All Forum Posts by: Nathan Stotts

Hi SW MO folks (and SGF investors outside the area),

Apologies, this may come off a little rant-ie, but hoping to get an educational discussion going. 

As the title suggests, I'm trying to understand the key driver of the housing increases in the Springfield area. I'm originally from the area and just left 7 years ago (left for career opps in Seattle, now LA based). Obviously, the entire market increased across the board in the past few years, but what I'm noticing is the Springfield area has increased more than any other market that I've been close to or looking at for investment  (Seattle, LA, KC, NWA, Joplin); its absolutely outsized in comparison of market forces generally raising prices throughout the US, and I'm trying to understand what it is! I'm hoping there are investors living locally or realtors who are in the know. Also, if you are an out of state investor, how in the world does this market become your target city considering all the thousands of cities in the Midwest which are "cheap" compared to the coasts or other in demand metros?

One thing I'm sure of, is that wages nor jobs have drastically increased. Meaning, Amazon or some tech co. hasn't chosen this city to be a corporate hub and hire a bunch of engineers making much higher salaries than the locals who then drive up housing prices (a la Seattle, Austin, etc). Also, I realize remote worker relocation from other cities is a thing, but that's happened all over and I can't imagine Springfield was deemed more desirable than any other smaller / mid sized city. I used Joplin as a proxy and noticed it hasn't increased at nearly the rate of SGF, nor has KC. A friend back home mentioned that Springfield made it on one of those Forbes lists, and that the frenzy is not from organic supply/demand, but that awareness of the area happened from a couple of articles in large publications. Then the realtor community and sellers realize if they wait it out, perhaps some out of state buyer will overpay.

Using a specific example, we are looking for a short term rental property in downtown, ideally a loft. When I was waiting for the market to fall out back in early '20 from the pandemic (lol wow thanks crystal ball), newer condos and lofts were running from ~$90k to 110k respectively. These are now being listed $300k - and get this, somebody is buying them! If you know anything about this market, its that if you buy a 1400 sq ft loft for $300k, that thing is not cash flowing, even with a short term rental fully booked. And this is a Midwest cash flow market, not an appreciation city based upon normal metrics of what organically drives demand to an area, such as proximity to mountains, beach, or loads of new high paying jobs. I noted that on a recent loft listing the seller was from California, so thought perhaps they over paid not understanding the market and workforce in SW MO, and that they'd never get the amount listed. Nope, it sold. Knowing what people make back in Springfield, I imagine homeownership is completely unrealistic for most at this point. Which is ironic, b/c that is one of the big selling points of living back there, it was affordable. 

Fellow SGF folks - What do you know about the driving forces for prices here? Are institutional investors coming in and just buying up all the inventory? Remote workers for some reason all decided Springfield was the place? Investment articles from large publications?

By the way, we wanted the short term rental in our portfolio only b/c we wanted a place to block out dates so we can come back and see family and friends multiple times a year, which is why I'm dedicated to this market for this purchase. Very much appreciate shared wisdom from BP Ozark community.

@Blake Ramsey Former Finance grad from Mo State. 

If you'd want to stay in school consider the Finance option with Real Estate emphasis at Mo State. A few things that might be good here:

1. You'll be focusing on business, finance, and specific real estate subjects - Knowing that this will be applicable to your ideal career may make the education piece way more palatable (and possibly enjoyable!)

2. You'll want a career in Real Estate to build income before you can be an "investor".   You have a lot of options here, but have a RE degree will allow you to get into firms that focus on RE in commercial, very large residential, etc. at a botique firms where you can touch all aspects of the biz or at a large corporate where you can go very deep in certain subject manner. If you are very math oriented (engineering) you could become a wiz at analyzing very large deals. 

3. In addition to the above, you could intern at RE firms to try out various career types that interest you and rub shoulders with industry vets

Also, and this is something I wish I'd known in college - unless you have a liberal arts degree (and that's not even true in a lot of situations), any "business" degree will get your foot in the door for a job in the event that RE falls through or is a side hustle for a bit. For example, I didn't end up in finance, but I make great $ in corp America. Most jobs don't fall into a neat bucket AT ALL...they are just general knowledge worker unless you are something like a software engineer. The RE degree will work just fine here. I actually wish I had gone the RE route in my Finance degree simply because the content is way more interesting (to me).

I think you could think of small towns like bonds and growth areas like stocks (simplified). You get the cash flow from the smaller markets immediately, but not much appreciation, and perhaps a ton of growth in equity in larger areas with a lot of migration and job prospects. I grew up in Carthage, MO, family is all over SW MO and lived for 12 years in Springfield. I've been living in the Seattle area the last 5 years. The house I rent here was purchased for $300k in 2012 and is now worth $1M. Let that sink in for a moment. And if you owned several of these properties? As mentioned on the podcast, the growth markets end up being the cash flow markets eventually, just not immediately. This house is well over the 1% rule now, it just took a few years for that to happen. Fair market rents on this home for rent are $3500 now (and likely $4k before too long) and $700k gain in equity. I'm jealous :). I think the NW Arkansas area with the Wal Mart ecosystem boom is going to be a great cash flow and equity market this decade.

We'll see how Covid impacts long term migration over time. I think it would be great to see the remote work trend continue, and for some of the leading businesses to move HQ's and operations centers to less expensive areas as Tesla has done (and Expedia did in Springfield, creating >1k jobs).

Hey all, reviving this thread for another recommendation. Any investor agents recommended for an 11 unit complex, or for smaller apartments in general in Springfield? I worked with Wilken when we were moving to Seattle to sell our home, but curious if anybody has other folks in mind for this type of deal.  Thank you!