Best Markets To Invest

[Josue Ramos]

Hello, my Fellow investors

I am looking for my first investment property and I have been researching markets. So far Dallas, Austin, Houston Texas and Columbus, Cincinnati Ohio and Nashville Tennesse and Nevada have caught my interest. I want to ask ya'll seasoned investors if you were starting out today where would you start investing with all the experience and knowledge you have now?

I goal is to find a market that has good appreciation rate with good to decent cashflow but out of the two appreciation matters more to me. I am already have a good lender that has pre-approved me with a DSCR loan so all I need is to find the right market to invest in!

I am currently located in The Bay Area, California and I am little nervous about  investing out of state but I thought I would give other cheaper markets a shot other than my backyard which is expensive. Any advice, suggestions or recommendations to honest investor mindset realtors in these markets would be greatly appreciated!!  Thank you!!

[Morgan Tondre]

Quote from @Michael Ewers:

Quote from @Josue Ramos:

Hello, my Fellow investors

I am looking for my first investment property and I have been researching markets. So far Dallas, Austin, Houston Texas and Columbus, Cincinnati Ohio and Nashville Tennesse and Nevada have caught my interest. I want to ask ya'll seasoned investors if you were starting out today where would you start investing with all the experience and knowledge you have now?

I goal is to find a market that has good appreciation rate with good to decent cashflow but out of the two appreciation matters more to me. I am already have a good lender that has pre-approved me with a DSCR loan so all I need is to find the right market to invest in!

I am currently located in The Bay Area, California and I am little nervous about  investing out of state but I thought I would give other cheaper markets a shot other than my backyard which is expensive. Any advice, suggestions or recommendations to honest investor mindset realtors in these markets would be greatly appreciated!!  Thank you!!

 If you're looking for strong appreciation, Dallas and Houston are great markets. Increasing job growth and a strong economy brings an ideal investment in these markets. Strong rental demands as well.
If you need any assistance on areas to focus on in these two markets I'd be happy to help!

 Agreed!!!

[Lindsay Davis]

@Josue Ramos,

Huntsville could be worth checking out since you’re leaning towards appreciation over cash flow. There’s a lot of new development going on in Huntsville proper, but properties in nearby suburbs like Athens, Decatur, or Meridianville are both more affordable at present and less prone to competition from new construction.

$150,000 can buy you a tenant-ready 3 bed, 2 bath single-family home in a B-grade neighborhood. You can probably rent it out for between $1,200 and $1,400, so from a cash flow perspective, that’s just shy of the 1% rule that’s often talked about here.

As for appreciation, the median home price in the Huntsville metro area has grown by 50% in the last 5 years, which bests the nationwide figure of about 28% nearly twice over.

[Michael S.]

@Lindsay Davis

"$150,000 can buy you a tenant-ready 3 bed, 2 bath single-family home in a B-grade neighborhood. You can probably rent it out for between $1,200 and $1,400, so from a cash flow perspective, that’s just shy of the 1% rule that’s often talked about here."

I am going to respectfully disagree with you on this statement.  

This was true back in 2021 and prior.  Current Huntsville market, 150k will get you a 3/2 at best in maybe a C+ neighborhood unless you get a unicorn off market deal.  

If you want a rent ready 3/2 in a B neighborhood, it will be 200-225k at minimum.  Rent probably around 1400-1500/month depending on finishes and exact location.

The number simply don't work well in Huntsville right now.

[Lindsay Davis]

@Michael S.correct - the numbers are tough in Huntsville but they can work in nearby suburbs and outer markets. Like I mentioned, Decatur is one of those areas. We've made several great purchases this year around the $150k threshold there. 

[Michael S.]

@Lindsay Davis - I completely agree with those numbers for Decatur. 

However, a disclaimer for those not familiar with this area who are reading this, to be clear, Decatur is its own city and not a Huntsville suburb.  It has greatly lagged Huntsville and Madison in growth and appreciation, and should not be viewed as having the same growth potential whatsoever.  I would only consider Decatur for a cash flow play, not an appreciation play.  

[Lindsay Davis]

@Michael S.,

You raise some interesting points. In terms of population growth, Decatur has lagged behind Huntsville, but it looks like appreciation—which is what’s important for investors—has been pretty comparable.

Home price appreciation in Decatur:

- Last 12 months: 19.8%

- Last 5 years: 62.1%

- Last 10 years: 74.6%

Home price appreciation in Decatur:

- Last 12 months: 21.0% (Annualized difference vs. Decatur: +1.2%)

- Last 5 years: 77.0% (Annualized difference: +2.8%)

- Last 10 years: 88.4% (Annualized difference: +1.3%)

So the housing stock in Huntsville appreciates slightly faster, but I’d say the data shows that Decatur can work for both cash flow and appreciation-oriented investors.

[Michael S.]

@Lindsay Davis - I appreciate the data and the dialogue.  

I'd rather see a comparison of dollar amounts rather than percentages - they may have similar percents but the absolute dollar amounts should be quite different.  

Let's use a tangible example.

So let's say you and I both own an identical 3/2 SFH - yours is in Decatur and mine is in Huntsville. Yours is worth 150k and mine is worth 250k.

Both appreciate around 20%.  So you netted 30k and I netted 50k.  20k is a sizeable  difference - so I think we can agree that similar percentages don't necessarily mean similar absolute dollar appreciation between the areas.  

Here's the other consideration.  Both houses need a new roof that will cost 15k.  Now your net is down to 15k (10% return) and mine is at 35k (14% return).  That's why I prefer absolute dollar appreciation rather than percent.   

Again, this is just for the sake of dialogue for folks to consider when looking in North Alabama at investments.  

Best wishes!