Fairfield, CA · Member since 2017 · 98 posts · 84 votes
My strategy thus far has been to find properties that cash flow $300-500 a month in areas that appreciate. While the cashflow I have earned thus far has been mediocre ($3k-5k/yr for last 5 years), the appreciation has been huge ($526k, huge for me anyway, lol).
I am hoping to repeat this success with my future purchases, but I know it won't work in the areas I bought in previously. They have already appreciated beyond the price for which they would cashflow.
So, what areas right now still have decent cashflow (monthly rents are 1-3% of purchase price), and are in an area that historically has seen, and is likely to see again, appreciation?
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Joseph Hennis The challenge is that you'd need a time machine to make your strategy work. Sounds glib but if it was predictable then everyone would have bought in markets like Austin and Nashville 8 years ago. Appreciation almost inherently kills cash-flow. In SFRs you get appreciation because of competition. So you're now competing with owners and not investors. Owners will almost always happily pay more than an investor because they're driven by emotion. That competition increases your purchase price, mortgage payment, and (by definition) cash-flow. Someone will find the "next Austin", it might be Indianapolis, it might be Boise, you just don't know.
I honestly dont know how anyone can answer you confidently. It's really a guessing game...I'd say even an educated guess would still need a lot of luck to turn out correct in this case.
Maybe Indy? Maybe KC? Maybe Jax? Maybe Louisville? Maybe Chattanooga/Richmond/Birmingham/Detroit/NWA/OKC? There's a reason why all the above have potential and some others as well. But for legit, Denver/Austin/Nashville explosion it's hard, or impossible, to anticipate.
Fairfield, CA · Member since 2017 · 98 posts · 84 votes
9y
@Diane G. clearly it does exist. I have already done it. I will do it again. It's not that hard. Just gotta be patient.
@Andrew Johnson I disagree with you on some of that. Appreciation isn't just a guessing game or gamble, there are strategies to position yourself to get it when it comes, but you are right, it is not predictable in the short term. It's kind of like they say in the BP podcasts, you make your own luck by being out there and talking to people. In the rental market, you make your own luck (for appreciation) by being in the market and owning rentals. That doesn't mean you should buy barely cashflowing properties in a place that has, and will likely never have, appreciation.
@Maxwell Lee Yeah I'm not looking for a confident answer. Appreciation doesn't work like that. One thing to look for is an area where the market is depressed currently, but historically the area sees appreciation (like california, 2008-2013).
Look, there are articles out there with EDUCATED guesses. Educated because they analyze trends and look at market data. No, no one has a crystal ball and will know what will happen in the next year, but over much longer periods of time, the market has predictable cycles. I am a patient investor.
In any case, I will be earning money from the cashflow and debt repayment, long term. Just don't really want to be in an area where it will never appreciate. I already have some ideas and places on my radar. Just wanted peoples' opinion on some other good places out there. Maybe I have missed an obvious one.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Joseph Hennis I never said to buy barely cash-flowing properties in a market that has never experienced appreciation. I don't know how on earth you got that from my reply. Appreciation is, as you put it, an educated guess. However, you would have a lot of "right" guesses in 2010 and a lot of "wrong" guesses in 2006 (both equally educated). A good cash-flowing property still makes you money in either timeframe.
Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
9y
Gotcha @Joseph Hennis As long as you know I am not confident in my answer, I put forth those cities in my reply. I wouldnt give any of them greater than 10% chance of being the "next it city" but there is a chance.
The Boise market is facing exactly what you stated ,,, homeowners paying well above asking prices for sfh. Pocket deals are the key. Once they hit MLS there is seldom any opportunity at all, even on "fixers"
Fairfield, CA · Member since 2017 · 98 posts · 84 votes
9y
@Andrew Johnson I'm not sure how I got that from your reply either, lol. I think I misread it.
I agree with you on the cashflow, it has to be there. It's probably best to have a mix of properties that cash flow only a little but will appreciate long term, and properties that have large cashflows but not necessarily as much appreciation... (though one can always hope...)
Right now it is definitely more difficult to find areas that will have both appreciation and cash flow. The strategy is to invest in areas that are cash flowing first, and will likely, though uncertain, appreciate.
Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
9y
Joseph Hennis you are looking for Pueblo,co. You can buy houses for around $50k. $15k down including closing costs.
Mortgage about $350/month PITI.
Rent $950/month
$650/month cash flow.
Minimum wage is $8/$9/hr.
Going up to $15/hr by 2020
Rents going up, property values going up.
I would guess between 50% and 100% appreciation due to inflation in the area.
Also Colorado is a hot spot with over 10,000 people per month registered as new Colorado residents.
