Best "cash flow" investment market for $100K?

Question

I would like to invest either $100K or $200K in cash in real estate in 2016. My goal is to maximize cash flow on day 1. What cities would you recommend? Would it be better to invest 100% in cash of cash + loan?

Thank you!

Joe Bertolino · Answer

I am currently investing in Sacramento's Oak Park neighborhood (95817,95820).  It's a transitioning area adjacent to some of the most desirable areas in Sacramento including Midtown,  Land Park, Curtis Park and the UC Davis Medical Center.  It is in the "path of progress" and has great architecture with a bit of a hipster vibe with restaurants,  coffee shops, breweries, art studios, etc opening up.  The current mayor hails from Oak Park so there has been a ton of recent investment in the area ($10-30m mixed use projects).

You can still pick up houses for $80-120k that rent for $1150-1400.  Those on the lower end need a lot of work but I prefer to buy low and rehab to my standards from the start to take the capex hit up front.  Like most transitional areas,  it's street by street so you have to learn the area.  There have been 5 sales of over $300 per sq foot in the past  120 days so the profit potential is high on the right block.  I am using direct marketing and flipping the houses I can get on the more desirable streets and using the BRRR strategy for those that are a little farther down the path of progress.  I suspect those $100k houses will suddenly by $200k in the next 12-24 months.   With the way rents are rising dramatically in Sacramento,  there is a lot of pricing pressure on the low end of the market.

In my opinion, the area is like buying in Brooklyn or Oakland 15 years ago.  It can't help but improve due to the location near the major investments being made in downtown and midtown and the expense of living in East Sac,  Land Park and Curtis Park.   The spillover into Oak Park is unavoidable.  I have been impressed with the tenant pool,  mostly late 20's/early 30's state workers or UCD Med Center employees that are tired of midtown  rent increases and want a house with a yard but don't want to commute from the burbs.

Derek Daun · Answer

I'm another Oak Park investor, however, I wouldn't consider the current market as really being 'cash flow'. The prices in the areas that can actually demand decent rent with good tenants, appreciation, and likely gentrification are now priced such that I aim for cash neutral strategies. (A couple hundred bucks a month over the escrow and water bill). Unless of course, you're sinking a lot of money down in rehab.

There are still cash flow opportunities, but these are the type of low end properties that really require the owner to work to make the money. (lots of turn over in low income areas).The highest ROI areas will be the gentrifying locations though, like @Joe B. mentioned. You better know the area though; I've seen lots of sucker properties go high dollar recently.

Jordan Thibodeau · Answer

Nice another fellow oak park investor.

Jordan Thibodeau · Answer

@Matt Smith a fellow Bay Area resident. Welcome. Finding the right market is almost like trying to forecast which stock will do the best next year. Markets ebb and flow. We all have our own biases towards markets, so I would do my own research and come up with a conclusion.

If you're planning to invest out of state, I would pick an area or two to investigate, and build relationships with local investors, but mind you, if you do invest out of state you will have little to no control over your investment so you must work with people who are reputable.

Good luck.

Maya Clark · Answer

Investing close to home is ideal for new investors. However, since moving back to the bay area I'm finding it very difficult to find cash-flow opportunities on single family properties. If/when you're ready to invest out-of-state I suggest taking a look at the TX markets.  Houston and Dallas suburbs worked well for me (pre-divorce) as well as several clients.

Maya Clark (CA & TX Broker/(New) Investor)

Kristopher Windsor · Answer

How would you apply this advice to the OP's situation, being from San Francisco? I'm not sure if SFHs in Sacramento will cash flow. Would you recommend the smaller cities in that vicinity? Does 2-4 hours of driving count as "close to home?" Thanks.

Stephen Nicholson · Answer

I always think investing close to home is the best strategy for any newer investor. Staying close to home helps to ensure you have quality market knowledge and allows you to be near enough to manage the property yourself

Best "cash flow" investment market for $100K?

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