The Best Places To Invest In Real Estate In 2019
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Hi, Benton Cotter here. Helping make your rental investment successful.
Today we’re gonna talk about where is the best place to invest in rental properties in 2019 and why? Now we like to look at two different kind of strategies that you wanna go through to actually identify the best places.
One’s a cash flow, no appreciation strategy. Another one is where you wanna try to get both appreciation and cash flow. Just a little bit less cash flow, more appreciation. So I’m gonna go over the best of both worlds. So the best for short term type cash flow properties where you’re pretty much not gonna get any appreciation are the Midwestern states.
We’re gonna look at Indianapolis, Memphis, and Columbus are the three areas that I would kind of target. For those that are looking for hey a long term hold, I want appreciation plus I want some cash flow, we look at the Dallas Fort Worth area, lot of Fort Worth side, Atlanta, and then the San Antonio and Austin area have been the greatest point.
Now we wanna kinda justify why are these spots good places to invest?
So let’s start with the short term ones. The ones that you wanna just get a cash flow at, Columbus, Memphis, and Indianapolis.
Those ones we wanna identify as let’s focus in on. Now that we know where the best places are to invest, we wanna figure out why and how did we identify those. For those long term plays where you’re gonna get appreciation plus cash flow, you look at a couple factors that really weigh into this decision.
A lot of these factors are economic growth, look at job growth, population growth, things like that, median average, median of the starting home price, appreciation in that area. Dallas has had great appreciation actually for the last four or five years, like most of the states have in the areas. And you wanna look at those things. And so like Dallas is huge. They actually had the biggest growth in the last two years of median home prices have increased.
I think it’s been 10% each year. Good factor. That’s the median home prices is the rental price range, that’s usually a three bedroom, two bath. That means that price is going up. Usually it means rent’s going up, plus your appreciation’s going up. So you wanna identify that. Also what we really like and focus in on is the demographic of renters.
What is the demographic? Usually it’s from 23, 25 to 35 years old. That’s the biggest population demographic that rents. And so where are they going? If they’re going to certain areas, let’s follow them. If they’re going in herds, let’s definitely follow them. Like Austin, huge influx of that demographic, which usually means they’re more likely to rent.
Means there’s gonna be more renters on the market place, less inventory, so rents are gonna go up. Usually when rents go up also you’re gonna see your appreciation go up as well ’cause they also do buy houses. So kinda look at those factors. We love that area.
The Dallas Fort Worth area, another strong. It’s had a lot of appreciation, a lot of businesses have gone there, State Farm, even like some Homeland Security, some big companies come, they call it Bellendur Road where all these big companies kinda hit their headquarters, State Farm, all those like big companies like that.
So they’ve had a huge appreciation the last three years in that area, the north Dallas area. Well we look at the west Dallas area, towards Fort Worth. We’ve gone out there. There’s some great start up homes, three bedroom, two bath. We can get in with a good price point that yet are gonna appreciate that you still cash flow with.
Cap rates are gonna be 68% on a good time, but yet you’re gonna get that appreciation which can be eight to 10% a year. So that’s, it’s kind of a double edge sword, but those are definitely the great areas.
As far as the cash flow properties, the ones where you’re just kinda getting in, you know you’re not gonna have a lot of appreciation, that you might have zero appreciation, but you’re gonna cash flow it really well. All those blue collar working states. The Midwest states. So what you look for in that. You actually wanna look for a starting price point. Look at, make sure you’re hey, a lot of these you can get under $150,000.
You can get in, but you can still rent for $1,000, 1,200 bucks and still cash flow pretty good. Usually what you wanna look at that and that stash gonna look up there that we kinda derive from are gonna actually look at starting price or average home price, compared to what the rents are. You can usually kinda compare those two.
If the rent’s high compared to the dollar per square foot, that’s usually a good area to get into cash flow. Again, usually those areas you might cash flow $500 a month, but you’re gonna get no appreciation. With that as well, we always wanna say hey, these should probably be short term investments, three to five years.
You don’t wanna wait there too long, ’cause usually what happens with those, if you’re not getting appreciation, even though you’re doing tons of repairs, let’s say you keep it for 10 to 20 years, you’re gonna do two ACs, a new roof, you’re gonna do tons of repairs, that’s not gonna bring back the value. It’s still gonna be worth the same even after you put 100 grand of repairs into it. Well it might go up a little bit, but you know I’m just trying to be dramatic there. But there’s gonna be, it’s not gonna get your return that you want. You’re gonna rely solely on that cash flow. So let’s maybe do the three to five year play. Once repairs start becoming an issue, let’s get out and find another one, or 1031 that out. So that’s kinda the strategy you wanna hold. There’s some great tools that you should do. There are some great tools that you can find across the internet or across resources that you have to kinda help you. HomeUnion’s a great tool that we use. Actually kinda helps you identify properties, have some good data points that it pulls in. Can pull in some of these data points that I’m talking about, even have some great neighborhood data points. Again, ’cause these are great cities I talked about that we’ve done research that we’re kinda going into and doing investing. But there’s great buys everywhere. Just there’s pockets everywhere that you gotta find. We’re gonna look at this marcro level, whereas you, as a land lord, you can actually look at the micro level and actually look at one neighborhood and concentrate on one neighborhood. Well HomeUnion has those great point data points per neighborhood almost that you can run comps and data points on, which is really good. Also, kinda gives you a calculator