Cleveland vs. Rochester vs. Buffalo for cash-flow?

Question

Hello everyone, I am new to this site and I am totally green to investing in real-estate. However, this is something I have been wanting to do for about 8 years, and I am finally in the position to do so.

Here is my situation, I am 24 years old and I work a remote tech job that pays 100k a year. Currently, I have 50k in cash.
I do not really have any monthly expenses as I've been living with my parents in Texas for the time-being.
I am very much willing and capable of traveling out of state to find a better investing environment.

For the longest time, I had planned to invest in the Austin-Dallas metro areas (pre-pandemic), but the recent price/interest surges have made these areas not great for cash flow. I also thought about buying an Airbnb, but doing so would mean having to put "all of my eggs in one basket" (as cash generating airbnbs tend to be pricier).

Some cities I am now eyeing include Cleveland, Rochester (NY), Buffalo, and Albany. Here, houses are more affordable and the rents are relatively high. While these investments will mainly be for cash flow, I don't want to invest in an area where properties will greatly depreciate (if at all). Likely, I will end up house-hacking in one these cities to remain available for property managing.

My overall goal is to create a scalable portfolio of cash-flowing properties. I am hoping to put all of my earnings toward this project until I reach some form of financial independence.

So my questions are, which city would be best for cash-flow and some appreciation (Cleveland vs. Rochester vs. Buffalo vs. Albany vs. Other)?
Do you think it is possible to own 7-12 units within 2 years in these markets?

I feel there are so many routes that I could take, but I am inexperienced.
Currently, I am going for the cash-flow route as I feel that will help me reach financial independence sooner, but if you have other ideas I would love to hear them.
Thank you!

Jordan Smith · Answer

Rochester native here and went to college in Buffalo - I currently house hack a 3-unit in downtown Rochester. I'm still a newbie with one property so take it with a grain of salt. A few of my thoughts below:#1 - Certain areas of Rochester I would avoid (I'm sure it's the same in Buffalo/Cleveland or anywhere for that matter). The true A-B class locations are harder to come by and at a higher price point. Anything lower I personally wouldn't want to house hack or manage, just my preference. Rochester currently has a terribly high crime rate and I don't want to be anywhere near that. #2 - I can tell you it's highly unlikely you will cashflow while house hacking. The other two units in my house cover about 90% of the monthly payment, and that's with a great interest rate/loan product from 2021. You would really need the perfect storm for that to work right off the bat (i.e. living in a studio unit while the other units are a renovated 1-2bed with above average rent. 90% is still great and I don't think anyone would really complain about that, but it's not cashflowing until I move out. #3 - In terms of scaling quickly, I think it's possible with the money you have, however I don't think they'd all be A/B class properties. Not sure what your preferences are, you can certainly get in for cheap around here, but at a different cost that I'm not willing to pay.

James Wise · Answer

You're really splitting hairs when comparing all 3 of these markets. What will matter to you more is what you buy in one of these markets as opposed to which one of these markets you buy in.Do research on all of them and when you've become comfortable with what you've learned and who you'll be working with to make the deal happen it'll be time to buy.I don't operate in Buffalo or Rochester but have sold $200 Million+ worth of rentals in Cleveland. As you learn the Cleveland market you will want to check out The Ultimate Guide to Grading Cleveland Neighborhoods. I highly recommend getting this level of knowledge on all 3 of these areas before buying. When folks who aren't familiar with a market start shopping on Zillow, they really jam themselves up when they don't realize the differences between one neighborhood and another.Good luck out there playa.

Paul Thomas · Answer

Rochester and Buffalo taxes aren't great. You're looking at payments that can be similar to a mortgage payment. I think they are probably lower, in Cleveland. The snow in Rochester is not nearly as much as Buffalo. Certainly more than Texas, though!I have been able to build up a decent portfolio here, in Rochester. The REIA here is full of good people, too.I think there is a lot to do around Rochester during good and bad weather. If you decide on Rochester, then welcome!

Shane Kelly · Answer

Househacking in a city would be an idea to consider. The tax benefits and being able to get into it for cheaper make it highly enticing. Of course, if you're to move to a city you're gonna have to go somewhere you would enjoy to some extent. As for the cities you've mentioned. I've been to all of them, but only ever called Cleveland my home, so I can't give much advice on the NY ones. Cleveland is a great city to own rentals in, and to live in, so I think it's a strong option to consider. Might have to buy a nice coat though, if you've only ever lived in Texas lol. If you have any questions about Cleveland, I'm happy to answer them. Best of luck!

Nathan A. · Answer

If you can move anywhere you want and house-hack once you get there, you're in an enviable spot.If you haven't seen it, here's Dave Meyer's list of the best cash-flowing markets. Take a look at the spreadsheet that goes with the article. To the appreciation/depreciation side of your question, all people can do is speculate. No one can tell you for certain. Here is one point of view on what's ahead. I would encourage you to learn to analyze some market fundamentals yourself to come to your own conclusions about what's ahead for the local economy and population growth or loss (which drive real estate supply and demand) in areas you're interested in.When you move to a city, consider renting there briefly while you get to know the area before you buy anything. You will need time to get to know the neighborhoods well so you don't inadvertently pick a Class D property.

F. Ramon Vill · Answer

Thanks everyone for the insights and resources! It seems that it all comes down to making sure I buy in the correct neighborhood. I will probably spend about several weeks in each city to get a feel of the areas.I went to school in western mass, so I am no stranger to snowy weather. I actually love the snow, so I am excited see it again.