Which Major Urban Market

[Maxwell Lee]

My wife and I have done a fair amount of investing in cheap cash flow markets. Aside from two condos in NoVa, the second of which was sold earlier this year, we have no experience in high appreciation markets. We wish we didn't have to sell them, particularly the second one that was ideally located by a metro station in Arlington, but it was probably necessary. 

Anyway I'd like to be able to get back into a similar market for the simple reason that a decade (or more) from now I'd like to have a property in a desirable, urban neighborhood of a major American city. I'd love to have a place that we can live in, or at least vacation in, if it makes sense as an investment. That's the key. If not, we can always just rent. But boy would it be nice to find something that we can get in on early and enjoy when we want to for many years to come. 

So what kind of market/neighborhood am I talking about? Imo, today, I'm interested in NYC, Boston, DC, San Francisco, Los Angeles, Chicago, Philly or Seattle. A vibrant, walkable neighborhood in a diverse, cultured, major metropolis. (Yes Seattle is a bit borderline and kind of is a gateway to the next tier) What kind of property? Really anything is fine as long as it fits into the type of neighborhood described above. 

I'm assuming Chicago and Philly are my only realistic options for finding a sensible long-term hold...something that isn't already overvalued, overheated, and can possibly cash flow. But happy to hear any thoughts from anyone who has experience in these metro areas. Also open to thoughts and speculation on cities that could become what I've described. Thanks!!

[Amit M.]

Your idea is a smart one. Simply said, cash flow pays the bills, but appreciation is what will make you rich. 

Whichever city you decide is it for you, I'd focus on a gentrifying neighborhood. That's how you will maximize  appreciation, especially if you won't be living it it for a few years. Play that right and you can buy in a so-so hood (for now), which becomes a great hood later (and desireable for your personal use.)

Also give thought to how you'll manage the property. Condos are easiest, but hard to cashflow due to HOA and generally high prices. If you're gutsy, going 2-4 should give you better cash flow (over SFH and condo), and will help with the rent vs personal use equation. Places where these can be converted to condos or sold as TIC fractional interests will give you an even better upside. This can be done in San Francisco, but you'll need some serious coin to buy here. Less expensive cities like Chicago or Philly may be more realistic, but you'll really need to know the city well to peg the right gentrifying hood. (You'll need to nail the gangsta >> craft latte transition well!)