5 Reasons the Midwest is Hands Down the Best Place to Invest

by | BiggerPockets.com

Let’s face it. It is tough living in a big city. It is no secret that life in a big city is seriously expensive. With ever-climbing costs, the situation just keeps getting harder. To top it all off, there’s the the skyrocketing costs of real estate! It’s just not easy to find an ideal spot worth investing in. Soaring prices, bad neighborhoods, and an overcrowded market are all big reasons so many would-be investors simply don’t ever get to it.

Everyone knows what happens when demand is high: Prices rise.

So, do you still want to follow the crowd and call a tiny patch of land with a tiny set of rooms your own? If so, then invest in the West Coast and East Coast. Investing there may be one of the stupidest things you can do right now.

Now, you might be thinking, why on earth is investing on the West and East Coast such a bad idea? Well, it’s because huge hedge funds have raised billions of dollars and bought tons of available properties. The first ones they bought were the best deals. There are absolutely no deals left, and the few available are usually not even worth the sweat. Right now, you would be paying top dollar and getting a crappy ROI to boot. But hey, you tell me. How does a $300,000-$500,000 single family home that rents for between $1,200-$1,500 per month sound? Does that seem like a good deal to you? Let me answer that for you: not at all! These are ridiculous and lousy investments in my opinion. I would rather stay in bed sleeping than wreck my balance sheet buying properties like this.

Why All Investors Should Consider the Midwest

Now, if you are someone who refuses to be a follower, I might have some awesome news for you. Think Midwest. Yes, you heard me. The Midwest is where all the real estate action is. Wake up and smell the roses. City dwellers won’t even believe how far their money can go in the Midwestern states. Here, you’ll end up spending almost one-fifth of what you’ll shell out on real estate in any area on the East or West Coasts.

Yes, life in the Midwestern region is different. Yes, it’s less crowded there and a lot quieter, but isn’t it better to have more space, more conveniences, and a stunning piece of real estate at knock-out prices? Well, many people with families would argue that it is indeed better to live there than anywhere else. With top-rated schools, the possibility for a high-end lifestyle, and effortless connectivity all finding their way to these locations, there isn’t much to complain about.

Related: 28 Smart Questions to Ask a Broker When Investigating Out-of-State Markets

The Midwestern region is known for its scenic natural vistas, which are virtually non-existent in big cities, thanks to rapid urbanization. Most Midwestern areas offer an incredible lifestyle at extremely lucrative prices. So what is the catch, you ask? Well, there isn’t any catch. The cost of living here is much more reasonable than in most big cities. This means people get to save way more than they could ever manage in the big city! Comparatively an under-explored market, the Midwest has potential beyond compare!

Why should you care as an investor? Because these Midwestern families are your future rentals. There’s such a clear demand for rental properties in the Midwest.

5 Reasons to Consider Midwest Investments

But there’s more. When was the last time you felt like a kid in a candy store? With deals so sweet you will feel like a kid again, the Midwest is sure to bring back some great feelings. Why? Properties are available between $50,000-$70,000. In addition, many of these $50,000-$70,000 properties will bring in a rent of $700-$1,000 per month. Now, I don’t know how good your math is, but this gives you a ridiculously high ROI. Many of these houses could be found in solid B areas! You can think of the Midwest as a hidden gold mine waiting to be explored. In many parts of the Midwest, a mere $1 million will buy you a stunning mansion with acres of open space surrounding it. You might even get a lake-facing property, or one with a huge pool and a car collector’s garage!

Let’s face it — life is too short to be spending your time in cramped spaces. Many people feel that way, and that’s why the Midwest is such a success for families. Of course, living in a place that doesn’t resemble a chicken coop is a big plus as well.

Take advantage of the low cost of living and low-priced properties. Invest in properties that give you a perfect ROI and do not burn a hole in your pocket. And there ain’t any place like the Midwest to do that! Here are five things that we absolutely love about the Midwest:

  1. It is so well contained and life is so much simpler. Its unspoiled solitude is both captivating and oh-so invigorating. Translation? Happy tenants. There’s no big city pressure in the Midwest; everything is just nice.
  2. Low cost living! An affordable lifestyle with all possible luxuries to go with it is never a distant dream here. That means more cash for rent. It also explains, in part, why rent is relatively high here. It also means that maintenance may be cheaper as well. Don’t forget, especially if you’re living on the East or West Coasts, your hard-earned cash simply has more milage in the Midwest.
  3. While big cities might be known for neon lights and crazy traffic, the Midwest is known for its serene outdoors and calming silence. Compared to busy city life, the Midwest is like an oasis. There sure are some really beautiful locations. It’s also perfect for the average family: Great family trips assured.
  4. The Midwest might not be the center of a bustling universe, but there’s still a lot of activity here — economically speaking, that is. There are few financial headquarters, many factories, and an overall less-corporate environment. There are loads of good blue-collar workers, jobs, and job stability.
  5. There’s a notable lack of pretension. Why is this important? Well, in terms of the maintenance and amenities you need to provide for a mid-class home, it makes a huge difference. People’s expectations are usually a bit lower, and that means easier tenants. It’s not a huge difference from the Coasts, but it’s still noticeable to investors.

