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Hi BP,

So I'm trying to narrow down my top 5 market choices for buy and hold rentals and am having a tough time walking the line between scalability and stability. The goal is to scale to 10 stable doors by 2021. With cashflow being 250-400 per door. See below for some quick data I threw in a spreadsheet.

My ideal area has steady population growth as well as steady job growth and low unemployment. From the data above, the only area that matches this criterion is Hunstville while the others seem to strike out on population growth.

The way I interpret the data is that Huntsville seems like the clear winner...until you get to avg. home price. It seems as it's going to be a bit tougher to scale when the average home price is almost double the next on the list.

I'm completely aware that REI is very personal, but wanted to get a few fresh sets of eyes on the data to see if there are any other interpretations that I may be missing.

Michael Albaum · Answer

Charles, you seem to have developed a good spreadsheet here, but I think you may be on the verge of paralysis by analysis. There will always be a better place to invest, or a better deal to come through. Don't get too hung up on doing the absolute BEST deal for your first. Just get your feet wet, do a good deal, and then use that knowledge and momentum to do more deals. You'll learn from each one you do and you'll get better. If you expect to hit a homerun every at-bat, but have never played baseball before, you're setting yourself up for disappointment.

It seems like you could make good money in all of these cities. I'd advise to find a city that YOU think has potential, where there seem to be numerous deals to be had, and start gobbling up properties there like they're going out of style. Beware of the single good deal in an area, because you want something that's repeatable. Best of luck!

John Koster · Answer

Interesting graphs.   Definitely useful information.  However, as a Cleveland investor who grew up in the area, I would like to point out that there seems to be city/county differences in the statistics listed, where sometimes county information is presented as city information.   There is a big difference between Cleveland proper and the county as a whole.   Without looking up the actual numbers of today, here is the difference based on the above graphs.

Cleveland City

- Population - 386,000

- Median Price - 55K

Cuyahoga County

- Population - 1,250,000

- Median Price - 155K

I suspect the other statistics such as job growth and unemployment may be switched and/or conflated as well.   Just a heads up for those in active research.

Bill F. · Answer

@Charles Mitchell you have laid out your criteria, now follow them.  Your ideal city only exists in your head.

Huntsville has the high home prices relative to your other cities most likely because of the population and job growth. Increased demand leads to higher prices.

Given the data that you've shown, thinking probabilistic, Huntsville is where you're likely to find more stable properties due to job growth and median wage.

Now its up to you to make a decision on whether you care more about stability or ability to scale quickly and pick a city that aligns with your long term goals.

Mike D'Arrigo · Answer

@Charles Mitchell  I think you're doing good analysis but I have to agree with @Michael Albaum that you're on the verge of analysis paralysis. It's easy to get caught up in creating spreadsheets and analyzing data but at the end of the day, you just need to pick a market and take action. Anyone of these markets can be good cash flow markets but you can't just look at today's cash flow. What you really want to consider is the long term IRR and what the investment will look like in 10, 20 or 30 years. That's where the economic and demographic trends are important. Markets with strong economic and demographic trends and diverse. modern economies are going to provide a better total return in the long run. Personally, I would have concerns about markets with stagnant economies and shrinking populations. That doesn't bode well for a long term return. I'm curious why you don't like the Kansas City market. KC has a growing population, growing jobs, and economy driven by modern industry . It's one of the hottest cash flow markets in the country. I track about a dozen markets quarterly which you can see below. Click on the image to expand it.

Greg Scott · Answer

Selecting the perfect city is important but not the key factor critical to success.  One can be successful even in a city that has bad metrics.

More important will be selecting the sub-market within a city.

More important than that will be getting a great team.

More important than that is being educated on real estate.

Probably the most important thing is to take effective action.  Without that, none of the other items mater.

Also, do not forget that this isn't "fire and forget".  This is a learning process.  You may go into a city and find out later there is something you didn't see before that you don't like.   If that is the case, re-evaluate and move on.

Mike D'Arrigo · Answer

@Charles Mitchell There's no question that Huntsville is the far better choice in terms of population and job growth over the other markets that you've identified. Inventory is getting pretty tight in Huntsville however, so scaling might be a little difficult. You've overlooked 2 excellent cash flow markets that have a combination of strong cash flow and good economic/demographic trends. I would highly encourage you to take a good look at Indianapolis and Kansas City. We've been active in both for nearly 10 years. I'd be happy to help you out if I can.

Donald Miller · Answer

I live in Cleveland and own a condo in Detroit Shoreway.  There is a lot of segregation in Cleveland.  I would never live with my family in most of the neighborhoods.  Still the rents are high because of Section 8 and Eden government assisted rent programs that pay $$$ (think $885 for a 2bd) for properites with very little appeal.  You can get nice cash flow, but you are stuck with very little appreciation because you are going to have to sell to another investor who will be looking for a deal on your property......Just my opinion.

Federico Gutierrez · Answer

$250-400 Cashflow per door after all your expenses? Mortgage, PM, Insurance, Lawn, Capex and Maintenance?

Nic Cooper · Answer

@John Koster Had same question if you took into account greater metro area and not only the city center.  Thank you for the Cleveland info.

Charles Mitchell · Answer

So I tried to screenshot the data and noticed its a little blurry. The original google shet is this Link . Feel free to edit/play around with it if you feel it can help you. I've made a copy :)

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