Help Picking a Market

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Help Picking a Market

Priya Gohil
Member since 2021 路 13 posts 路 20 votes

I need help picking a market. Just watched Bigger Pockets podcast/video about picking a market here as well as read through this article about markets with both appreciation and cash flow here

First lesson - keep the end in mind. So, my end goal is to replace some of my current income. Ideally, want to replace all of my income, but I'll start small. Therefore, I think I'll be placing heavier emphasis on cash flow markets. That way I can also build more capital to invest elsewhere. However, I would still like to either maintain or get some appreciation on my investment. I want to invest around 50K, looking around for properties around $250k.

Second lesson - look at market data. I'm always trying to find good data. I really like the  appreciation vs. cash flow article here, but also not sure where to look for things like where businesses are moving to and types of jobs in the area written in the same way as that article. For example, when I google, I often find those types of "Top 10 cities" without knowing where the data is coming from, what the methodology is, and what parameters are they looking at. These types of articles vary a lot. Am I being too data centric now? idk.

  • Correct me if I'm wrong, I keep hearing about biggerpockets.com/insights on multiple videos and podcasts - and I thought it was a database of information you can sift through, sort, etc. similar to the excel sheet in the appreciation  vs. cash flow, but now that I've searched through the site it's just BP PRO blog articles?

Third lesson - where is your unfair advantage. Other than California, which I can't afford right now, the places I've been looking at and can afford...well, I don't know anyone in that area. So don't think I have an unfair advantage anywhere else. So I will have to go about calling property managers and real estate agents to get a better idea.

Now, everytime I watch a video, listen to podcast, read an article, look at instagram, etc. different cities attract my attention, and I can't seem to decide where to focus on. After a couple of analysis in one area, I often jump to another area completely different area then start feeling like I can't find anything.

These are cities that caught my attention since digesting all these real estate investment content.

North Carolina: Raleigh-Durham, Charlotte, High Point

  • 1. For the universities and schools in the area as well the research triangle area for Apple's first East Coast campus.
  • 2. High point for it's accessible entry point
    3. Also, the gains I've seen here https://www.howmoneywalks.com/... 

Tennessee: Memphis, Knoxville

  • 1. In a BP video, Memphis was noted for it's RTP of 1.04%, low tax rate, and "could generate 20% can on cash return" (though where they are getting these number, idk.)
  • 2. However, a bit weary about Memphis because of how much $ is moving out of that city https://www.howmoneywalks.com/... same with the cities in Pennsylvania and Minnesota

Pennsylvania: Pittsburg, Philadelphia

  • In the article I mentioned before early in my post, both cities seem to have a good balance of both appreciation and cashflow.

Minnesota: Minneapolis, St. Paul

  • Because it also seems like an accessible entry point.

    How long should I stick it out to find property in a specific area, before moving on to the next? I also understand looking at a city isn't just it, but that it's about neighborhoods, and sifting through the properties, talking to the real estate agents/property managers etc. I guess, how do I decide where to commit my research to before contacting all these people and sticking it out. I feel like my tendency to look at properties include the sun belt states (Tennessee, North Carolina, etc.) Is it because of all the research I'm doing or some bias? 

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    Evan Polaski
    Cincinnati, OH 路 Member since 2020 路 4k+ posts 路 3k+ votes
    4y

    @Priya Gohil, given your budget, I am assuming you are looking at single family or small multis (4 units or less).  As such, I would only be concerned with markets that you can get to easily/cheaply and hopefully have a direct tie to (family, frequent business trips, etc).  

    Personally, I don't think any direct real estate investment is a "hands off" investment.  Even a good manager needs to be overseen, met with in person, and I like to put eyes on my rentals fairly regularly, since it is my money on the line. 

    Secondly, the whole "cash flow vs appreciation" conversation is simply a lie to me. Most "cash flow" properties are high risk investments that can be underwritten to show cash flow, but actually hold high levels of tenant risk, turn over risk, Capex risk, and only show more cash flow by underwriting with the same assumptions as a high end area. In reality, "cash flow" areas to me are high turn over, higher turnover cost, and higher Capex, which all equates to the more risk for less return. I am not saying there won't be a lot of people, myself included, who have made very good money in these areas, but at the end of the day, 10 years ago, the "good cash flow" I was getting, was really just unaccounted for Capex or deferred maintenance. Where I made money was through renovations and ultimately appreciation, by buying in neighborhoods adjacent to where I lived, which I saw as gentrifying. Over the last decade, that gamble paid off and significantly helped grow my net worth and investable cash. I also had some that for 5 years, I could have just as easily put money in the S&P and saw a much higher return. Those were the ones that I would classify as "cash flow" properties, a bit more, since the markets were a little weaker than those directly adjacent to my neighborhood.

