The Best Buy-and-Hold Markets for Cash-Strapped Newbies

What are the best markets for new investors with less than $100,000 in cash? This limits your ability to make high down payments and have enough for reserves and rehab. 

Also, cash flow without appreciation gives me less exit strategies (and frankly, doesn't help build my net worth either). So what markets will offer you not only decent cash flow, but also decent appreciation, and are affordable enough for a cash-strapped newbie?

The Analysis: Midwest vs Piedmont Atlantic

First, I organized job growth data from the Bureau of Labor Statistics, then I organized median rent, median price, and median income data from the US Census.

Then I connected the data to a map of all MSAs and began my filtering.

The two "megaregions" I analyzed were:

1. The Midwest (Texas, Oklahoma, Louisiana, Arkansas), and

2. The Piedmont Atlantic Region (Alabama, Georgia, Tennessee, North/South Carolina)

(Technically the "Midwest" is not a "megaregion" as defined by this map, but for this analysis it doesn't really matter.)

Let's look at the Midwest.

The Midwest

In the image above, every MSA has a red outline. I then marked all MSAs where the median price was above $280,000 in full red. This would mean a 25% down payment of $70,000, which doesn't leave that much for rehab and reserves. As you can see, the Austin, TX and Dallas-Fort Worth, TX MSAs are marked in full red, meaning they are off-limits.

Everything else with a shade of pink/light-red means the median rent is above $760. There's no sense in investing in an MSA with rent any lower.

Average Monthly Job Growth (by Total Number)

In the map above, shades of green represent the average number of jobs an MSA is growing by per month. The darker the green, the more jobs are being added to the area on a monthly basis. (And no green means the job growth is too low.)

As you can see, San Antonio, Oklahoma City, Tulsa, and Houston have darker shades of green (more total job growth per month) than all the other MSAs.

We also aren't tracking the Austin and Dallas-Fort Worth MSAs since we are already priced-out of them.

Average Monthly Job Growth (by Percent)

In the map above, shades of blue represent the monthly job growth as a percentage (no blue means the job growth is too low). The more jobs are being added to a market relative to its size, the darker the blue.Smaller markets are more likely to be highlighted here, since they need a less total amount of new jobs to grow faster.

But I don't like to track one without the other.

Job Growth (by Percent and Total Number) and Median Rent

The map above tracks everything we've shown so far. The MSAs in complete red (Austin, TX and Dallas-Fort Worth, TX) are off-limits (too high of a median price). The shades of blue represent monthly job growth by percentage. The shades of green represent monthly job growth in absolute numbers (darker shades are better for both). The shades of light-red/pink represent median rent.

The MSAs that have a mix of everything might be a good pick. That leads us to the top picks.

The Midwest Top Picks

The top Midwest picks, in no particular order, are:

1. San Antonio, TX

2. Houston, TX

3. Oklahoma City, OK

4. Tulsa, OK

5. New Orleans, LA

It's worth noting that Sherman-Denison, TX is building not one, but two microchip plants. And with a relatively low median price, you best believe I'll be looking there for a multifamily acquisition. 

Even though the midwest presents strong choices, I personally prefer the demographics of the Piedmont Atlantic megaregion.

The Piedmont Atlantic Region

Like above, MSAs with a median price higher than $280,000 have been marked in full red as off-limits. The shades of pink/light-red are MSAs with acceptable median rents that aren't too low.

Average Monthly Job Growth (by Total Number)

Like above, total average monthly job growth is shaded green (the darker the better). Greenville, SC and Knoxville, TN are worth noting, along with Birmingham, AL and Greensboro, NC.

Average Monthly Job Growth (by Percent)

Shades of blue represent average job growth by percentage. Like the previous map, Greenville, SC and Knoxville, TN are shaded, along with Athens-Clarke County, GA, which lays east of Atlanta.

Job Growth (by Percent and Total Number) and Median Rent

Combining everything gives us a few markets to choose from, but Greenville and Knoxville still stand out due to their turquoise shading, representing good job growth.

The Piedmont Atlantic Top Picks

The top Piedmont Atlantic picks, in my subjective opinion, are:

1. Greenville, SC

2. Knoxville, TN

3. Athens-Clarke County, GA

4. Birmingham, AL

5. Greensboro, NC

Conclusion

If you can afford it, the Dallas-Fort Worth, TX MSA has had the strongest job growth in the past year (2022). I'm also very bullish on Austin, TX becoming the next Silicon Valley. So while the markets outlined in this article are potentially great for cash-strapped newbies, I personally don't want to invest in them forever. They are just stepping stones to get me to the best markets.

That being said, based on the preliminary data on MSAs only (without looking into individual cities yet), my top picks for this list are currently:

1. Greenville, SC

2. Knoxville, TN

3. Athens-Clarke County, GA

The Texas property tax rate has also killed many deals I've analyzed from being cash flow positive. But if I were able to make it work, I would also want to invest in the Sherman-Denison, TX market due to the two microchip plants being built.

Thank you for reading. Let me know if you want more articles like this.