\n<\/p>\n
What makes a good real estate market?<\/strong> A stable <\/strong>or growing population<\/strong>, large employers <\/strong>nearby, tourism<\/strong>, and, as a bonus, college-educated residents<\/strong>. Put those all together, and you\u2019ve just stumbled upon your next great real estate investing area: college football towns! <\/strong>After digging into the data, the On the Market<\/em><\/strong><\/a> panel discovered that many top college football markets aren\u2019t just great for partying and tailgating; they\u2019re also undeniably promising property markets!<\/p>\n On today\u2019s episode, Dave, Henry, James, and Kathy will uncover four of the BEST college football markets in the nation<\/strong> and share which ones they personally would invest in<\/strong>. Looking for cash flow<\/a>? We\u2019ve got a couple of markets. What about long-term appreciation? We have those, too! We even have one STRONG college football market that has seen prices drop off <\/strong>over the past two years, with HUGE potential for rising prices<\/strong> in the near future.<\/p>\n If you\u2019ve been waiting to buy your first or next rental property<\/strong><\/a> but don\u2019t know where to invest and which metrics to watch, this is THE episode to listen to. The On the Market<\/em> panel will explain exactly how they analyze each market<\/strong>, which ones make sense for which investor, and why you\u2019ll want to score a deal in these cities before it\u2019s too late!<\/p>\n Dave: Kathy: Dave: Kathy: Dave: Kathy: Dave: Henry: Kathy: Henry: Dave: Kathy: Dave: Kathy: Dave: Henry: Dave: James: Kathy: James: Dave: James: Dave: James: Dave: James: Dave: James: Dave: James: Henry: Kathy: Dave: James: Henry: James: Dave: Kathy: Henry: Kathy: Dave: Kathy: Dave: Kathy: Dave: Kathy: Henry: Dave: James: Dave: James: Henry: James: Dave: James: Dave: James: Kathy: Dave: Henry: Dave: James: Kathy: James: Kathy: Henry: Dave: Kathy: Dave: James: Dave: Kathy: Dave: Henry: Dave: Kathy: Dave: Henry: James: Dave: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
Hey everyone. Welcome to the BiggerPockets podcast. My name is Dave Meyer and I\u2019d like to start by just wishing you all a very happy New Year. This is going to be a very fun episode of the podcast where we\u2019re going to be talking about some of the best markets to invest in in the United States. And in order to do that, I have brought my friends and co-hosts from the On The Market podcast to join us. First we have Kathy Fettke joining us. Kathy, tell me one of your New Year\u2019s resolutions this year.<\/p>\n
Oh man. I would say it\u2019s to watch less Outlander before bed.<\/p>\n
What is Outlander?<\/p>\n
I started watching it because my mother-in-law\u2019s dream was to go to Scotland and so Rich and I are taking her to Scotland and I heard there\u2019s a whole tour in Scotland for Outlander. It\u2019s a show on, I don\u2019t know, Scotland. So now I\u2019m addicted, but then what happens is I stay up too late watching it and then I don\u2019t get up early enough and I love getting up early, so I just need to limit it. I just need to back off a little bit of Outlander.<\/p>\n
I\u2019ll be honest, I was expecting a real estate related New Year\u2019s resolution but each of us have to have our own goals. So if you are trying to watch less Outlander, we are all here to support you in that resolution, Kathy.<\/p>\n
Well, it is real estate related because then I\u2019ll get to bed earlier and get up earlier and be able to focus more on real estate.<\/p>\n
I like it, better mindset. All right. Henry Washington is also joining us from Northwest Arkansas. Henry, what\u2019s one real estate resolution you\u2019re working towards this year?<\/p>\n
Oh, Kathy, Outlander is such a weird show.<\/p>\n
It is weird.<\/p>\n
My wife watches it and maybe I just catch it at the weirdest parts but I\u2019m like, \u201cThis is a little too much for me, a little too much for me.\u201d My New Year\u2019s resolution is to finish my resolution from last year. So last year I made a goal to lose a hundred pounds and I got 65% of the way there, and so I\u2019ve got another 35 pounds that I need to lose in 2024.<\/p>\n
Damn, man. You should be very proud of yourself. 65 pounds, that is very, very impressive.<\/p>\n
That is.<\/p>\n
You look great. Last time I saw you-<\/p>\n
You look great.<\/p>\n
\u2026 you do look great and we\u2019re very proud of you.<\/p>\n
You can keep saying that actually. It\u2019s fine.<\/p>\n
Again, you\u2019re both are just sort of failing on the real estate goals, but I really support you in your resolution. Maybe James Dainard, our last co-host from Seattle. What is your resolution? You got to give me something about real estate.<\/p>\n
Well, I will say the last New Year\u2019s resolution we talked about on our podcast, I didn\u2019t even make it one day. It was to quit Rockstar. I think I just kept going, so I failed. I failed at that. I\u2019m not putting that back on the agenda. Well, my New Year\u2019s resolution is always to just do more deals. My goal is to get our volume back to 2021 levels because they were just a\u2026 We were just running hot and obviously 2023 was a lot flatter. We\u2019re probably down 30%. So I want to get it back up to that magical 2021 volume of sales.<\/p>\n