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    • Joshua JanusBusiness Member
      Realtor 路 Cleveland, OH 路 Member since 2021 路 1k+ posts 路 1k+ votes
      4y

      Hey @Priya Gohil have you checked out Columbus, Ohio? It is a top five appreciating city in the USA. You could get a duplex in a B-C class neighborhood for 250k and take advantage of a hybrid mix of cash flow and appreciation. 

      [email protected]614-502-5316Podcast Guest on Show #1
      3Reply
    • Joseph Bafia
      Investor 路 Raleigh, NC 路 Member since 2019 路 314 posts 路 280 votes
      4y

      You've done your homework and there is no right or wrong answer to your findings. Although I do believe there are "better" places for REI value, you can really find a good investment in any of the markets you mention. What's really important are these 2 things.

      1) How much research, work connections and investigating are you personally willing to do in any of these markets?  You are competing with investors in those markets who know those areas so you have to outwork them to find a deal that they can't find.

      2) Network in those areas.  If you have connections, resources, fellow investors, friends, etc. in those markets, you have connections to hearing what is available.  If you are missing these resources, again you are competing against "experts" in those markets and they have an advantage over you.

      I'm in Raleigh, but I invest in Western NC (4 hours from me), coast of NC, (2.5 hours away), CA, and IL.  It can be done.

      My advice is pick a place and put ALL your efforts into a strategy to get into the game in that market.  Start by finding someone who has been successful in that market and willing to help you get into it as well.  (those people are out there)

      3Reply
    • Evan Polaski
      Cincinnati, OH 路 Member since 2020 路 4k+ posts 路 3k+ votes
      4y

      @Priya Gohil, given your budget, I am assuming you are looking at single family or small multis (4 units or less).  As such, I would only be concerned with markets that you can get to easily/cheaply and hopefully have a direct tie to (family, frequent business trips, etc).  

      Personally, I don't think any direct real estate investment is a "hands off" investment.  Even a good manager needs to be overseen, met with in person, and I like to put eyes on my rentals fairly regularly, since it is my money on the line. 

      Secondly, the whole "cash flow vs appreciation" conversation is simply a lie to me. Most "cash flow" properties are high risk investments that can be underwritten to show cash flow, but actually hold high levels of tenant risk, turn over risk, Capex risk, and only show more cash flow by underwriting with the same assumptions as a high end area. In reality, "cash flow" areas to me are high turn over, higher turnover cost, and higher Capex, which all equates to the more risk for less return. I am not saying there won't be a lot of people, myself included, who have made very good money in these areas, but at the end of the day, 10 years ago, the "good cash flow" I was getting, was really just unaccounted for Capex or deferred maintenance. Where I made money was through renovations and ultimately appreciation, by buying in neighborhoods adjacent to where I lived, which I saw as gentrifying. Over the last decade, that gamble paid off and significantly helped grow my net worth and investable cash. I also had some that for 5 years, I could have just as easily put money in the S&P and saw a much higher return. Those were the ones that I would classify as "cash flow" properties, a bit more, since the markets were a little weaker than those directly adjacent to my neighborhood.

      3Reply
    • Evan Kraljic
      Investor 路 Minneapolis, MN 路 Member since 2019 路 129 posts 路 210 votes
      4y

      I like Minneapolis/St. Paul as a local, but wouldn't recommend it for someone investing out of state. The main reason for that being that both cities are very much tenant friendly. St. Paul recently implemented 3% rent control (irrespective of inflation) which has been a complete disaster so far - no one knows how to enforce it, developers are stopping new builds, etc. Minneapolis has an ordinance which will allow rent control to be implemented in the future, but as of now the mayor does not support it so that should hold off for a couple years. Anyhow, that compared with fairly high taxes and moderate cash flow makes me think that you could do better in a place like Knoxville or Pittsburgh, not knowing too terribly much about those markets. 

      I'm not doom and gloom on the twin cities as some other investors I know are, and will continue to invest my money here, but I can't realistically advocate for others to do the same without an unfair advantage, as you stated in your post. Good luck!

