Thoughts on Indianapolis vs St Louis vs Birmingham vs OKC markets

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Thoughts on Indianapolis vs St Louis vs Birmingham vs OKC markets

Eric Chase
Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
Greetings friends! I’m a SFR buy and hold investor looking to branch into a new market. These are the ones I keep hearing about and I’m interested in your thoughts on their positives and negatives as they compare to each other. Would love your long-term thoughts on jobs, population dynamics/growth, cash flow, appreciation...anything you can provide about the markets will be value added to me! Thank you and all the best! Cheers! Eric
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Chris ClothierBusiness Member
Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
7y

@Eric Chase - We've researched and visited each of those markets.  They are all similar.  I don;t have the indy data on this spreadsheet and included oklahoma city by accident.  But, here is the data that we compile anytime we go to a new market and we have researched close to 20 markets at this point.  

Don't pay attention to the first line as it didn't line up correctly, but you can see from the columns and lines that we pick a few metrics centered around affordability and future job growth.  The viability of a market is really going to be centered around job growth and wage growth.  Affordability is equally important and tax rates, cost of housing and median income all play into that number.

A site you can use that gives you all of this plus a ton of other data points is Best Places .net.  Also, use MSA numbers and not just city numbers.  That will take into account surrounding areas and path of progress.

Oklahoma CitySt. LouisBirmingham
MSA (as of 12/2017)OKCSTLBHM
Population1,358,4502,811,5901,145,650
Median Home Price$132,300$143,400$126,300
Homes Rented31.72%26.98%26.31%
Homes Vacant10.43%10.31%13.45%
Cost of Living (% of national avg)87%91%84%
Property Tax Rate / $1000$10.13$13.62$5.20
Unemployment Rate4.70%4.90%6.00%
Recent Job Growth (last 12 mos)2.98%2.96%-0.35%
Future Job Growth (next 10 years)41.25%41.02%33.30%
Family Median Income$63,140$70,470$60,921
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  • Hank Keller
    Rental Property Investor · Mansfield, OH · Member since 2017 · 151 posts · 117 votes
    7y

    The guy i buy turnkey rentals from has a great model which i’ve Adopted: Look for markets that have:

    1. Population over a million and good growth rate. This ensures that there are plenty of available houses (with an approximate 3% foreclosure rate, there are about 3000 houses at auction each month), renters to choose from and that the city is growing rather than stagnate or losing population. Good markets didn't drop during the 2008 crash...

    2. Cheap Houses. Make sure you get at least the 1% rule meaning $1000 of rent for each $100k of purchase. This should also ensure youre getting about 8% return on your money.

    3. Business Friendly and Credit worthy City/State. Look at how easy it is to set up an LLC, the costs of maintaining the business and the cost and timing of evicting a tenant. Also look for states and cities that have a good credit rating which ensures that they will be pouring money into revitalization which increases jobs, growth, appreciation and rents.

    4. Jobs. Look for cities where there is a good mix of manufacturing, warehousing and overall good job market with low unemployment. it also ensures that taxes won't go up in the event that a city starts going bankrupt.

    Using these four criteria will help you to narrow your search for what city to invest in... Hope that helps.

    3Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y

    @Hank Keller Absolutely! Thanks for the info. Have you had good success with your turnkey provider? Who do you use?

    0Reply
  • Kerry Noble JrPro Member
    Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes
    7y

    Born and raised in Indy..........in Indy you can live pretty decent on a decent salary. the inner city is going through changes......properties that were once ran down are made into 300k properties, easily...... check out the Indianapolis Business Journal for more info. I read it several times a week. Feel Free to connect if interested. 

    1Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y

    @Kerry Noble Jr Thanks for responding, Kerry! I've seen that the Indy population is increasing (though slowly). What kind of changes are you referring to in the inner city?

    0Reply
  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
    7y

    @Eric Chase - We've researched and visited each of those markets.  They are all similar.  I don;t have the indy data on this spreadsheet and included oklahoma city by accident.  But, here is the data that we compile anytime we go to a new market and we have researched close to 20 markets at this point.  

    Don't pay attention to the first line as it didn't line up correctly, but you can see from the columns and lines that we pick a few metrics centered around affordability and future job growth.  The viability of a market is really going to be centered around job growth and wage growth.  Affordability is equally important and tax rates, cost of housing and median income all play into that number.

    A site you can use that gives you all of this plus a ton of other data points is Best Places .net.  Also, use MSA numbers and not just city numbers.  That will take into account surrounding areas and path of progress.