Most can't afford Denver, and Colorado Springs is getting up towards Denver prices.
Everyone else trickling into Pueblo, without enough rentals, and low amounts of construction of new homes currently.
I already own properties there. I just sold my Commerce City house here in Denver. Going to send that money down to buy more.
Pueblo county is #15 in the United States markets currently, according to BP. The only one in colorado to be in the top 25.
Once everyone is making more, the cost of homes will go up, also lots of new buyers with this new money, so that will increase prices. Most investors will wait a couple years to get in when they see how hot the market is. Then they will add to the competition of buying these homes, further causing the prices to increase. It's a perfect storm, and this is the Calm... make it happen!
Property Manager · CO · Member since 2016 · 42 posts · 47 votes
9y
@Robert Herrera Hi Robert. I've been reading your post with interest about Pueblo. My husband and I have been investing in the Springs but we are are interested in buying in Pueblo as well. I'm on PPAR right now and the least expensive SF I see is 115k. Do you mind PMing me with info and advice on searching in Pueblo? We have a super fast agent and I found all our properties up here in the Springs using Redfin, PPAR, and Zillow. I'm just not seeing anything close to 50k properties but perhaps I'm looking in the wrong places! Thanks so much!
Here is one on a quick search of Craigslist. I know this one is HUD buy they don't get many sold anyway so investors can always come grab those up when the timing is up for First Time Home Buyers.
Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes
9y
@Joseph Hennis you might check the historic districts in Indianapolis. Indianapolis is not the only city that is seeing this as @Max T. said the same thing about Philly.
It can be a little dicey though, because typically these are large scale rehabs. I don't care for Fountain Square in Indianapolis as it is becoming hard to purchase at the appropriate price any more, but there are still tons of other areas that are developing in similar ways. You can check in to:
Bates Hendricks
Irvington
Mapleton/Fall Creek
Highland Park
Windsor Place
Christian Park
These are typically the pre-1940 homes. Many of these may have small foundation issues and may even need to have all of the plaster pulled from the home, but the payoff on a short-term hold strategy can be immense. Here is an real example of one of my clients who just sold one of their Fountain Square properties after 6 years. This owner does not finance, so it was all cash-flow
Purchased (Cash) - $26,900
Initial Rehab - $11,400
Rented for 36 months at $750, then $775 then $800/mo
The tenant was pretty hard on the home and it cost the owner around $9,000 to clean up and upgrade the property as needed.
The next tenant lived there for 24 months at $995/mo for both years.
After the tenant moved, the owner did a $95,000 rehab. This included refurbishing the original hard wood floors, putting in a $25,000 kitchen, finishing the attic space and adding a master suite in the loft converting from a 3 bedroom/1 bathroom to a 4 bedroom/ 2 bathroom.
They ended up selling the home for around $225k last summer.
This is not your typical deal, but similar opportunities still exist. While it's hard to get in to Fountain Square for $40k anymore, there are still other neighborhoods that are available with similar numbers.
Also, I have a client with similar success purchasing spec homes in the nicer, growing suburban areas. He doesn't cash flow the first year or two though... his money is in the principal payoff and appreciation as the area develops.
Property Manager · CO · Member since 2016 · 42 posts · 47 votes
9y
@Account Closed Hmmmm...crime is my worry down there. Thanks for sharing your knowledge on the area. I've just started to research the area. I read your profile I was raised in Indiana too and my husband and I have four boys. We love living in Colorado Springs but with prices going up so rapidly we are not sure we are going to be able to keep investing here.
Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
9y
My family has lived in Pueblo for Decades as well. This isn't the same Old Pueblo... but hey, Invest in a couple years when the market is at the TOP... and I'll sell you all the properties I've been buying up.
Crime is caused by NO MONEY... minimum wage going up to $15/hr.
Investor · Bowie, MD · Member since 2017 · 47 posts · 8 votes
9y
@Joseph Hennis, I agree with you. I think cities in Florida and Washington can produce numbers you are looking for. I am recently looking in areas in Maryland that can rent for more than the 1% and in the next 5 years have massive appreciation. They are out there. Location is key and with colleges and universities and public transportation growing, you can find properties like this.
Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
9y
Amir Safayan I see, and that's why I'm selling when everyone will be buying. I'm glad you will never invest there. Less competition. Trying to scare everyone with outdated info and tactics is not a good way to help anyone.
Here is an update for everyone wanting some info on the area
PuebloRiverWalk.com watch the videos.
Don't go to the .org as it is a good site.
Also steel mill is back up running, still prices going up, trump stopping cheap steel from being imported. Pipelines have to be done through American companies, etc. This means lots of new jobs!
Happy Investing