Best Places to Invest in Real Estate
I feel it’s time I talk about the best places to invest in real estate. It’s also very important to know where NOT to invest.
If we’re gonna talk about the very best markets to invest in, let’s start with where NOT to invest. And that is YOUR BACKYARD!
Now why would I say such a thing when of course we’d be most comfortable with our personal geography, our surrounding area?
Would you say investing out of state is riskier? Many say yes, as they’re not familiar which properties could be more valuable or if the property is in a good place.
The truth is, the nation is made up of 350 sub-markets and there’s bound to be five amazing markets out there. And statistically, your backyard is probably NOT one of them.
What THAT does to your ROI and overall experience in real estate is that it’ll in fact cut down your investment by 50-80% on average.
So which are the best areas to buy real estate?
First, you have to understand TIMING.
Have you ever heard of the phrase ‘market bubble, the bubble popped”?
Think about real estate – how it’s going up over time in value, but it doesn’t move in a straight line, right? Everything over that line is what we call a BUBBLE. And bubbles eventually pop.
The inverse of that is what you’d call a TROUGH, and troughs also pop. So we HAVE TO come back. Why? Because of INFLATION. And because REAL ESTATE WILL ALWAYS COME BACK to at least what it cost to build a house.
Now, think about that bubble for a moment and think about that trough for a moment.
In a bubble, I’m using a cash flow strategy.
And the purpose is to go into a cash flow market.
You’d want to go to a market that has a really high cap rate.
That means if you buy a house, you get a mortgage, and you take into account all of your expenses and how much cash flow is left. That will help you understand what your net margin is.
Generally, if an investor can find something at 8 or 10%, they’re thrilled.
But what I do is I go into markets where I shoot for 13 and 14%.
Now, my last thousand deals, that’s what I hit on average.
In a cash flow market, the real focus is on a short-term single-family home rental.
You can hold that home in 3 or 5 years in an optimum market like we talked about before; meaning one of those top five of 350 sub-markets.
Similarly, if you find the market crashing and you’re in this trough, that’s an EXCELLENT time to be making money in real estate. Why?
Because that’s where you can actually hone in on markets that have the huge equity play, which I call an equity growth strategy.
In those markets, you’d want to go in where they have an overload of auction properties, HUD sales, and foreclosures. There’s so many of them happening that we can’t get enough investors in there to help clean the economy up. And THAT’S WHAT YOU WANT TO DO in those markets.
Right now around the United States, you’re always going to have hot cash flow markets and you’re always going to have hot growth markets.
Personally, I like to have my hand in both because it’ll depend ultimately on my personal strategy and what market will ultimately serve what my big picture goal is…
…which now depends on whether I’m focusing on increasing my net worth or my cash flow.
So which then are the very best places to invest in real estate?
Now that you understand the difference between a cash flow market and an equity growth market, I’ll let you in on one of my well-kept secret strategies:
For cash flow, I’ll go to Memphis, Tennessee. I’ll also go to Indianapolis, Indiana.
Those two markets right now give me cap rates of 13- 14% on average which as you now know is a really high figure. That represents the BEST in the country.
For equity play, you’ll see me in Phoenix or Las Vegas; and right now, Orlando – which is a huge equity growth market that has just come online.
In that market, I can purchase homes SO FAR BELOW the market in terms of the rebuild value.
Now, ultimately THE BEST comes down to YOUR game plan.
Do NOT be one of those investors that doesn’t have a plan and just says “Hey, I’m just gonna go from good deal to good deal.”.
Going from house to house is haphazard. You want to have a game plan that says:
‘There’s a REASON for this purchase and I know this purchase is going to get me to my goal which is to have residual income and achieve financial independence.’.
Finally, make sure that you work with a team that has an infrastructure set up in those markets because you don’t wanna go there, hop on a plane, and become an out of state investor without having proper infrastructure.
Because if you’ve got bulk on your side, if you’ve got team and leverage in one of those mentioned best places to invest in real estate, then you have a chance in succeeding out there!
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