    Oklahoma CitySt. LouisBirmingham
    MSA (as of 12/2017)OKCSTLBHM
    Population1,358,4502,811,5901,145,650
    Median Home Price$132,300$143,400$126,300
    Homes Rented31.72%26.98%26.31%
    Homes Vacant10.43%10.31%13.45%
    Cost of Living (% of national avg)87%91%84%
    Property Tax Rate / $1000$10.13$13.62$5.20
    Unemployment Rate4.70%4.90%6.00%
    Recent Job Growth (last 12 mos)2.98%2.96%-0.35%
    Future Job Growth (next 10 years)41.25%41.02%33.30%
    Family Median Income$63,140$70,470$60,921
    Podcast Guest on Show #224
    REI Nation4.576 Reviews
    WebsiteView Page
    7Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y

    @Chris Clothier - Thanks so much! Really appreciate you taking the time. I actually had you in mind when I listed OKC as an area of interest. Need to schedule a call with you one day soon.

    Cheers!

    Eric

    0Reply
  • Hank Keller
    Rental Property Investor · Mansfield, OH · Member since 2017 · 151 posts · 117 votes
    7y
    Originally posted by @Eric Chase:

    @Hank Keller Absolutely! Thanks for the info. Have you had good success with your turnkey provider? Who do you use?

     Sent you a PM so I’m not advertising...

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    7y

    @Hank Keller These are all very different markets. If you're goal is cash flow, I think Indianapolis would be the best choice. Indy is not only a good cash flow market but has strong economic and demographic fundamentals such as growing population, jobs and  modern, diverse industry whereas St Louis and Birmingham are pretty stagnant. OKC has a growing economy but I don't know the market well enough to know how it ash flows. I've been active in Indianapolis since 2010 so I know it well.

    1Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y
    @Mike D'Arrigo Thanks, Mike! Really appreciate the feedaback. Love getting all perspectives!
    0Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y
    Do any of you weigh schools particularly heavily in your decisions to invest in a given market?
    0Reply
  • Matthew Perry
    Developer · Boston, MA · Member since 2017 · 125 posts · 137 votes
    7y

    @Eric Chase

    personally I would go with OKC or Birmingham over Indy and St. Louis. Indy is a close third however, and St. Louis is a distant fourth. B'ham is poised rapid growth in the next couple of years, but I do not think it poised for immediate growth like OKC growth is right now. It becomes a question of period of time you are looking to hold for. If it is less than three years I would lean towards OKC, if it is longer that is B'ham. This is not a knock on Indy by any means just a stronger preference right now towards the other two but it is a really close call.

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    7y

    @Eric Chase Good schools are very important for a retail flip but less so for a rental. Many renters young, single and don't have children. Also, not everyone can afford the rents in areas with good schools. Everyone needs a place to live so people rent where they can afford. Most of Indianapolis and Kansas City doesn't have great schools but it doesn't inhibit getting good tenants.

    2Reply
  • Hank Keller
    Rental Property Investor · Mansfield, OH · Member since 2017 · 151 posts · 117 votes
    7y
    Originally posted by @Mike D'Arrigo:

    @Hank Keller These are all very different markets. If you're goal is cash flow, I think Indianapolis would be the best choice. Indy is not only a good cash flow market but has strong economic and demographic fundamentals such as growing population, jobs and  modern, diverse industry whereas St Louis and Birmingham are pretty stagnant. OKC has a growing economy but I don't know the market well enough to know how it ash flows. I've been active in Indianapolis since 2010 so I know it well.

    Agreed Mike. I’ve also got very good cash flow in Indy as well as my Charlotte property. Most of my Indy properties are appreciating @ ~ 3-5% but one of my very first properties purchased is in an Opportunity zone and i’m Seeing double digit appreciation. Very happy in Indy; in most cases they are outperforming my local buys.

    2Reply
  • Tae Kim
    Rental Property Investor · Brooklyn, NY · Member since 2017 · 18 posts · 15 votes
    7y

    @Eric Chase

    As the above posts have shown, the three markets you're interested in have their distinguishing factors but all have proven to be productive SFR buy-and-hold rental markets... with the correct local team in place. I ended up investing in Birmingham and own 2 SFRs, but i'd say my decision was largely based on my comfort level when trying to build a local network. Sounds as though with proper homework, and assuming you have the correct amount of capital to play with, all three choices can produce.

    Feel free to reach out if you have any questions about Birmingham, i'd be happy to connect you with some of the folks that i've used as boots on the ground

    Tae

    1Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y

    @Tae Kim 

    Hi Tae, thanks for taking the time to provide your thoughts! I may take you up on it as I get smarter about the market and can ask better questions. 