And yet I spoke with you yesterday and you said you also wanted to slow down a little.<\/p>\n
I know.<\/p>\n
I don\u2019t believe it. That\u2019s like his Rockstar resolution. It\u2019s just complete nonsense. He\u2019s just completely lying.<\/p>\n
Yeah, Kathy caught me on a moment. I was in between two different things at the moment, but then you just keep going. You chug a Rockstar and you\u2019re back on it.<\/p>\n
So these things are related. Okay, I get it.<\/p>\n
Yeah, peaks and valleys.<\/p>\n
For me, my resolution is if you follow the On The Market podcast or know anything about me, I live in Europe and I\u2019ve invested almost entirely passively over the last four years and my resolution is to start a buying again directly single-family, small multifamily deals in the US. I\u2019m going to tour a couple of markets in the first couple of weeks of January to pick where I\u2019m going to do it and I\u2019m very excited to jump back into that part of my real estate portfolio. And with that is a good transition I guess to what we\u2019re talking about today, which is some of the best markets to invest in in the United States. And we thought a really fun way to present information about good markets is to follow the four teams that are in the NCAA college playoffs right now. So each one of us here on the show is going to represent one of the towns and colleges in the playoffs.
So James is going to be representing Seattle and the University of Washington. Kathy\u2019s going to be representing Texas at Austin and the Longhorns. Henry, the Crimson Tide for Tuscaloosa, Alabama and I will represent Ann Arbor, Michigan for the University of Michigan. And I want you guys\u2026 We\u2019re doing this because it\u2019s a fun way to talk about markets and to debate about which different metrics are the best and the most important.
But as we\u2019re talking about these things, think about the different metrics and the ones that are most important to you and your strategy. The thing that I think we would all agree on despite the debate we\u2019re about to have is that different markets work for different people. There is no such thing as the best market in the United States. It\u2019s really about which market works for you. So as we talk about these things, just take notes of which metrics, which points that each one of us make that are applicable to your situation and then go use them when you do market research and make decisions about your deals. So with no further ado, let\u2019s get into our first market. Let\u2019s start with James because he gets the easy layup and we\u2019ll just let him roll off some stats and talk about his own backyard first. So James, first tell us a little bit about the Huskies. What do we got to look for in the games today about the Huskies and then tell us a little bit about Seattle as an investing market?<\/p>\n
Well, not only is Seattle the best investing market, the Huskies are the best team this year. They\u2019re the number two ranked 13 and 0 and this is the final year of the Pac-12, which is kind of sad to me because I grew up watching Pac-10, Pac-12 football, and now it just got obliterated and this is its last year, so we\u2019re hoping we win the final championship game and they\u2019re going to smash Texas on Jan. 1 and I do plan on going to the championship game in Texas, so I\u2019m excited to go.<\/p>\n
James, do you have a ritual for watching the game? This episode comes out on the first. We\u2019re obviously recording it beforehand, but you will be watching the game while everyone is listening to this. What do you do to support your Huskies?<\/p>\n
Well, I mean, as soon as you put your underwear on, you got to put your gear on too. So it\u2019s hats and jerseys right away. I will say my Seahawk rituals are a lot more aggressive, but you just got to rep them. And so I\u2019m actually going to be in Australia randomly, but I will be repping the W throughout on all continents.<\/p>\n
All right. Well, that\u2019s an image for everyone to think about during the game today, James. But why don\u2019t you tell us about Seattle as a market. Obviously, this is your backyard where you have built your entire career. So tell us a little bit about why Seattle is such a great market for you and what strategies people listening to this might want to consider.<\/p>\n
Yeah, I mean, Seattle\u2026 Not only the Huskies the best team, Seattle is probably the best market that I know to invest in. And I know they go\u2026 I hear a lot. They\u2019re like, \u201cOh, it\u2019s expensive. The landlord laws can be tough,\u201d and those are all true things, but it is an amazing city to invest in in general. To give you a quick background what it is, there\u2019s over four million people and the unemployment rate is 3.9%. What makes Seattle so good to invest in is the median income is 97,000 and in the tech space it\u2019s more like I think around 120,000 and we have a lot of condensed, very well paid, very well employed workers, and the median home price is only at 699, 750. So for the income that\u2019s being brought in, it\u2019s actually somewhat affordable. But the reason it\u2019s such a great market, we have built an amazing portfolio. We can cash flow it at 10 to 11% cash on cash returns every year.