Now, those of you who know me know that when I speak about good investment opportunities, I never talk about the appreciation of a property. Right now, the East and West Coasts have some decently appreciating real estate. The thing with appreciation, however, is that it’s basically anyone’s guess as to where it’s going. Many people buy an expensive property and hope that it increases in value in a record amount of time. You might call it investing, but I call it gambling. You know, all I care about is a good cash flow from properties. If you think about it, that’s all that matters. And it’s exactly what the Midwest has to offer. Don’t ask me about where the properties are going in terms of value because I simply don’t care.

Add in extensive homeownership (thanks to some of the lowest average home prices in the country), simple lifestyle, and low-cost living, and you’ve got the perfect mix for investing in properties. After all, homeowners take care of their homes and make living in their neighborhoods as nice as they can.

Related: 4 Things to Do With Extra Cash in a Low Inventory Housing Market

Check it Out for Yourself

Of course, I understand that if you’re currently living somewhere else, it’s hard to imagine what it’s like elsewhere. It’s why I always recommend that people go check it out for themselves. Know where you’re investing. Think about traveling to the Midwest, and check out some properties in areas that appeal to you. It doesn’t matter that you won’t be living there  it’s just always nice to know that you understand what living in a certain place is like.

Above all, considering a purchase price of $60,000 for a single family home with a rental income of $800 each month, you’d be hard-pressed to find a deal with a similar return anywhere else  especially if you take into account that one $600,000 East or West Coast home buys you 10 of these Midwestern homes. I personally own 20 properties and am looking to buy another 30 by the end of the year.

How’s that for a passive income?

[Editor’s Note: We are reposting this article to help out our newer readers.]

Where do you invest — and why?

Let me know your thoughts on the best real estate markets!

About Author

Engelo Rumora

Engelo Rumora “The Real Estate Dingo" is a successful property investor, motivational speaker and serial entrepreneur that quit school at the age of 14 and played professional soccer at 18. He is also a soon to be published author along with becoming a TV personality in his very own real estate house flipping show. To find out more go to engelorumora.com . Engelo Rumora has been involved in over 400 real estate deals and founded five businesses in Ohio. The most successful is Ohio Cashflow, a company that specializes in providing turnkey properties in several Ohio markets. The newest venture is List’n Sell Realty, a real estate brokerage based in Toledo, Ohio and soon to be known as the #1 discount broker in the country.

118 Comments

    • Lyuba Barrington

      Property taxes are 2.17% in Omaha Nebraska.
      HOI rates are raising fast due to hurricanes. Historical appreciation is 5% annually.
      Please do your math before investing…

      Schools are indeed very good (that’s were your property taxes are going).. And jobs are plenty… State Income Tax and sales taxes are rather high.

      I am a local real estate agent, investor and a CPA in slow winter season. Please do not hesitate to reach out. I have all the investing math ready in my s/sheets!

  1. Mike McKinzie

    Engelo,
    I agree whole heartedly with your article. But remember, there are places on both coasts that are twins of the Midwest. If you stay within 30 miles or so of the coast, from San Diego to Seatlle, you are correct. But go inland 50-100 miles and things change dramatically. Whether it is San Bernardino, Bakersfield, Freano, Modesto and even on up to the outskirts of Sacramento, finding $100,000 houses that rent for $1,500 a month is not that difficult. Last year, in a small town called Visalia, CA, I bought some homes for $40,000 that rent for $950 a month. I put 20% down, so you figure out my ROI. This year, I ventured into the Midwest state of Missouri. Getting 1% rent in a class A area is still easily doable. Class B gets 1.25 to 1.5% rent. But always check your overall expenses. For instance, Indiana has a 2% Property tax and Missouri has a 1% property tax. Texas approaches 3% property taxes. California is about 1.25%. So yes, the Midwest has some great investments, but research all areas, I think just about every state has some good areas to invest (not sure about Hawaii)

    • William Morrison

      Mike nice recap and California. A one born in California and family who came there in the 1800’s is always an interesting discussion with those on the East Coast who think of California as a one small all the same place state. I usually start the discussion by saying it stretches Jacksonville, Florida to NY and would they describe that area as all the same. Grin.

      What California does have statewide in an irritating and convoluted tax system for out of state investors. And yes I know first hand.

    • Hi Mike, I live in California. Any tips on where I can find such great prices in Visalia and the outskirts of Sacramento? I look at a website called openlistings.com which lists properties throughout California but I don’t see such low prices. Are you able to find deals that aren’t on the MLS? Thank you!

    • Engelo Rumora

      Thanks Mike,

      Agreed.

      The numbers can work in any market as it comes down to how cheap you buy and how good you are at negotiating.

      The Midwest tho offers crazy deals and it feels like they are just falling off trees.

      I’m sure the same can’t be said for the West Coast and the deals you mentioned are a dime a dozen.

      In Toledo for example you can pick up as many as you won’t everyday at the $50,000 price point renting for $800+ per month.

