My Top 3 Picks for Up-and-Coming U.S. Real Estate Markets

by | BiggerPockets.com

When looking at real estate, you want places in growth whenever possible. I like to look at three things to measure this: the state economy, job market diversification, and population growth. If a city is in decline in any of these areas, it’s easy to expect decline in other areas as well.

  • State growth: How a state runs its financials matters to you. You want governments that reinvest in their economy. States that have extractive financial practices like Kansas, which is now bankrupt, can’t afford to reinvest in their state. You can’t grow without reinvestment, and it’s unlikely you can outpace a failing state economy.
  • Job market diversification: Find out who the big employers are in town. If it’s limited to one or two—or even one or two industries—you have to worry about this. If a town is supported by only one employer, you may be only a few bad quarterly reports from disaster.
  • Population growth: These metrics are easy to find and compare. If people are moving to a city, then opportunity is increasing. When people are moving away from a city, find out why. Don’t be the last to realize it’s a lousy place to live.

Remember, our financial well-being has far more to do with the higher level economies that we are a part of than with ourselves. Sure, some people make it against all the odds, but most people make it with the odds. Use geography to shift the benefits to your favor, move to a city that is in growth mode, and you’ll have no choice but to grow with it.

Nashville

Nashville is growing quite fast if you hadn’t noticed, and it’s at the top of everyone’s “move-to” list. It’s a large city of ~1.9M people, which puts inside of the top 20 biggest metro areas in the United States. It boasts strengths in factors that make any locale promising: low cost of living, underpriced housing, lots of opportunity. What else could you want? The hype is picking up in Nashville—I personally know a few people who have moved there this year just for real estate.



Related: I Used to Think All U.S. Markets Were Too High—Until I Started Investing in This City

Las Vegas

Two years ago, I looked at the Las Vegas market and knew it was about to blow up. It turned out I was right. Sure, Vegas had been on an upswing for a while, but I watched a culmination of factors come together just before we moved, and it spiked after we got there. What did I look for? Population and job growth estimates: I knew the Raiders were going to close soon.

Three weeks after I got there, they announced it. Marijuana was about to be legalized, something that has a massive impact on state economics. Additionally, there are billions of dollars in big casino projects in the pipeline, most of which will be complete around 2020. Vegas is showing few signs of slowing, and in many ways, it’s picking up steam. Additionally, the SALT (state and local tax) laws changed last year, which will make Vegas even more appealing.

Tampa

Similar to Nashville and Las Vegas, Tampa has no state income tax, a low cost of living, low housing costs, and tons of opportunity. Tampa metro is over 3M people, which means there is no shortage of opportunity. Tampa also means you get to live near the beach, which my wife says is a good thing. Tampa really is an ideal city except for one big systemic risk: hurricanes. If you’ve never had your house ruined and flooded from a hurricane, I assure you it’s not fun—and it’s not cheap. Tampa is like every great C class property that looks fantastic on paper, but in real life, it’s just too difficult to manage and not worth it.

All that said, this is a hard opportunity to pass up. So instead of living in fear of hurricanes, my wife and I are trying to devise an emergency escape plan built into our move. Any time a hurricane shows up, we drive north for a few days. It’s not feasible for everyone, but may be the best fix for an otherwise perfect place to live.

Other Factors to Consider

Low Cost of Living

All three of my recommendations have one big thing in common: no state income tax. This is really a huge benefit when comparing one location to another. When I moved to Nevada from North Carolina, my cost of living immediately went down 4% just because of different state laws. These are the states that have no income tax:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming
  • Tennessee (wages only)
  • New Hampshire (wages only)

Location & Natural Disaster Risk

For long-term outlooks, moving inland and upwards is going to become an extremely obvious advantage as time moves forward. Hurricanes, floods, rising water levels, fires, and other natural disasters are going to increase risks and costs. In Miami, rising sea levels are causing massive infrastructure to be built to prevent any damage. Well, who do you think pays for this?

Related: Why “Overpriced” Markets Like San Francisco May Be Healthier Than You Think

Two years ago, Hurricane Matthew did significant damage to my primary residence back in North Carolina. FEMA and my insurance company paid out about $22,000 to fix the flooding, roof damage, and all the felled trees. I was recommended to place flood insurance on the building for the indefinite future—and my insurance company dropped me over this very legitimate claim. I was forced to go with a much more expensive company.

