I was often asked why did I choose Indianapolis, in mid-west, not some place popular like bay area, NYC, Austin, or Atlanta.
To explain it we have to go back to our strategy determined in the first place: long-term rental with positive cash-flow. The city has to have appreciation potential, with population and economy growing. In the meantime, the housing price has to be relatively affordable for us to invest in.
After many rounds of filtering, we are left with:
- Indianapolis
- Columbus, OH
- Nashville
- Philadelphia
- Charleston, SC
- Charlotte
- Raleigh
Among these cities, single families houses in Indianapolis and Charleston, and multi-families in Nashville and Philadelphia are easy to cash-flow, while we have to work really hard to find some cash-flowing deals in Charlotte and Raleigh.
For economies, Charleston is mainly tourism + retirement; Nashville is super popular among tourists but it also has many other industries; Philadelphia's population has grown during the pandemic but we are not sure about its long-term trend; Indianapolis, Columbus, Charlotte and Raleigh all have diverse and robust, growing industries.
Housing Price Trends
We made the decision of which city to invest in in April, so all data here ends at Mar 31. I downloaded zillow's housing price index ZHVI, and made it into a chart of ZHVI Year-over-year growth. Therefore, as long as it's above 0%, the housing price is increasing. The only difference here is the speed of the increase.
Because how popular Austin, Atlanta, and Pittsburgh are I put them in there as sort of a benchmark.
We can see obviously, Austin has the most increase, while Indianapolis, Philadelphia, Charlotte, and Columbus closely follow.
If we take a look at the period of pandemics where housing price dropped, Indianapolis and Columbus has been stable, while Philadelphia has a significant drop and Austin only starts exploding very recently.
Rent Growth
ZORI is zillow's rent index, similar to ZHVI but with rent.
Very interstingly, Austin is the only city with YoY negative, so it's the only city that rent is decreasing. Indianapolis, Columbus, and Atlanta are the top 3 in rent increase, among them Atlanta has more fluctuations especially during last year.
Summary
Because my strategy is centered around rentals, Indianapolis and Columbus are the only two cities with reasonable price, high rent growth and decent appreciation.
Between these two, SFH in Indianapolis can easily cashflow while only MFH in Columbus can. We also think that SFH is a better hedge against inflation than MFH.
The low housing price in Indy can also enable us scale up much more easily. For example, we can buy a couple houses at $100k+, this will be a great boost to expanding our portfolio at the start.
With the daydream of having a portfolio soon, we chose Indy.
