Hottest Rental Markets to Invest In?

Question

I am in Silicon Valley, California - which has very high rental values and very high property values. Any thoughts about the best location in the U.S. to purchase property to rent out and buy and hold?

Why do you think that the location you suggest is this is a good market?

Why do you think that the location you suggest is this is a good market?

Jay Hinrichs · Answer

@Ian Greensides  Welcome to the site... as one who grew up in Cupertino, I have certainly watched it grow from the early 60's...

@minhle I would check in with minh,  there are some great opps with the local investors there to get into bigger bay area deals as a partner... there is a very active group in the south bay that meets ... You may want to consider CA  Vegas ,, even Portland as an alternative to mid west deep south as well... WE get a lot of CA investor coming to PDX  but many also move permanently.

If you decide you want to go a few time zones east then do so with a purpose.. Many will tell you and Account Closed has a strategy to buy enough homes to create mass... buying one rental or two rentals in the mid west can be a challenge you want enough to spread you good days over your not so good.  The rental market in these areas could not be more different than the west coast.   IE for all intense and purposes we have no section 8 in our areas as its a negative stigma and most land lords who get 30 applications first day and have 700 to 850 fico's to choose from have much better tenants to pick..

Whereas Sec. 8 in many markets in the mid west and deep south is the preferred tenant. IE for the perception of government paid rent.

You also want to decide if this is cash flow or if you want some appreciation.. I know on BP I am in the vast minority in that I Look at appreciation first and foremost and cash flow second...

Best of luck with it... you will find most folks here to be very helpful.. you have already gotten Reponses above from those that sell out of state investors their homes so depending on what type of feedback your looking for consider the source.

IN out of state turnkey you have 3 types of sellers.

1. you have a marketing company that generally just acts as middleman broker to the actual turn key company

2. You have actual turn key company were your buying from the folks that own the asset and may also own the PM company or are closely affiliated.

3. And you will have RE brokers who kind of middle man you buy off the open market and they help with the rehab etc.. your taking the position of a rehabber in those instances.

Lastly and this is a very important point.. properties in the mid west and deep south are not as liquid as our west coast properties..  IE you just can't pop them on MLS and sell them in 30 days for all cash... In the mid west and deep south the marketing companies and turn key providers create market demand as opposed to market demand being made organically. And those that sell this will tell  you if you buy one of these and need to sell in 2 to 5 years your probably going to write a check to sell it...

Account Closed · Answer

@Ian Greensides I live in San Jose and have been out of state investing in Indianapolis and Birmingham for just over a year now.  I have seen a little success and managed to buy 6 properties since October 2014.  I was like you once trying to find the best market possible and kept getting "analysis paralysis".   In the end I decided that all the main cash flow markets were great markets and went with where I felt the cash flow was best and the purchase prices were the lowest.  That led me to Birmingham and Indianapolis.  The next step was finding a good turnkey provider in these markets and after meeting and working with a few I believe I have found the perfect teams in both markets to help me.  All but 1 property has been smooth sailing  for the most part.  The 1 that isn't doing to well is from a provider I will never use again.  The good thing is I learned a tremendous amount to protect me for purchases in the future.  with the interest rates remaining low all the main investing markets are hot this year making inventory low and demand high.  My guys in Indy have a waiting list for clients because they can't supply the demand.  Birmingham seems to have a bit more inventory but this is getting more and more competitive and sooner or later will be just like the rest of them if it isn't already.

I like Tom"pay it forward" and help others.  I had someone like me help me when I started and feel obligated to do the same.  PM if you want to hear more or connect with the people I work with.

Account Closed · Answer

Ian,

I have no clue which rental markets are hot. I just know our market is in high demand. If you owned rentals in the Bay Area, you'd know what I mean. Google probably can help with your question.

Everyone has different goals and risk tolerance. Some people like to chase yield while others like to build long-term wealth. There's no right or wrong answer. If the yield is only 8-10% CoCR with no chance of property appreciation, I'd rather be a private lender. No tenant, no toilet, no headache.

When it comes to investing, I like to evaluate my investments based on IRR. I don't mind giving up several percent in yield in exchange for build-in equity. Sometimes, the answer is right in front of us. We are just too lazy to devote our time to recognize it.  As Albert Einstein said "It's not that I'm so smart. It's just that I stay with problems longer."

Have fun figuring it all out. It should be a fun and rewarding journey.

Curt Davis · Answer

There are lots of markets around the country that are going to be considered great rental markets. Some of the ones you will typically hear about will be Memphis, Kansas City, Dallas, Houston, Birmingham, and those are just a few I mentioned and there will be others who will chime in.  I am sure I have just awakened the Kraken by listing all those cities.

Are you planning on going the TK route or using a Realtor in the market you decide to buy in?  Making sure you have a good team or TK provider in the market you choose is probably more important then the market itself.

Good luck

Daniel Miller · Answer

@Jay Hinrichs Lastly and this is a very important point.. properties in the mid west and deep south are not as liquid as our west coast properties..  IE you just can't pop them on MLS and sell them in 30 days for all cash... In the mid west and deep south the marketing companies and turn key providers create market demand as opposed to market demand being made organically. And those that sell this will tell  you if you buy one of these and need to sell in 2 to 5 years your probably going to write a check to sell it...

Excluding Florida's big three (Tampa, Miami, Orlando)

Jay Hinrichs · Answer

@Ian Greensides  as for out east hot markets  check out Charleston and North Charelseton I moved into that market 2 years ago when Boing fix the 787 battery issue. its blowing up... of course price points are not mid west.. but that is a great town in my mind.

Jon Klaus · Answer

Another thing to look at besides cash flow and price/rent ratio, is future rent growth.  Look at cities with high job and population growth where new construction is constrained or expensive.  Maybe even somewhere in your own backyard.

Account Closed · Answer

Currently, many of the best cities for "Buy & Hold" are in Florida, probably for next 5 years.

~ Yoshi

Jennifer Nguyen · Answer

any changes in hot markets a year later?

Walter Key · Answer

Omaha, NE and the surrounding area is another great market.

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