What is a smart cash flow investment

Question

I plan on selling a condo in San Diego and doing a 1031 exchange (planning in the next 4-6 months). I am looking at single family (option with turn key) and multi family. The question is what and where. With the interest rate the way it is I can’t make the numbers work even with 25% down.

Bill Gulley · Answer

Welcome! In this market of rising rents for everything attached to dirt and with 25% down, I'm wondering how you are trying to compute cash flow or ROI.

Let me tell you, interest rate are not high, not at all! At 5 to 7.5% investors should still be killing it! Perhaps most here weren't born in the 80's, that was high interest, 12%+ and I still bought RE! Remember, as rates go up prices go down.

The mid-west is the most stable and lags in price behind national trends. In the mid-west, I'd suggest you stay in cities of 250,000 down to 100,000, markets are generally more stable, should have moderate growth. Good luck :)

Malorie Moore · Answer

HI Sophia,

I agree with the other replies as far as investing out of state to get the most bang for your buck. I would suggest TX, AL, AR, OK, and MO. I would love to chat with you more on those markets and give you some stats about each of those!

Happy Investing!

Wale Lawal · Answer

@Sophia Oberlander

I would recommend looking in Houston, Texas.

Surrounding areas such as Katy,
Cypress, Spring, Conroe, Tomball, Pearland are
great places to own rentals.

The rental income growth is steady.

You can be in touch with local real estate
professionals like agents, lenders, and investors to better understand the
current local market.

Best of luck!

Billy Daniel · Answer

You'll likely have to go outside SD.  Another option would be to find something that is "on sale" (ie needs work).  Commercial loans will generally allow you to finance the cost of repairs.

People are going to say the midwest or the south.  I'm in Arkansas and can say its fairly easy to get cash flow with a 25% down payment (outside of NWA).

Ryan Blackstone · Answer

I agree with @Billy Daniel Arkansas is a great place to invest, but you wont find amazing cashflow in Northwest Arkansas unless you "create" it or look off-market. However, you will find appreciation and huge growth for the area. So, it depends on what you are going for.

Mike D'Arrigo · Answer

@Sophia Oberlander even with today's higher interest rates, some of the more affordable Midwest markets still cash flow nicely. However, if you're looking at cash flow alone, you're missing the big picture. No one gets wealthy from just cash flow. Wealth through real estate comes from a combination of cash flow, appreciation, equity through mortgage paydown and tax benefits and comes over time. That's where the real power of real estate is. We're active in Indianapolis, Kansas City, the Quad Cities and parts of OH and still see significant returns. I'm happy to share my thoughts on some of the better cash flow markets if you'd like to connect.

Eliott Elias · Answer

It's recession proof investing. Your primary clientele (military) will always be there and wanting to buy with a VA loan and rent from you. You can find 1% rules and if you really dig deep find BRRRR deals. I have a few under contract i'm willing to assign. Shoot me a DM

Alex Briones · Answer

I am listening, what's so great about Killeen, Tx?

Dan H. · Answer

I disagree with all the posts that indicate cash flow is poor in San Diego.  Historically it has been outstanding for long term holds.

There is a poor relationship between initial cash flow and long term cash flow.  This is not happenstance.  RE markets are efficient.  The prices are based on numerous factors.  Two of the largest is expected appreciation and expected risk.

What do you think happens to cash flow when a property appreciates?  Do you think the rents do not go up?  Historically rents lag property price movements (in both directions).  When prices increase, the rents will increase.  In my San Diego market, the average rent increased over 20% in the last year.  A 20% increase at today's average San Diego rent would amount to a $500/month increase.  Over 20% is the average rent increase, not the highest rent increase (Source ApartmentLists.com).

Neighborhood Scout lists San Diego as a 10 out of 10 for property appreciation this century.

Case Shiller lists San Diego as having the 3rd highest return of all US cities for buy and hold for this century (since 2000).

The reality is San Diego has historically produced outstanding cash flow and outstanding appreciation for long term holds.

In addition, RE investing OOS is full of items that increase risk compared to investing local.

Good luck

What is a smart cash flow investment

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