    Cheers!

    Eric

    0Reply
  • Rhett TullisBusiness Member
    Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes
    7y

    i only know okc but have a bit of knowledge here.  overall i have found it a good market.  there are still some deals to be had but there is more competition now.  

    [email protected]405-283-6522
    Integrity Oklahoma
    WebsiteView Page
    1Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y
    @Rhett Tullis Good to know! Thanks, Rhett!
    1Reply
  • Rob Barry
    Rental Property Investor · Ramsey, NJ · Member since 2016 · 72 posts · 55 votes
    7y

    I just got back from a prospecting trip in Birmingham. I can't comment on the other markets but B'ham is pretty enticing for a longer-term cashflow play as @Matthew Perry suggested. There's loads of sub 70k inventory that'll rent for ~$800 and taxes are stupid low. The signs of coming growth are there: jobs expansion, downtown revitalization, brand new schools thrust into Class D war zones. The bigger craft brewpub in town just bought the smaller one. Six years ago there were no craft brewpubs. But the big engine of revitalization seems to just be getting moving. Seems like it could take some years.

    I was surprised by the number of burned-out houses and run-down neighborhoods there were. The housing stock is a bit older - though the brick 3/1s do seem pretty solidly built. I'd really go out there if I were you, learn the neighborhoods and meet people if you're thinking of going in. I would't buy one SFR there unless I planned to scale to 10+. People seem to be doing the portfolio play. But I'm thinking of doing just that.

    0Reply
  • Clayton MobleyPro Member
    Birmingham, AL · Member since 2014 · 875 posts · 947 votes
    7y

    @Eric Chase I know I'm late to the party but this thread only just caught my attention. Obviously, I'm biased towards Birmingham, but I noted a bit of data listed above that's a bit out of date. I'm including some references that are as unbiased as possible (ie no AL.com links lol). 

    The unemployment rate for the Birmingham-Hoover MSA has been on a steady decline. Most recently fully compiled data (Nov 2018) has it at 3.1%, not 6%: 

    https://www.bls.gov/eag/eag.al_birmingham_msa.htm

    Similarly, our jobs growth over the past 12 months for which full data is available (Nov 2017-2018) shows jobs growth of 25,102 jobs, or just under 5%... (25,102 increase / 505,088 jobs in Nov 2017): 

    https://data.bls.gov/pdq/SurveyOutputServlet

    Since census data is from 2010 and won't be done again until 2020, the USCB has to estimate population and other metrics based on trends, so bear that in mind. Still, two different sources that use that data show the % of total households that are rented in Birmingham is closer to 31%, and the NLIHC shows Jefferson County is up to 37% (you can change the MSA/county selection via a drop-down menu on the right)

    https://reports.nlihc.org/oor/alabama

    https://www.deptofnumbers.com/rent/alabama/birming...

    The 'Dept of Numbers' also shows our rental vacancy (number of vacant rentals vs total number of available rentals, which includes apartments) being below 8%:

    https://www.deptofnumbers.com/rent/alabama/birming...

    I always love to see folks diving into the numbers and really honing in on market analysis. It can be tough since we only have a census every 10 years and depending on where you get your data, different sites use different methods of analysis. Whenever possible, I encourage people to look at government or .org sources, like the Bureau of Labor Statistics, the Census Bureau, etc to get raw data and do the math on their own whenever possible. Other sites can be funded by advertisers or have other goals in mind other than just pure data collection, and you won't always know how they calculate different metrics. Hopefully, the links above can provide an unbiased view of where Birmingham is and where we're going. We're almost to 2020 as it is, so we'll have some more solid data in the next couple years.

    There are several really great investment markets throughout the south and midwest, it's all about finding solid unbiased data and selecting the market that aligns with your criteria and goals. 

    Best of luck to all!

    Clayton

    0Reply
  • Eric Chase
    OP
    Rental Property Investor · Germany · Member since 2017 · 74 posts · 22 votes
    7y

    Awesome! Thanks so much, @Clayton Mobley! I'm a huge fan of data!! This is fantastic.

    Cheers!

    Eric

    1Reply
  • Melissa Nash
    Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes
    7y

    agreed w. Clayton here. Alabama has the second lowest property taxes in the country (next to Hawaii) so the pro forma's always look pretty awesome when you have it side by side another market with the exact same numbers. So take advantage of that! You don't go to Birm for appreciation, you go there for the cashflow. If you get any growth-- that is the cherry on top. You really get a lot of bang here! 

    1Reply
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