      Thanks again 🙂

    • Amber turner

      I live next to Modesto (in Turlock) and not sure you would be able to find many, if any, of those kinds of deals here anymore. You could find something to break even if you put enough down or if one bought in a low rated neighborhood maybe. But we haven’t found anything lately, especially multifamily, that would pencil out. There are properties that can be flipped, but not usually rented out.

      • Engelo Rumora

        Thanks Amber,

        If I was you, I’d look into other markets that are within the closest drive time of where you are based.

        Success in real estate doesn’t come without sacrifice and that might mean investing further away from home.

        Much success

  2. Hi Engelo, Thanks for your post. I live in California and, as you say, almost everywhere (in my experience) is really expensive.

    Are there any particular cities/states you recommend investing in? Do you recommend SFR over multi-family?

    I find the thought of investing out of state daunting but I feel like it’s probably my only option if I want to make the most of my money. How long do you need to spend somewhere to “know where you’re investing” – just a few days looking at properties?

    Any tips on how to make sure I get a solid property with a steady stream of renters, especially if I’m buying a place that isn’t already rented (e.g. a SFR as opposed to a multi-unit). How do I figure out what to rent the place for if it isn’t already rented and doesn’t have a history of being rented? Should I just ask realtors who know rental markets? Do you recommend working with a company in the area that helps investors find properties and how do you know they’re trustworthy?

    Thank you.

    • Engelo Rumora

      Thanks for your comment Rachel,

      Yep, the market there sure is expensive and I just got back from San Francisco.

      Crazy rent prices for 1 bed condo’s hehe

      In Toledo you could rent an entire shopping mall for those prices hehe

      I highly suggest you check out Ohio. I’ll be bias and say Toledo and Dayton are my first recommendations. I also like the Michigan market and Indiana.

      All good things take time and the same goes for learning a market/area.

      If you’re looking at investing out of state I highly suggest buying turnkey.

      I don’t know of anyone that can say that they successfully invest in run down properties from out of state. There are just too many things that could go wrong if you try doing it yourself and that is why a good turnkey company can look after all of that for you.

      Google is your best friend so make sure to spend time researching the people that you’re looking at working with.

      Team work makes the dream work so focus on the people side of things first before looking at the stats/demographics of an area.

      Thanks again 🙂

      • Palmira Angelova

        Hi Engelo,

        Thanks for a great post! I’m looking for my next investment to be in a cheaper, cash-flowing area like the ones you’ve described. I’m curious about your above comment though – why would you recommend turnkey investments? Would your opinion apply to non-run-down properties as well?

        I have a few out of state investments, which I travelled / vacationed to to pick out myself, then handed over to a property manager that I trust. I’ve considered 2 Turnkey companies, but generally find that they keep the best profits from most deals for themselves (they sell to you at roughly market price) *and* they charge outrageous property management fees.

        Curious to hear more about what you think!

        • Engelo Rumora

          Hi Palmira,

          If you can find the right turnkey company, you could do very well from a cashflow and “hands off” standpoint.

          If you want the best deals and not to pay a premium, then you will have to look for the deals yourself and do all of the work yourself lol

          The best turnkey companies have in-house property management that doesn’t nickel and dime to death.

          I wish you much success

      • I live in Bay Are and thought of investing in Midwest but read about a huge opioid epidemic in Ohio that was crippling towns. Can anyone local there comment on how that is affecting RE?

        • Engelo Rumora

          lol Tom,

          I heard there are earthquakes in CA but still property prices are hitting record highs lol

          Don’t believe everything you see in the media.

          Conduct due diligence on a local level and not what the media says.

          Much success

  3. Marcus Auerbach

    Hi Engelo, great post and you bring up a lot of good points about the midwest. I have been buying and renting in Milwaukee the last 7 years. I was able to put a nice portfolio of completley remodelled properties together and ultimately quit my very well compensated corporate job thanks to what you describe. I work now as an agent for other investors and despite the best market we had in ten years we can still find great deals with solid cash flow for investors who have saved up some down payment. So the economics still work very well for landlords arround here, but our intern brought up a really good point: we are right at the Great Lakes, the largest fresh water resorvoir, and water as a ressource for farming as well as manufactoring will be a major consideration for the years to come.

    • Engelo Rumora

      Thanks for your comment Marcus and well done on your success.

      The upper rust belt could see major changes if more jobs come back from China.

      Either way, the numbers make sense just as you mentioned and we are all in with Ohio properties.

      Have you seen much appreciation in Milwaukee?

      Thanks

      • Marcus Auerbach

        Actually, yes we have seen heathly appreciation in the last years. The greater Milwaukee area breaks down into different markets that develop quite differently. While the lower income areas just barly keep up with inflation we have seen between 4-6% in the majority of areas, and a few selected suburbs as high as 8%. That’s 2015 data. 2016 will be another good year, MLS data looks very promising so far. Milwaukee is generally a much more stable market, both up and downs are more moderate arround here.

    • Engelo Rumora

      Thanks Jeff,

      1) Ohio
      2) Michigan
      3) Indiana

      These are my top 3 picks and if you’re looking for B class with solid cashflow, you can’t go wrong.

