All Forum Posts by: Trevor Ewen

Some of you may have read my last post on the Best Rental Markets vs. population growth. @Mike D'Arrigo , @Ken Siew, and @Engelo Rumora had great comments about what the data is and is not telling you. 

Last night, I put together a similar comparison for RealtyTrac's Best Single Family Markets for rental return.

This is another round of much the same, but it could get some early investors ticking on markets they hadn't thought about otherwise. Florida looks like a clear winner for growth and cash flow... but I would look into home ownership rates if you're planning to buy:

http://pearoftheweek.com/realtytrac-best-single-family-rental-markets-vs-population-growth/

@Engelo Rumora 

I am in complete agreement. All real estate is local. I would throw away all the stats to get a couple hours with one of your property managers.

This content is strictly to open us up to some of the demographic trends going on. While I won't say that Ohio is bad, the growth certainly suggests great things about Florida, and that is probably relevant for some investors.

Of course, there are a million vertical stats that we can use to slice up an area. If I was planning to invest in Tampa Bay, my next stop would be to look at home ownership rate in the area. As a New Yorker, I know enough people who head straight to Tampa with no plan to rent, whatsoever... an anecdotal explanation for the growth that is going on there.

I got another one coming, so hopefully Ohio investors won't start banning my posts :) 

Thanks

@Mike D'Arrigo

To your point. All stats show a very small slice of a story. In no way do I intend to point a finger at the market of a lifetime. I was just attempting to mash up the disparate sets. I agree with Detroit. After the adjustment, it still ends up looking too good for what it really is (vacancy hell!). Atlanta (metro) actually doesn't look as good, but instead it's strictly related to Sandy Springs, which has seen much better population growth than the city (which has had a slight decline according to the census).

@Ken Siew

Pleasure to meet. You are definitely in my neighborhood. It's always a good sanity check to meet New Yorkers who are looking outside of our lovely tax heavy-low cap-rate 'utopia' here in the Northeast.

As I mentioned to Mike, there are so many factors un-considered. But it's a good way to put some markets in perspective.

Population growth is likely correlated with a lower unemployment rate, and I can't give you exact numbers on that, but it's a good start to filter the markets at hand. People move for jobs... I experienced that anecdotally growing up.

US Census is a treasure trove of info that I will go to before looking into any city. What they have is good, consistent, and applies to every town you can think of.

Last night, I decided to put together a look at RealtyTrac's 'Best Rental' markets vs. population growth.

Using US Census data, I was able to see the 5 markets in the 'Best Return' list that have had the highest population growth since 2010. Here they are in order of adjusted return:

Atlanta-Sandy Springs-Marietta, GA (29.76%)
Kansas City (22.4%)
Pittsburgh (21.08%)
Tampa, St. Petersburg, Clearwater (21.02%)
Ithaca, NY (19.32%)

It's also nice to know that the list seems a bit more sane when you look at it this way. I would consider myself lucky to live in any of these 5 markets.

Hey Guys -

Thanks for the quick responses to start. So a bit more about our goals.

Our end line goal is to get to cash flow $6,000 / month in the next 12 years. It's ambitious, but we both work hard, and that's where we get our starting capital.

In the short term. We have a couple domestic goals that can either help or hurt this initiative. No kids, and we are probably about 5 years out from that (which is good for urban areas). Like most New Yorkers, we rent. We have a good rent deal for the location, but any purchase (that we live in) can reduce our cost of living, and effectively: cash flow. Our money is largely in ETFs and the stock market. We have done well, but we are over leveraged in a portfolio that I see as being 50% physical real estate, in the ideal case.

While I would love to get in on the commercial game in Philly. It's a lot of money to throw at a place that is still at the whim of our managers and local trends of which we may be less hip to. Sadly, I can give you good details on any neighborhood in NYC and the Burroughs, but I lack the 1.5 Trillion Dollar down payment and taxes.

My gut reaction is that single families in Philly would be a good target. We are even willing to take a slight hit on the numbers for the right place (not lose money, but lower cash flow). Just because we are planning to move there, and if we took over the space we would want to like it, or at least have the ability to make it great. The rest of our money can go to turnkey stuff in solid markets that we already like (Memphis, Kansas City, St. Louis).

We can deal with edgy from a comfort perspective. Many New Yorkers (read: Manhattanites) (incorrectly) are convinced the Bronx is a chaotically dangerous place. It has its rough spots, it has the lower end, but it's also a place where families and communities (of all kinds) have been for generations, so we don't mind the stigma, as long as there is some real positivity in the area.

So. We have been hitting our heads against the oft ridiculousness of the New York market. Our target has been the Bronx, but cap rates here are rough. We wish to be true to our numbers, but they definitely don't lie, and NYC is not a great cash-flow option.

This is further bolstered by the fact that we are looking to move out of NYC in 3 years or so. Philly has been at the top of our list for awhile. Cost of living is better, we love the architecture, there is more than enough opportunity for work and quality of life for both myself (Software Engineer) and my wife (Accountant). When we get nostalgic for NYC, we plan a night out, and head up.

Given all that. What's the strategy? Here has been my strategy for the Bronx, but I noticed that the single family stock seems high in Philly (narrow buildings):

2 Units $400,000 and under

3 Units $500,000 and under

Is the multi-unit play a good strategy in Philly? Or are we better to keep our eyes peeled for 2 single families in the near $200,000 range? We'll take stories, advice, zip codes, colleagues... whatever you can suggest.

Paul -

My wife and I have been scanning the area, and just put in an offer on a place in the Longwood neighborhood.

I would suggest looking anywhere in the South Bronx going up the east side.

Mott Haven (Probably the most 'Up & Coming')
Throggs Neck
Cypress
Longwood

Those are the places I would check out. Grand Concourse has great train access, but lacks some of the neighborhood feel that you get in these other areas. Either way, the Bronx is the place to look.

This is definitely live-in.

I wouldn't even consider NYC if we weren't here. Cap rates are low. The government is huge, tenants have more rights than than a pedestrian on a school crosswalk.

Unfortunately, it's hard to hand money to our landlords for their nonsense when we know we can do a better job. It's the conflict of buying nice single family homes for our renters in the midwest. As much as we would enjoy that environment, it is not 'go' for me professionally.

My profession thrives in areas where population is high and the government takes everything it can.

That being said, we are erring on the 'no go' side. As we do not plan to raise our kids in NYC, so it would be hard to hold onto a low ceiling high tax investment for the duration.

That's been our logic.

We pay $1650 / mo for rent right now (which is notoriously low for our area, Long Island City). One reason we are hesitant is because we have the best transportation we ever will in the city.

Realistically, if I was to think like an investor, I would pass on this house... it just needs too much. However, because we will be living on the first floor, it starts to wander into this 'What if' territory, which is a bit dangerous. How much of this attachment should I allow in my process?

My wife and I are thinking about making a low ball offer on a row house in the Bronx.

Ask: $400,000 (not worth this, no question)
Been on the market for a year

The house has got character! And it also has a load of problems. While it is a legal 2 unit, it needs at least 15-20k of work to get it there.

Are we making a mistake putting our aesthetic and character desires in the way? We already know we can make quicker, lower-risk money investing turnkey in the midwest (Memphis, Indianapolis, Kansas City). That being said, we love old row houses in the Northeast, and all things considered, we can turn the second unit into a $1800 / mo rental, it's just a matter of the interim (vacancy, rehab, etc.).

We are struggling with the fact that our desire for a unique living space conflicts with the investor fundamentals. Furthermore, any property that has been passed on for a year, has got to have problems galore.