      2Reply
    • Bruce WoodruffPro Member
      Contractor/Investor/Consultant 路 San Diego / Phoenix 路 Member since 2021 路 12k+ posts 路 15k+ votes
      4y

      My initial read of your post makes me think you're over-analyzing this.

      Pick a couple areas and go visit...you'll know when it feels right. Then hook up with a Realtor and get going.....

      In the meantime you can figure out exactly what angle you want to do: STRs/LTRs/BBBBRs/ MFs/Etc....

      1Reply
    • Priya Gohil
      OP
      Member since 2021 路 13 posts 路 20 votes
      4y

      @Evan Polaski - Unfortunately, the places I can afford right now I don't have much of a connection to nor have visited myself. Understood about the not so "hands off" investment. Totally okay with that. Lastly, looking for that right balance of cash flow and appreciation which is why I'm not even looking at Detroit, lolll. 

      @Evan Kralijic - Thanks for your frank opinion on Minneapolis, MN

      @Bruce Woodruff - I do tend to overthink.

      Thanks for all your responses.

      3Reply
    • Kyle Spearin
      Real Estate Agent 路 Boston, MA 路 Member since 2016 路 446 posts 路 214 votes
      4y

      @Priya Gohil lots of great information above. There are deals in any market, but in my opinion, it's worth exploring Charlotte more-- it has a strong job market (fintech space in particular), a growing population, and it's on the border with South Carolina which is more of a landlord friendly state where you could own property. Good luck!

      0Reply
    • Priya Gohil
      OP
      Member since 2021 路 13 posts 路 20 votes
      4y

      Reflection Post

      **This is for anyone reading my post and who was in my position when I first wrote it.**

      Which market should I invest in and how long should I stick it out to find property in a specific area, before moving on to the next? 

      Before I answer this question, I think it is important to make sure you know what want and can afford.

      For me, I wanted a property that was pretty much turn key and required minimal updates (painting or adding washer-dryer) as a buy and hold investment. I wanted something around 250k at the time of this post, but actually I wanted something around low 200s. My end goal was to have a mix of cash flow and appreciation as a buy and hold investment.

      I had to reevaluate many times how much I was willing to spend. I think at times I caught myself willing to spend A LOT more than what I was truly comfortable with. I think I would make excuses or adjust the criterias just to make something work. 

       I really wanted to invest in certain parts of North Carolina. However, after about 3 months of crunching numbers, it just wasn't working out the way I wanted. I felt spread thin or had to look for other ways to finance the property. (Disclaimer: I was looking at a very specific part of NC. I am sure there are deals to still be found there or it would make a good investment for someone).

      I didn't really think much of Ohio until I posted here on Bigger Pockets. Then I remembered I have coworkers out there! I picked the brain of my coworkers, and asked what areas they lived in and what they thought of certain neighborhoods. Ever since, I started to notice companies that were based in Ohio or had headquarters there. From the return address of the mail I received to the the address listing of apps I use at work, Ohio caught my eye. It wasn't much of an "unfair advantage" but I did start to notice Ohio a lot more in my day to day. This got me more comfortable with the idea of investing in that market. To top it off, the market was more within my price range, and I started to see numbers that I was excited about.

      I started looking in Ohio in December. Started putting offers in around late January. Closed in mid-March.

      TDLR; In my experience, the criterias you adjust for after a couple months of just looking and running numbers will help you determine which market might suit you the best. Lastly, I'm not sure if it makes sense to give a specific duration for how long you should search within a market (considering economic conditions and all), but if I had to I would look into a market for about 3+ months before moving on to the next.

      Hope this helps someone & thanks to everyone who responded to my initial post! 

      5Reply
    • Remington LymanBusiness Member
      Real Estate Agent 路 Columbus, OH 路 Member since 2017 路 6k+ posts 路 7k+ votes
      4y
      Quote from @Priya Gohil:

      Reflection Post

      **This is for anyone reading my post and who was in my position when I first wrote it.**

      Which market should I invest in and how long should I stick it out to find property in a specific area, before moving on to the next? 

      Before I answer this question, I think it is important to make sure you know what want and can afford.

      For me, I wanted a property that was pretty much turn key and required minimal updates (painting or adding washer-dryer) as a buy and hold investment. I wanted something around 250k at the time of this post, but actually I wanted something around low 200s. My end goal was to have a mix of cash flow and appreciation as a buy and hold investment.