      Make sure you have the right people on the ground as they will make or break your investments.

      Thanks

  4. Christy Greene

    Thank you for the article ,Engelo.
    You sound like you know the mid west pretty well. I have been looking in areas in Indiana and Ohio. It seems most of the schools are good and price of houses are reasonable.
    What I did not like was that in some places, the property taxes were higher and some areas had high crime rates.
    Could you share what areas in the Midwest you are talking about?

    Thank you.

    • Engelo Rumora

      Thanks Christy,

      I’m glad you found the blog useful.

      I suggest looking into Ohio.

      I’m bias as I’m based here and we do around 10 deals per month.

      I think the market is very undervalued in key pockets and there is not much competition.

      Rents are strong and tenants are decent blue collar working class folk.

      The taxes don’t have anything to do with the ROI if the rents are high enough. Crime can be found everywhere and as long as it isn’t ridiculously high, I wouldn’t worry about it much.

      You will never find a perfect investment but do your best with minimising your risk as much as possible. Risk is minimised over time by doing enough market research.

      Thanks

        • Engelo Rumora

          You’re wrong

          Since you’re still sticking around my blog I’ll happily keep going back and forth with you to continue bumping my blog up the ladder for all to see it.

          So thanks for “stinking” around 🙂

          The investor I replied to is worried about taxes affecting her ROI. Well the taxes don’t really matter in an area where a property has super high rent.

          For example in Toledo, the taxes are “high” as they are $1,500 per year but a $50,000 house rents for $750+ per month showing a better than average cap rate.

          Buying the same priced property in another market with lower taxes ($500 per year) but also only renting for $500 per month affects the ROI so the taxes “don’t matter”.

          The point of my comment to Christy is that the ROI comes down to the overall numbers in each individual deal.

          As for credibility, how about you update your profile and a photo first before talking.

          Or do you prefer hiding who you are and just BULL$#@%ing with comments?

        • So losing 16% of your gross income to property tax “doesn’t matter”. Great.

          It makes me wonder what other expenses don’t matter to you.

  5. Jerry W.

    Interesting article. I have bought several mid west homes to try mid west investing. I could buy all in for $60K and rent for $900 per month, but taxes were $200 per month, property management came to about $100 per month, throw in the cost of refurbishing when you have turnover, and $200 per month on a water bill when the place is empty and my returns dropped to about 6% which I can beat in my local area. I realize that taxes vary a lot, but I found the desirable areas were good school districts and the taxes went up accordingly. Perhaps if you do economy of scale you could do better, but me experience was very lukewarm.

    • Engelo Rumora

      Thanks Jerry,

      Those taxes do seem a bit high.

      We are seeing them at around $1,200 – $1,500 per year in Toledo.

      We dispute them also and usually get them lowered 30-50%.

      Our turnkey sale prices are between $50,000 – $70,000 so you can imagine what my personal ROI is on these B class properties when I decide to keep them for my portfolio.

      Thanks

  6. Anne M.

    Funny. As an outsider (non-American) who has traveled quite extensively in the US (44 states and counting), I was just telling my husband I think the Midwest is the right place for us to invest in. I still need to do a lot of research, obviously, nothing more than intuition at this point. Just odd that I found this article this morning.

  7. Scott Trench

    The problem is – where are you going to be in 5 years?

    If you buy your $300,000 home that rents for $1,500 per month, in five years you *MIGHT* have a $400,000 home that rents for $2,000 per month.

    If you buy five $60,000 homes ($300,000 total) that rent for $800 per month, yes you have $4,000 in gross rents, but you might have $315,000 in 5 years and $4,400 in rent. Oh and you had twenty different tenants in that time frame, vs one or two in CA or the East/West (I’m in Denver, which you can throw in there).

    The problem is that in some places, you can be pretty sure that your outcome is going to be fairly mediocre cash flow. In other places, you HOPE for appreciation. It’s not about what you get today, it’s where you are when you exit in 5 years or a decade or two down the line. For me, I’ll hope for appreciation all day long.

    And, just because I’m investing in Denver, hoping for some appreciation, that does NOT mean that it is “risky” – I still maintain a strong cash reserve account and my properties still cash flow strongly – just not to the same degree that properties cash flow from day one in the midwest.

    The people you are dissing for investing in CA are the same people that have been investing in SF for decades. They are millionaires tens or hundreds of times over, from appreciation. Don’t know too many millionaires that got there as rapidly out in the midwest.

    It’s foolish to depend on appreciation, but it’s equally foolish to ignore it entirely.

    • Engelo Rumora

      Thanks Scott,

      “Hoping” in my opinion never has and never will be a strategy.

      Hoping is for terminally ill people that have no over choice.

      Real estate is a numbers game that requires calculated risks.

      My portfolio is built on ZERO capital appreciation projections.

      I don’t need any nor do I want any to be honest as I can’t live of it.

      There are far to many folks in CA that lost their ass during the GFC more than becoming millionaires.

      This is just my opinion.

