I'm looking to purchase my first investment property; however, I'm having trouble deciding where to invest – analysis paralysis is the real deal. One area that I'm looking at is Bozeman, MT (where I live), which is the fastest growing micropolitan city in the US for the last three years and will soon cross over into metropolitan status soon. Home values are pretty high, and the best CoC figure I've been able to find is about 2-3%. But appreciation rates have been incredible over the last decade (conservatively 6-10% depending on the year), and I see no signs of it slowing down, even in a pandemic. I would be able to manage the property myself here but wouldn't be making a lot of cash flow.
The other areas I'm looking at are in Wyoming. Smaller towns (15,000-20,000) with much lower population growth, but also feel like Bozeman before Bozeman was discovered by the rest of the country (Very speculative – I know). Home values are much lower than Bozeman, so I'm able to find CoC returns in the neighborhood of 8-9%. Price-to-rent ratios are not significantly better than Bozeman, but in WY, property taxes are very low allowing for a decent CoC return.
Here’s where I’m at:
Bozeman purchase price: $325,000-$350,000
Rent: $1800-$2000/month
Appreciation: High
Self-managed
Wyoming purchase price: $190,000-$225,000
Rent: $1300-$1500
Appreciation: Medium-Low – in line with inflation to slightly better
Property manager needed, but property taxes are very low
So – looking for input to hopefully shake off this crippling analysis paralysis. We are in a financial position where we can take on some risk, but everything I read says ‘don’t invest for appreciation, consider it the cherry on top’. It just seems to me that of the four wealth creators of real estate, appreciation is where real wealth is created, and not the $200/month in cash flow.
