All Forum Posts by: Austin Wolff

Quote from @Debra Orringer:

Quote from @Austin Wolff:

Real estate is a hyper-local game. For an extreme example to highlight the point: no matter how much the population in the US declines, there will always be strong demand and low supply for Los Angeles property close to the beach. There will always be great locations to invest in.

 Hey Austin, I don’t know a ton about LA but don’t you think if there are one or two more wildfires people will get frustrated and leave? For instance, we’ve been getting more/worst hurricanes in NY. There are some amazing beach towns in Westchester that people are very slowly not buying in anymore because it’s become a flood zone. 

There’s only so much property in America that’s close to the beach with no humidity and basically no hurricane risk and is within a 15-20 minute drive to world-class restaurants and entertainment. I don’t think class A or class B neighborhoods in Los Angeles will ever have a lack of demand, given the extremely small amount of supply.

At the risk of being socially shunned, I wanted to write a piece helping people identify up and coming neighborhoods, which may be good places for new investors to get their foot in the door in an evermore expensive housing market.

A post on gentrification can’t be written without addressing some of the most popular arguments for or against it in today’s discourse. I am by no means an expert on the topic, nor am I in any group that is adversely affected by gentrification. 

In the spirit of demography, there are plenty of resources for research on the effects of neighborhood revitalization, such as this list on the pros and cons, this study on racial disparities across different gentrifying neighborhoods, and this article on how gentrification can be seen as a visible reaction to neglected neighborhoods finally receiving the investment other neighborhoods have gotten all along (see the images below).

With this disclaimer out of the way, I’d like to bring the focus back to how mom-and-pop investors can identify up-and-coming neighborhoods to invest in, which usually involves purchasing a property that has been neglected in its upkeep, and add value to it (and the surrounding neighborhood) by repairing its deterioration and making the property livable and comfortable for its residents.

What Up-and-Coming Neighborhoods Have In Common

Luckily, a lot of research has already been conducted on this topic. A 2018 paper published by Harvard Business School using Yelp, Zillow, and Census data has mathematically shown something we all inherently know: The number of new Starbucks, grocery stores, cafes, bars, and restaurants do have an impact on house prices or the number of college-educated people living in an area (correlation and impact vary by city and variable).

The converse also appears to be true. According to the study, ‘These results seem compatible with the literature on “food deserts” that documents how poorer people live in areas with fewer options for healthy food.’

To help with identification, here's a list of all new Starbucks that have opened.

Another indicator is the increase in median wages in an area where median rents are at-or-below the median rent for the entire city. This can be found with some elbow grease digging into the U.S. Census data at the census tract level. If anyone wants that kind of deep analysis please let me know; it will take a bit of time and there needs to be enough demand to be worth it.

Anyway, that's pretty much all I have to contribute to the gentrification discussion.

Real estate is a hyper-local game. For an extreme example to highlight the point: no matter how much the population in the US declines, there will always be strong demand and low supply for Los Angeles property close to the beach. There will always be great locations to invest in.

I'm paid to analyze markets. If a market consistently has properties where the monthly rent is 2% of its purchase price, you don't want to be in that market.

I've reached out to Zillow for comment on Los Angeles and San Diego. It doesn't make sense to me that those place would have lower costs on new homes than San Jose, which has the highest in this list. Either they are not taking the cost of land into account, or new construction homes are in areas where the land is actually cheaper to build, therefore pushing price data down.

Zillow has released a nice bar chart revealing places where new construction is actually cheaper than existing homes. 

(You can click on the image to see a bigger version in a new tab.)

Does any of this data surprise any investors?

Idaho Falls, ID (about a 30-min drive from BYU-I) was placed as a Tier 1 small metro by the Milken Institute. In other words, a fantastic market to be in if you can find a house-hack there.

A look at which metro areas may currently be buyer's markets. Click here to be taken to the interactive map.

Still a seller's market in Los Angeles.

Quote from @Sam Cohn:

Great question. If you're open to A–C neighborhoods, I’d personally lean toward A-class multifamily in A locations. While B/C assets can offer some value-add upside, A-class properties in more affluent areas tend to come with lower risk, stronger tenant profiles, and more stable long term returns. Especially in today’s environment. And when it comes to finding those opportunities, the Midwest stands out for a few key reasons.

The Midwest, in particular, deserves attention. It’s kind of the “steady eddy” of U.S. real estate. Not flashy, but rental growth has been remarkably consistent over the past 40 years, even through downturns. The Midwest tends to be less crowded with institutional capital compared to places like Texas, Florida, or the coasts. Which often means less competition, more reasonable pricing, and stronger fundamentals relative to risk, which helps on both the acquisition and exit side.

Here are a few Midwest/Midwest adjacent markets that check those A-class boxes:

1. Indianapolis, IN – Landlord friendly, strong economy, and great fundamentals for Class A in suburban or infill locations. Steady demand from healthcare, logistics, and tech sectors supports high occupancy. Strong occupancy rates and consistent rent growth. Suburban Class A properties perform especially well, with steady demand and less pricing volatility than coastal markets.

2. Kansas City, MO – Growing but still under the radar. You’ll find healthy demand for A-class properties in more affluent pockets, with less overbuilding than some Sunbelt peers. There’s strong demand from renters-by-choice, and stabilized assets typically lease up quickly with minimal concessions.

3. Bentonville, AR – Driven by Walmart HQ and related vendors, the area has strong household incomes and growing demand for high-quality rentals. Class A here is in high demand with relatively low new supply.

4. Pittsburgh, PA – A bit outside the Midwest but shares similar fundamentals. Education, healthcare, and tech help anchor demand. Class A properties in core neighborhoods tend to attract stable, long-term renters, and there’s virtually no new multifamily construction planned in the near term. That supply constraint puts existing A-class assets in a strong position to hold value and capture future rent growth.

If you’re thinking long-term, A-class in these types of markets offers a compelling mix of durability, yield, and lower volatility.

 Great list!