free