Move to bigger city for better investment opportunities ?

Question

I’m still trying to figure out my first property acquisition. I’m located in Palestine, TX (population 18,000)and the market out here seems to be very slow with a very low appreciation rate. I’m interested in house Hacking to get started, but there are zero multi family units available within an hour. Also, it is very difficult to find off market deals. It is a rent friendly town, but it’s very hard to find good enough deals with such a small offering of homes.

My question is this: should I move to a bigger market for better real estate investment opportunities? I’m interested in building my long term wealth through BRRRRs, and possibly do flips to build capital. What do you think? Is there better opportunities in the cities in Texas, or shouldn’t just hold out and wait for something here? I’m sorry for the long post, and thank you in advance!

Joseph Firmin · Answer

Bigger city, more competition. You can dominate your small town, but there is risk due to fewer employers and smaller resident base. Unless there are employers within an easy drive, a small town can stay that way for a long time. I'd recommend setting your goals and then if your current location won't support those goals, get a move on.

Stephen Beck · Answer

I would suggest becoming a pro member and downloading the Rent_and_Prices_by_Zip_Code spreadsheet. Choose the area where you want to invest (I prefer Texas since I live here) and then prioritize the markets that have the best appreciation and RTP (rent to price) by zipcode. Always drive an area before you buy! Beaumont and Port Arthur looked great on paper for appreciation until a real estate agent told me that the killer appreciation for the past three years has been due to all the remodeling from 2 major hurricanes in the past three years! So, the 20-50% appreciation was not organic appreciation that would continue in the future. A drive through Port Arthur confirmed that!

Pete Harper · Answer

@Dustin Crawford

You are right, there is not a lot of multifamily inventory in Palestine. However, there are a lot of single family properties. Have you looked at the sheriffs tax auction?  A couple times a year the county will sell off delinquent tax properties at public auction. Palestine usually has a large inventory. Read up on the rules before you bid. Non owner occupied properties have a six month redemption period. Homestead properties have up to two years. During the redemption period the owner can buy back the property for 25% premium over auction price. Any renovations would be forfeited. For this reason you have to wait out the redemption period before doing any work. However you can still charge rent, including the previous owner for owner occupied.

My other suggestion is to look for off market deals. Beat the streets looking for likely multifamily properties. Send lots of yellow letters to find your own deals.

I’ve had luck with both approaches.

Dan DiFilippo · Answer

@Dustin Crawford I would *at least* wait and see how COVID shakes out.  You might move to a city with a lot of commercial real estate that proceeds to get hollowed out.  I contend there are three things every investor needs to consider.

1) Where people work

Will a city lose its economic driver as workplaces start to go partially or fully virtual and let their employees live wherever they want?

2) Where people retire

A lot of people are retiring over the next 15 years.  Which side of this movement is your market on?

3)  Recession

Due by virtually all economic metrics.  Are you prepared for this as well?

Russell Brazil · Answer

15 years ago I was unhappy with where I lived for various reasons (Boston) and I too decided to move to seek better opportunities. I ended up moving to DC, not entirely because of this, but very much in part because it had the highest incomes in the country.  By moving here and at the time increasing my pay by almost 25% for the same job, it made it possible for me to eliminate the existing debt I had much quicker.

Whitney Hutten · Answer

@Dustin Crawford Couldn't agree more with Theresa.  Waco and Longview are relatively close by.  Both are good tertiary markets.  What about College Station too? Arlington is expanding so I bet you can capitalize off that expansion somewhat.

Mike Reynolds · Answer

Let me know if I can help with that. Nac has been growing pretty fast lately. 160 million construction going on at the college right now. Plus new public schools being built right now too.

Dustin Crawford · Answer

Thank you for the information! What markets do you suggest?

Stephen Beck · Answer

@Whitney Hutten mentioned College Station. The problem with College Station is that the asking prices for SFH are very high compared to the rents you can get for them. This makes cash flow a serious problem. Rents may be low because of over building of student housing - remember that your SFH will be competing with lazy rivers and indoor gyms! Also, many newer student housing has one bath to one bedroom ratios - something the students love. I like to look for areas that have a high median rent/median sales price ratios and are appreciating . That way, I have a better chance of buying a property that cash flows.

Dustin Crawford · Answer

@Joseph Firmin @Jeremy Wirths @Theresa Harris @Whitney Hutten

Thank you so much for your insight! It is truly appreciated. I really don't want to move, but I want a property that gives me the best possibility for cash flow. I am also looking for a sfr with a rentable adu. I will wait for something good!

Move to bigger city for better investment opportunities ?

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