      Thanks and much success

    • Great comment Scott. Even though I have a couple rentals in the Midwest, I’m not opposed to investing in CA. While some investors only look to maximize cash flow, others prioritize investing in especially strong markets with greater appreciation potential even if that means lower cash flow in the short term. Though I will say that the Midwest does offer a lower barrier of entry with its low price points…it’s how I got started 🙂

      I’d be interested in seeing how the long term returns compare between places like the Midwest vs coastal cities.

      • Investing in CA would be a different strategy. Right now there is a HUGE demand and lack of inventory has been driving up prices like before 2008. If we sold our house today, we would make $200K. We bought it 2 years ago! That is tax-free money 🙂
        To compare, rent on average for a house like ours would run about $3000, still less than our mortgage payment.
        The problem is as an investor, it is hard to find deals in this market. People are just not selling… so if if you do, you just hit gold.

        • Engelo Rumora

          Hi Becky,

          Congratulations on your success but investing based on appreciation is a gamble in my opinion.

          Personally, I think the CA market is ridiculously expensive

          Much success

    • Faisal Farnas

      I have friends who bought in the midwest in the bottom of the market during 2011 and sold a few years later when the market recovered. Their houses appreciated by 2-4% during that time frame.
      I know people who did the same thing in Florida, and they saw close to 100% return (house doubled in price).

      I will take the change of 100% return any day.

    • Faisal Farnas

      I have friends who bought in the midwest in the bottom of the market during 2011 and sold a few years later when the market recovered. Their houses appreciated by 2-4% during that time frame.
      I know people who did the same thing in Florida, and they saw close to 100% return (house doubled in price).

      I will take the chance of 100% return any day.

      • Engelo Rumora

        Thanks Faisal,

        I wouldn’t take that chance.

        Real estate is about the long term and not short term play.

        You might as well go and play Black Jack or roulette and put it on black.

        You might double your money in 30 seconds lol

        Much success

  8. Andrew Abbott

    Great article, Engelo. Thank you!

    Would you group Chicago into this category or do you not recommend a “big city” market?

    Reason I ask is I currently rent in metro Detroit which I consider to be a very low-cost of living, affordable market, but I plan on moving to Chicago within the next year and purchasing my first investment property.

    Just gathering some opinions on Chicago market. Any advice from anyone would be appreciated.

    • Engelo Rumora

      Thanks Andrew,

      I’d keep investing in Detroit if I was you.

      It’s my #1 hot spot for the future and I believe it will get a ton of air time very soon.

      Media is heating up about it but then it will be to late once the word spreads.

      Lot’s happening there but still years away from any significance in my opinion.

      Thanks again and much success.

  9. Deb Dossinger

    I wish this was true…I am originally from Milwaukee, Wisconsin, now in Charlotte, NC….I never bought any property up there as taxes were too high and what no one has mentioned here is the weather factor….you have very rough winters and cold weather which can figure into upkeep on your property and maintenance as far as shoveling and snow blowing.

    • Engelo Rumora

      It sure is true in my opinion.

      Hedge funds have bought the entire NC market and the deals have been long gone.

      I’ve been investing in the Midwest for 5+ years now and wouldn’t be willing to get out of bed unless I see a 15%+ net return on investment.

      Much success

  10. Garry C.

    So many options, so little time…

    I’m in Denver, which I contend is neither coastal nor midwest. But, we all know it’s becoming more and more like the coastal areas daily.

    However, no matter where you reside or invest, there are deals to be had. You just have to focus on that area and put some time into it. I’m finding deals in Denver, they just aren’t sitting on the shelf waiting for me to buy them like they seem to be in the midwest.
    I’m OK with that. I try to find deals at the right time when I’m ready to buy. Just in case I can’t locate something when it’s time to pick up the next property, I’ve been considering the midwest.

    I just haven’t decided between Ohio, Detroit, or Milwaukee.
    I’m open to opinions on those…

  11. Heidi Feringa

    We are semi new to buying sfr’s to rent out of state. We are in California and just bought out first house in Firestone Park, ohio. We fix most things diy and are now looking for a multi family duplex so we can have. Home base while rehabbing. Any suggestions from anyone which city to invest in …a “b” house in an “a” area, that we could live in when in town. Someplace safe and fun for the family that is also a great investment area.

  12. You seem to be arguing not so much in favor of the Midwest as against cities.

    But cities are where there is a critical mass of tenants and without tenants you have vacancies.

      • What can a manager do if you have people leaving the area due to no job prospects?

        If you owned property in Detroit the last 30 years, your great managers skills would have gone to waste.

        • Engelo Rumora

          Those markets are very rare and IMO can only be found in areas that are stimulated by only one industry like mining.

          A good manager can find tenants and get your property tenanted in most places.

          There are investors making millions in the ghetto of Detroit not because of the market booming but due to having the right team in place.

          People still need shelter over their head so unless your opinion is of a zombie apocalypse happening soon and human beings becoming extinct.

          There will always be a demand for rentals in pretty much every market nationwide.

