Are Hyped Markets Still a Good Investment?

Question

"Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett

There are some markets such as Kansas City, Memphis, Indianapolis, etc. that seem to be listed as "Best Places to Invest" year after year. Are these kinds of locations still good investments when investors swarm in, or is it better to invest places no one talks about?

Ali Boone · Answer

The answer kind of depends on the specific market and what kind of dynamic has been created by all the investors flocking in. For instance, there was a point where I wouldn't touch Memphis at all because of what the investor flock there created (once all the hedge funds started selling back their properties, etc.). Atlanta also got such a rush that it became really saturated. But Indianapolis and Kansas City, while having been attracting investors for several years now, seem to stay more even-keeled and haven't ended up with the same kind of rush that Memphis and Atlanta got.

I think generally, the question you're asking is too broad and shouldn't be the question that determines whether you invest somewhere or not. You want to know about the property and the market specifically, so just find out those details and you're good to go.

Evan Parker · Answer

@Sean Larsen

I echo what @Ali Boone said. The locations you listed are listed for a reason, and a lot of people getting deals there shouldn't deter you from learning the market and getting deals as well.

Find a market that makes sense to you and attack, regardless of the articles. There are still people finding and creating deals in LA, NY, SD, etc where it's "impossible" to find deals. It's all about what/where you want to put in the effort.

Hope this helps!

Corby Goade · Answer

There are good deals in every market. The key is knowing a good deal when you see one and having the ability and fortitude to execute. I have a client that just got a killer deal in my market, which is super hot- nearly every property has multiple offers, almost everything sells significantly over asking price. The appraiser called me and insisted that the contract price must be wrong, or it wasn't an arm's length transaction (which is was).

Don't buy the hype that only good deals come off market or that some markets are impossible to find a good deal in. Learn and prepare yourself and WORK to find good deals. In times like these, it's much easier to build quick equity, which can be difficult in down markets- there are so many benefits to investing when a market is hot, especially for novices because of the availability of money.

Keep in mind, especially for new investors; when the market is good, like it generally is now, money is plentiful and cheap, but you have to work hard to find good deals. When the market is cold, money is expensive and hard to get your hands on, but deals are everywhere. You can't have it both ways, but you can educate and prepare yourself so that you can act quickly and confidently when you find the right deal for you.

Good luck!

Ritch Bonisa · Answer

Those areas have a tendency to be stronger.  There is more stability, alot of home ownership overall - like in Indianapolis.  Strong local economies, job growth, working class demographics, where there isn't alot of fluctuation in appreciation, and there is a growing population of people who want and/or need to rent.  We also see areas in some of those cities where gentrification is very much visible with some areas better as flip to retail, and some better for rental and holds.  Some of those cities have a nice mix and the rental side can feed off the flip side due to area rejuvenation and the benefits that come with being on the fringe of those areas.

Mike D'Arrigo · Answer

@Sean Larsen markets get hyped for a reason. That's usually because they offer good cash flow and they have good economic and demographic fundamentals like job growth, population growth, diverse economies etc. Of course it would have been better to get in before they became so popular, but that doesn't mean they don't cash flow well. Kansas City and Indianapolis are two of the best cash flow markets. It might be hard to get anything with equity built in today, but that shouldn't matter if your primary goal is cash flow. Besides, with appreciation (these are hot markets after all) and principal pay down, you'll build equity quickly.

Josh C. · Answer

@Sean Larsen

Indianapolis is still very good. Not the could do no wrong it was 5 years when I turned down all the rentals in fountain square for 30k each in favor or “less ghetto” areas lol. But still good to buy and the rent to price ratios are much better than most places in the country. I mean Lebron is good every year right?

Brian Adzadi · Answer

@Sean Larsen

Wow, very good question. I have thought about that myself. I still think its still a good time to invest in those areas because the housing stock is so large.

I feel, the game is not over in those areas until the big time developers from NYC, San Francisco and Miami start to settle there.

Sean Larsen · Answer

Thanks for all the great responses. What I am getting out of this is that the "hyped" markets are hyped for a reason. It's worthwhile to at least investigate to see if your investment strategy would work there. It's irrelevant if there are a lot of investors as long as the deals work. Thanks for your thoughts!

Are Hyped Markets Still a Good Investment?

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