      I had to reevaluate many times how much I was willing to spend. I think at times I caught myself willing to spend A LOT more than what I was truly comfortable with. I think I would make excuses or adjust the criterias just to make something work. 

       I really wanted to invest in certain parts of North Carolina. However, after about 3 months of crunching numbers, it just wasn't working out the way I wanted. I felt spread thin or had to look for other ways to finance the property. (Disclaimer: I was looking at a very specific part of NC. I am sure there are deals to still be found there or it would make a good investment for someone).

      I didn't really think much of Ohio until I posted here on Bigger Pockets. Then I remembered I have coworkers out there! I picked the brain of my coworkers, and asked what areas they lived in and what they thought of certain neighborhoods. Ever since, I started to notice companies that were based in Ohio or had headquarters there. From the return address of the mail I received to the the address listing of apps I use at work, Ohio caught my eye. It wasn't much of an "unfair advantage" but I did start to notice Ohio a lot more in my day to day. This got me more comfortable with the idea of investing in that market. To top it off, the market was more within my price range, and I started to see numbers that I was excited about.

      I started looking in Ohio in December. Started putting offers in around late January. Closed in mid-March.

      TDLR; In my experience, the criterias you adjust for after a couple months of just looking and running numbers will help you determine which market might suit you the best. Lastly, I'm not sure if it makes sense to give a specific duration for how long you should search within a market (considering economic conditions and all), but if I had to I would look into a market for about 3+ months before moving on to the next.

      Hope this helps someone & thanks to everyone who responded to my initial post! 


       Congrats on your success in Ohio!

      [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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      1Reply
    • DeAndre White
      Investor 路 Ohio & Fort Lauderdale 路 Member since 2021 路 75 posts 路 50 votes
      2y

      This post found me at the perfect time, and really hit home - thanks everyone!

      3Reply
    • Megha Malhotra
      Member since 2024 路 5 posts 路 5 votes
      2y

      Hey Priya, thanks for such a thorough post. Any turnkey company recommendations in ohio?

      3Reply
    • Taz Zettergren
      Real Estate Agent 路 Memphis, TN 路 Member since 2019 路 365 posts 路 264 votes
      2y

      @Priya Gohil Memphis is a great market that's landlord friendly with a very low entry cost. There are tons of economic stabilizers and with the addition of XAI coming to town and the Ford Blue Oval plant this is helping the economy even more. 

      @Megha Malhotra I've heard good things about @Engelo Rumora

      2Reply
    • Engelo RumoraBusiness Member
      Investor 路 Toledo, OH 路 Member since 2013 路 4k+ posts 路 2k+ votes
      2y
      Quote from @Taz Zettergren:

      @Priya Gohil Memphis is a great market that's landlord friendly with a very low entry cost. There are tons of economic stabilizers and with the addition of XAI coming to town and the Ford Blue Oval plant this is helping the economy even more. 

      @Megha Malhotra I've heard good things about @Engelo Rumora


      Hi Taz,

      Appreciate the mention 馃檹

      You guys set the standard we do our best to follow 馃憤

      Hi Megha,

      Happy to assist if you are interested in the Ohio market.

      We aren't perfect but always do our best.

      We also only work with investors looking to purchase with cash so keep that in mind.

      Reasoning is two fold:

      1) I don't believe investors should build the foundation of their portfolio with leverage (Especially now in this high interest rate climate). It makes it more risky with vacancies/turnover and if an investor needs/wants to exit quickly.

      2) Our price points are very low entry so many can easily purchase with all cash.

      We also choose to not deal with the logistics of when it comes to selling a property via finance.

      I have always believed that "less is more" and could easily triple our sales volume if we wanted to sell via financing.

      So at the end of the day it's a decision which in our eyes protects investors long term interests and a business decision to minimize financing hassles on the back end.

      Much success

      Podcast Guest on Show #89
      Oz Realty4.5367 Reviews
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    • James WachobBusiness Member
      Real Estate Broker 路 Memphis, TN 路 Member since 2015 路 1k+ posts 路 887 votes
      2y

      Memphis is a major transportation and logistics hub, home to FedEx鈥檚 global headquarters and a key center for shipping and distribution. This economic stability and growth in logistics, healthcare, and education sectors create job opportunities, attracting more residents. I'd love to be your contact in Memphis, TN. 

      1Reply
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