  13. Detroit is a zombie apocalypse. I sure wouldn’t want to have invested there. From what I have seen making money in real estate is 90% about two things, location and timing. If you get those right, you don’t have to work very hard for the rest of the pieces to fall into place.

    As far as the “Midwest” goes, it has it’s share of disaster cities that have become ghost towns, which might be why you focus on the markets far from the hustle and bustle. Well good luck with that, because many of those small towns are dying also. It seems that a job at Walmart is not really enough to live on.

    This is not to say that there are not some areas that will do OK in the Midwest, but it looks to me like more of a crap shoot than areas that are adding population more consistently. The West seems to be always growing as does Texas.

    • Engelo Rumora

      You could have done very well in Detroit and 90% of downtown has been bought without any more bargain deals. So you missed your “timing” on that one lol

      All I can say here is good luck to you with your “location and timing” strategy as you will definitely need it more than me 🙂

      After doing 400+ deals over the last 5 years I have come to the conclusion that success in real estate is dependent on the numbers in the deal and working with the right people.

      I’ve invested across numerous markets in the US and the world and I make money if the people on the ground are good. I loose if they aren’t.

      A good team will either make or break your investment no matter the location while money can be made anytime and anywhere as long as you know what you’re doing.

      Good deals are always out there.

      Much success

      • There are still many houses in Detroit for under $15K, so I am not sure I missed a huge run up. My point was that had you bought there 20 years ago, it’s hard to imagine you would have come out ahead the way you would have buying in some California markets where the average house is up over a million dollars.

        Everyone likes a turnaround story, but when it comes to investing I like a sure thing. And I don’t see Detroit’s come back as a sure thing. I do however see LA and the SF Bay Area in California as a sure thing. And being a sure thing, you have to pay a premium for that.

    • brian ploszay

      I mapped out the areas in Detroit to buy up. It is a small area near downtown. Love it there. The rest of Detroit is super marginal. I would suggest looking in suburbs for investments if you want to be in that region. Detroit is not a bargain, but it has systemic decline. There are a shortage of good renters to fill the houses. There are some that are doing it, but not the best place unless you have strong boots on the ground.

      • Gordon Eisenberg on

        I have been considering the real estate market in Detroit Brian which includes Midtown, New Center, North End & Indian Village. Do you agree with my thoughts? What do you consider to be those up and coming markets of Detroit.

  14. R.C. Allen

    Good post, thanks.

    I’m currently just getting started in my REI adventure. I am actively perusing wholesaling as the catalyst to my future rental portfolio.

    I live and work in the Dayton, OH area. The outside investment in downtown Dayton has been immense over the past year or two. People are flocking back to the downtown areas as better amenities continue to pop up and older buildings get converted.

    I feel that the entry level is very low and the experience gained along with the cash flow are worth the investment for newer investors.

    I would agree with Scott above, the appreciation will never be what the coastal cities and Denver could offer. That being said investing in an areas like Ohio and Indiana could provide the foundation and knowledge for a successful REI career.

  15. Palmira Angelova

    Something I’d love to understand better is how you are finding these deals. Do you look on the MLS? Do you look at Zillow? When I check the postings, even in some of the areas you are mentioning, there is nothing that would come close to even 1% rent over value. Do you have connections, drive around the neighborhood?

    I’d like my next investments to be in cheaper, B areas that cash flow better and appreciate less quickly, like the ones you are describing and would love to learn more about your process!

    • Rebecca Cirisan

      Anup,

      Engelo is still dominating in the same markets he recommended last year, the same market he touted 3 years ago and the same market he was told he was absolutely nuts for taking over 5 years ago. Personally, Toledo, Dayton and Cincinnati in Ohio are my favorites so far.

    • Engelo Rumora

      Thanks Anup,

      The core principles always stay the same.

      You can do well and make money in any market as long as you have the right team in place.

      I believe the Midwest will always show amazing cashflow and the day it doesn’t.

      I work with all of my investors to sell at a high price and we can all move to the Bahamas then lol

      Much success

  16. John Barnette

    Grew up in the midwest (chicago burbs, Indy, Columbus, oh) and family still in Indy area. Live in SF 20 years now and a real estate agent and investor. Investing in a market like SF is very challenging but possible. Long term. Not only has there been significant appreciation in propery value (to owner retail customers) but huge rent appreciation. And prices did crash 2008-2010 but rents outside of the very top luxury market did not change much. Need to be consistent and look for the occasional deal that others look over. Get cash flow and appreciation. My parents very high end luxury home in Carmel (Indy) suburb isn’t worth much more than their cost to build it 25 years ago. Factor inflation and way under. Mind you not a rental type house. But brother’s townhouse also in Carmel has not appreciated more than 10% probably in 7 years. They are lovely places. The thing is that midwestern populations are generally flat to declining. Lots of land to build and build. Thus no value growth. SF, Seattle, Portland, even Denver are very or somewhat limited in land space to build, cumbersome construction regulations, and coupled with high paying jobs and ensuing population growth. All make for outsized appreciation in these markets. Will there be a correction. For sure! Will these industries go away? Not anytime soon. Tech is business. All business. Biotech is key in our graying demographic. Internatiomal destination spots for cash. Absolutely. Long and short. Yes the midwest is great place to get started in RE investing, passive, some cash flow, relatively low risk, easy entry prices. But real wealth is made with supply and demand imbalance, being able to spot a needle in the haystack kind of deal, betting big when the market has drops. Takes patience though. Lots

  17. Sharon Thompson

    Thanks for a great article. The midwest definitely has lots of opportunities for serious investors these days. For everyone else, we have jobs and reasonably priced homes. Money Magazine just ranked Fishers, IN as the the number one place to live in the United States. Three other Indiana towns made the top 100 list. Happy to set up tours from my Indianapolis office.