Geographic location and the climate that comes with it are not to be underestimated. The associated costs of negative climate events can make or break your business, and the volume of instances are absolutely going to increase at the coastlines over the next few decades. When you’re considering moving, go inland and upwards.

Population Growth

This one is simple: Go where the people are. Every dollar you ever make in life is going to come from another human being, so go where there are lots of humans. Population growth means opportunity growth. It’s not controversial to say if you want to find a lot of opportunity, you should stay away from small, dying cities in the middle of nowhere. You don’t have to move to the middle of Manhattan, but a reasonably-sized city in growth is a really good idea. If you’re in a small town that doesn’t even have a regular real estate meeting, how much are you hindering your real estate growth?

Now it’s your turn: What are you favorite picks for up-and-coming markets?

Weigh in below!

About Author

Alexander Felice

Alex is a long distance single-family real estate investor and a full-time underwriter at a commercial bank. After a few years of success in real estate, he felt compelled to teach people real estate is more profitable than they might think and far less risky than they assume. Alex is the author of brokeisachoice.com

32 Comments

  1. Jake Walroth

    I just think its interesting to note, I know a lot of people who have left Nashville of late… back to Cincinnati or Louisville-other cool towns that actually “affordable”. Nashville use to be “affordable”, quaint, and a cozy town with lots of entertainment…. now its cranes and 10x more Bachelorette parties. Not saying I disagree, just thought it was interesting you knew people moving their for the real estate, and I know people electing to leave–costs of realestate/housing being reason #1.

  2. Tina Huffman

    I too am avoiding any hurricane prone location. Global warming ain’t getting any better any time soon, and denying it won’t change anything for sure. (The insurance companies certainly aren’t.) I’m currently looking at different locations in Alabama.

  3. David M.

    I’ve considered Las Vegas but dismissed it because of the very reason that you cite: limited diversity of industry. A huge part of their economy is based on discretionary entertainment spending. Construction jobs are there in the good times but crater in the bad. Lots of retirees for sure. How did you get around the limited industry to put Las Vegas in the top three for the country?

    • Alexander Felice

      Luckily there is a lot more to Vegas than gambling these days. Most of us locals don’t even go anywhere near the blvd. Lots of other industry here, the strip is only 3 mile portion of the whole city. There is a LOT of investment going on right now too so it’s not like that one industry is in any sort of decline. in the next 24 months there is about 20Billion of projects wrapping up which will bring a ton of jobs and income.

      That said, sure your right in that it’s mostly banking on one industry, but there is a huge demand for finance jobs (I’m a commercial loan analyst), and it’s one of the top cities for nursing (which my wife is). So since we’ve been here we’ve only flourished, along with many many others.

      Lastly, I didn’t say these are objectively the top 3 cities, they are just MY top 3 😉

    • John Cleveland

      Hi Ann,

      When you mention “Central Florida” that can encompass many different areas. I am a native Floridian so when you say Central Florida the only thing that comes to mind is Orlando. Now of course there are several different surrounding areas such as kissimmee (Disney), maitland, oviedo etc. If you are talking about orlando and the surrounding areas that are low cost real estate i would start with around the pine hills area which is on the west of Orlando and then i would go east as far as USF (college) if you are thinking about college rentals. Let me know what your thoughts are if you would like to reach out to me.

  4. Ashley Dennis

    Does anyone know of an investor friendly realtor in the Nashville, TN area? After reading your blog on recommended investment areas, Nashville sounds attractive. I lived there in the late 90s on the west side and sold my new home when I moved away for a new job. Thanks.
    Ashley Dennis

  5. John Cleveland

    Great article. I am a real estate agent in Tampa. I have been living here for 20 years and it is expanding really quick. I am familiar with several of the pockets of growth here. If any one needs the lay of the land and would like to network please connect with me. I will be more than happy to help you in the great market!!

  6. Winston Parks

    Nice post, but I’d say Nashville RE has been crushing it since 2010 with several projects still in the pipeline. Yes, cranes are everywhere, which is great and the growth continues. That said, the amount of homes sold in July ’18 were less than July ’17. Definitely a higher priced market, but still great if you can afford the cost of entry.

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