If none of the cities you are familiar with fits your investment strategy, you might have to look at other cities. For example, I went to UC Davis during my freshman year, and the Davis/Sacramento markets aren't as expensive as bay area but they are still too expensive for a rental to cashflow. I lived in Baltimore for three years and the risks there are too high for my liking for now.
Before picking a market, you need to decide your investment strategy. Here are some common ones:
- If you are trying to buy a house where you live in, you should either house hack or just don't count it as an investment. There is difference between assets and liabilities.
- Invest for appreciation, then you should buy in places where you can afford and has huge potential for appreciation. Do your due diligence on why it would appreciate, for example population, economy, future developments etc. Calculate IRR to figure out whether the potential minus the holding costs make sense.
- Flip/BRRRR (buy rehab rent refinance repeat) similarly you need to do your due diligence, but you also need to accurately estimate rehab cost and comps.
- Airbnb/Short-term Rentals/Vacation Houses, the market and the location needs to be desirable, and you should also research local regulations to make sure the business is sustainable.
- Rental, this is my strategy. I hope to both have positive cashflow and appreciation potentials. Because I'm still trying to save for down payments, I will focus on SFH/duplex under 350k, so I'll just need around 80k in cash.
Emerging Trends in Real Estate
Here, we are using PwC and Urban Land Institute's annual Emerging Trends in Real Estate It lists US top 80 real estate markets, and rank them according to surveys going to experts and funds. Even if you don't trust their opinions, the ranking at least reflects how hot a market is, and there are many other data and analysis that might help you.
Many of people might not be familiar with many of the markets and have never been to most of these places. I'm in a similar boat, but I googled and wiki-ed to learn more about them, and filtered out most of the markets
Note: I haven't been to most of the places below so below are only my naive opinions, but they are reflected in my actual investment strategy. You are still likely to make a profit or even better profits than me in some of the markets with different or even similar strategies.
Feel free to leave a comment if you disagree.
Too expensive or not landlord-friendly
- Inland Empire
- Orange County
- Oakland/East Bay
- Portland, OR
I'm personally not familiar with FL and its mostly tourism + retiree + service industry, so I'm skipping it. Please comment below if you are have experience with the market.
- Tampa/St. Petersburg
- Cape Coral/Fort Myers/Naples
- West Palm Beach
- Fort Lauderdale
Greater New York Area
It's in general not very affordable and it requires a lot of work from me to be well-versed in the different submarkets.
- Long Island
- Northern New Jersey
- Jersey City
- New York–Brooklyn
- New York–other boroughs
- New York–Manhattan
- Las Vegas (I know it's not only that but it's a big part)
- Virginia Beach/Norfolk
The crime rates in these areas are relatively high. They are not fit for new investors who are out-of-state or not familiar with the areas. Besides, their long-term appreciation potential is questionable. However, if you know which exact streets, pockets, or neighborhoods are safe you can find a lot of good deals.
- Chicago (a lot of nice but expensive areas I know, but you need to know the areas for it to work)
- St. Louis
Too expensive or very hard to cashflow
- Austin. High property tax in Texas, and recent year's appreciation makes it impossible to cashflow
- Dallas/Fort Worth, just like Austin
- Washington, DC - Northern VA
- Washington, DC - District
Slow or boutique markets
Because I still hope to get some appreciation on my investments, I'm removing these slow or boutique markets, reasons including but not limited to: not too many economy development, stagnant population growth, or simply lacking investor attentions:
- Westchester, NY/Fairfield, CT
- Portland, ME
- Spokane, WA/Coeur d'Alene, ID
- Des Moines
- Oklahoma City
- New Orleans
We finally managed to shrink the list from 80 to 17, next I will do more research on these markets and write about them.
- Salt Lake City
- San Antonio
- Washington, DC - MD surburbs
- Greenville, SC
- Kansas City, MO