      • Engelo Rumora

        Kurt,

        I’m not a fan of the CA market.

        It’s the same as Australia.

        Great to live and not to invest unless you really manufacture the equity with some Hard Yakka

        I’m buying buildings like a walk in the park all across Ohio for 20-30 cents on the dollar of what it would cost to build.

        You just can’t do that in CA.

        Much success

        • All you need to do in California is wait and prices go up. A house that sold for $250K in the 90s sold for $500K in the 00s now sells for well over a million today.

          You just can’t do that in anywhere in the Midwest I’m familiar with. You can’t buy almost any house and expect to make a million dollars in your lifetime. Not happening.

  18. brian ploszay

    The writer sells turn key investments in the midwest, so I view this as a marketing piece. I am not attacking him.

    I live in the Midwest: Out of region buyer’s beware: There are many small and medium towns which are economically on the decline. Youngstown Ohio, Toledo Ohio, Rockford Illinois. Be very careful in buying homes in this region. They might be worth less when you sell them.

    Purchase in strong areas: Part of Chicago. Milwaukee, Iowa. Twin Cities.

  19. Engelo Rumora

    Thanks for your comment Brian,

    My apologies that you don’t know me better.

    If you did tho, you would know that I turn down more business than I take on and that I don’t pitch through my blogs or Bigger Pockets posts.

    I also disagree with your comment.

    Success comes from working with the right people and not so much the stats/demographics of an area.

    If you don’t mind me asking, what do you sell in Chicago? 🙂

    Thanks again

  20. Stuart Donovan

    Engelo,

    Do you still buy in the Toledo area now that they have passed the lead ordinance? Or do you not buy homes older than 1978? If so do you go through the yearly lead certification or do you go through the lead abatement? Is it worth the added headache to invest in these homes?

    Curious on your thoughts.

    Regards,

    • Engelo Rumora

      Hi Stuart,

      We are buying now more than we ever have been.

      The lead BS was just a money pinching gimmick by the city.

      They still don’t know what to do with it and how to go about it.

      There might be a new mayor soon so that will be another cluster.

      We are the biggest buyer in town so we do whatever we need to do to satisfy whatever needs they currently have lol

      I’ve left the nitty gritty of it to my CEO and 2 project managers to sort out.

      They keep changing the game so we are just adapting.

      Not a big deal tho as now we have system in place that we implement on every deal just to protect us and our investors from any future shenanigans the city wants to pull again.

      Much success

      • Rebecca Cirisan

        Learning the lead ordinance rules that changed daily was tiresome, implementing the testing and being fully compliant was the easy part.

        We are currently working very proactively to get over 150 properties tested and certified. Our 6 year certs starting rolling in about a month ago, I am thinking we can hang them all on the fridge like we did in grade school.

        We have built this procedure into our renovation processes so that our investors do not have to deal with this headache. Comply, conform and keep on rolling!!

  21. Michael F Ferraro

    ENGELO:

    “How does a $300,000-$500,000 single family home that rents for between $1,200-$1,500 per month sound? Does that seem like a good deal to you? ”

    That’s a good deal.

    I don’t where you are getting your statistics from but I seriously doubt if you can find a $500,000 house that rents for $1500 located from San Diego north to the end of Los Angeles County. I live in Castaic which in an unincorporated area of Los Angeles and you be hard pressed to find a one bedroom apartment 500 to 600 sq. ft. for $1200, let alone a house. There isn’t a single family rental available for much less than $2500 anywhere in the Santa Clarita Valley.

    Check Zillow listings and verify.

    Respectfully

    • Engelo Rumora

      Thanks Michael

      You asked:

      “How does a $300,000-$500,000 single family home that rents for between $1,200-$1,500 per month sound? Does that seem like a good deal to you? ”

      I’d run from a deal like that.

      I can get $80,000 – $100,000 duplexes within 3 min of where I live in Toledo (Solid B class area) that will rent for $1,500 per month.

      That’s just another day in the office for me lol

      Those types of deals are falling of trees here mate.

      Much success

      ps. I’m not a fan of the CA market. It’s the same as Australia. Great to live and not to invest

        • Engelo Rumora

          I’d run from Californian real estate unless you want to wait another 20 years.

          Kurt,

          It would be great if you could upload a picture to your profile.

          It might make your comments more credible and less “trolly”

          Just saying.

          🙂

  22. Joseph M.

    “Midwest” is too broad a brush, I think. I live in “the Midwest” but not in the rust belt. Twin Cities, MN. It’s not this rustic, huge spaces kind of place you’re describing. It’s a metropolitan area of 5+ million people with tons of fortune 500 corporate work. It seems your post is more about “Big City” vs “Mid to Small City/Town” vs “Rural” investing.

    MLS deals are scarce here in the Twin Cities, none to be had on the MLS unless you can close with cash within hours of a listing. Fundamentals are super strong, high median wage, good rental prices and they continue to grow, tight inventory of housing for rent or sale, highly educated workforce, etc. But if you go up to Northern MN you see lots and lots of dying little towns that are poor areas to invest in. Declining populations as the boomers retire or pass away. Then there are places like Detroit, generally just bad due to the political situation; or Chicago where people are leaving en masse because of its impending bankruptcy (also political).

    You are right though that if you go off the beaten path there are some mid-sized towns with good to great fundamentals yet still low prices and good rent. Its critical to look at whether the local economy is in a good place or not though and whether the population is declining or growing.

  23. Buy property in the Midwest for $50-$70k and get $700-$1000 I’m rent. You must be delusional or this article was written 30 years ago. At those prices they’re a dump and no way your getting those kind of rents . Especially not in illinois , not to mention you’d get murdered on the property taxes here. Stay away from Illinois. The ROI IS NOT WORTH IT

    • Engelo Rumora

      George,

      Is Illinois the only state on the Midwest?

      I’m buying properties with even better numbers than that all day long.

      You should check out Ohio, Michigan and Indiana as there are some great numbers in those markets.

      Its easy easy as taking your poodle for a stroll through the park hehe

      It’s great to be me.

      Much success

  24. Dan Heuschele

    Your 5th sentence is why to invest in coastal CA. As for it being gambling, there is over 70 years of long-term appreciation that exceeds inflation and most other locales. If you are in the game long term it would be similar to betting on a horse that has one every race for over 70 years. Is that gambling? Is it gambling to bet on the sun rising tomorrow? I realize the sun has been rising more than 70 years but the point is that in my market (San Diego) it does not matter when you purchased in the last 70 years (including 2008) your investment would have produced a good ROI. The only people to have lost money on San Diego buy n hold are people that were over leveraged and had to sell when the market was depressed.

    With cap expenses and other costs the only way $700/month rent is worth me owning is if it has appreciation to go with the cash flow.

    I believe you can make money in many ways in RE so I am not trying to discourage Midwest RE investing as much as point out that coastal CA has been a great place for REI for decades (i.e. has produced great ROI). I would not be surprised if the East coast is similar to the West coast at having produced great ROI for decades. This really implies that you can do well investing in RE anywhere if you do it smart.

      • Engelo Rumora

        I like my odds better where I can make a passive income of 20% net cashflow on a bad day.

        You live of cashflow and not the $1m in equity you just gained 20 years.

        Plus, 20 years to make just $1m???

        That sounds bad IMO.

        I could save that much working in Walmart for 20 years lol

        Much success and sorry but I’m being a bit of a smart A$$ above 🙂

    • Engelo Rumora

      Actually,

      Betting on horses is gambling.

      Is betting on horses in CA not considered gambling? 🙂

      Investing in CA is speculative and expensive.

      I’d run from that market like a cheetah lol

      It would take too much hard work to manufacture equity.

      In the Midwest you can make a $30,000 – $50,000 profit on a flip that you might have a total outlay of $100,000.

      I’m sure that in CA the $30,000 – $50,000 profit would take at least a $500,000 total outlay.

      Plus, you would be competing with everyone in CA while in the Midwest it’s much more quiet.

      I do agree that you can do well and make money in every market tho.

      There are great deals to be had everywhere.

      Some places they just fall of trees (Like the Midwest)

      Much success

  25. Engelo Rumora

    I like my odds better where I can make a passive income of 20% net cashflow on a bad day.

    You live of cashflow and not the $1m in equity you just gained 20 years.

    Plus, 20 years to make just $1m???

    That sounds bad IMO.

    I could save that much working in Walmart for 20 years lol

    Much success and sorry but I’m being a bit of a smart A$$ above 🙂

  26. Rebecca Cirisan

    Invest $500,000 and make $100,000 passively every year after? so if I held these properties for 20 years (since Kurt says CA makes 1 million in 20 years) I would make 2 mil passively. Less money up front and a better ROI…. To each their own as every way to invest has both pro’s and cons but I personally choose passive income all day long.

  27. Joanne Basecki

    I use to live in Silicon Valley. In fact that’s when I purchased in Midwest, Chicago, Cook to be exact. I can’t claim a talent in area of investing. The building soon turned into a vacant lot. Demolished !!! LOL (; (: Determined to turn my luck (and talent) around I read lots on land investing by Jack Bosch. Some interesting strategies. My lot however is still not sold. (Almost 90 days on market). Many ideas but hands strapped for lack of cash. Anyone here has an opinion on how is it best (or even possible) to sell a vacant land in WHP?

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