We do this and the reason that it\u2019s such a great market to invest in, it\u2019s a heavy value add because what we have is we have a booming city where the tech is expanding. The reason the tech is expanding is because we have no income tax in our state. And as these tech companies in San Francisco have to start competing with Amazon, right? Our two big anchors are Microsoft and Amazon, our big tech hubs. What\u2019s happened is Google, Apple and everybody else had to come to our city because they can\u2019t compete with the wages because anytime you\u2019re making over 13% more than California, people\u2019s quality of life automatically goes up. So it\u2019s a booming city and we\u2019ve seen a lot of growth and the growth is going to continue.
The tech expansion throughout the market is massive. Microsoft is building a 10-year campus build-out. Apple\u2019s investing in their campuses, Google\u2019s expanding their campuses. That tech money is real money that\u2019s coming in and building infrastructure. But not only can you make high cash on cash returns if you are into value add, we also make an average of 35 to 40% on our flip properties and dev deals. So it\u2019s a high, high return business.<\/p>\n
Well, James, one thing I can\u2019t agree with you on is I also wore Husky underwear, but that\u2019s because it was the Fat Kid brand and that\u2019s what I wore when I was a kid. Other than that, I think what you meant to say was that Seattle is a great investment market for people who already have money. I mean, the prices are expensive and that means you\u2019re going to have to put a down payment down and 20% of $200,000 in the Midwest somewhere is a whole lot easier than 20% of $550,000 for a fixer-upper. So I think you have to get pretty creative if you\u2019re a new investor who doesn\u2019t have a lot of money to be able to jump into a market like Seattle and take advantage. I agree. The margins you have, man, I get jealous when I see your profits and your proceeds on a flip because you\u2019ll make on one flip what takes me like four or five to make, but it seems a little riskier as well. So Seattle scares me.<\/p>\n
Yeah, I agree. I mean, Seattle\u2019s a great place to invest 20 years ago. I wouldn\u2019t invest there unless I were James Dainard and really knew how to do it or if there were little pockets outside that are growing or yet to be discovered, perhaps that could work. But the people I know, Tarl Yarber for example, he\u2019s not doing the buy and hold, and I\u2019m a buy and hold investor, so I don\u2019t think it would work for me.<\/p>\n
James, what do you say to that? Do you think regular people can jump in?<\/p>\n
Regular people can jump in. We work with clients all day long that are regular. It works for any types of price point just because certain pockets of Seattle are expensive, that is for sure, but there\u2019s also very affordable pockets too. You can flip a house and buy it for 350,000, sell it for 499. You can buy rental properties in the 350,000 and they just need a little bit more work. The beautiful thing is about being in an expensive market though or more expensive market with the big equity positions, it allows you to leverage more, so you don\u2019t need this\u2026 Even though the pricing\u2019s bigger, you can get deeper discounts with bigger equity positions and so you can stack your leverage if you want. And as an investor, it\u2019s about figuring out that market. The first deal I ever did, I had to take a hundred percent financing on and pay for it, but it gave me so much equity, it gave me the gunpowder. I could start rolling it from there. So that first deal can give you that cash to grow very quickly.<\/p>\n
You heard it here folks. James Dainard is going to give you the cash for your first deal in Seattle, Washington to get you started.<\/p>\n
And remember what I said, I paid a lot of money for that money. You vary the rates.<\/p>\n
All right, James, you\u2019ve done a decent job defending yourself, but I think all of James\u2019s problems, James\u2019s opinions are a little biased given that he\u2019s only ever invested in Seattle. So let\u2019s go to a different part of the country, one that has been really in the center of a lot of news over the last couple of years. Kathy, you\u2019ve got the University of Texas at Austin, Texas. Tell us a little bit about the team. I\u2019d love to hear your recounting of what the team is like and then tell us about the market.<\/p>\n
Well, listen, if I were 17 years old, I would definitely consider going here. The team is the Longhorns of course, record 12 to one, win probability of college football playoffs at 25%. James is shaking his head.<\/p>\n
James has no chance.<\/p>\n
Austin is cool, Austin is weird. That\u2019s what they say. It\u2019s a great place to invest for the long term. It\u2019s been the darling of real estate investors for years and right now it\u2019s a buyer\u2019s market. And realtor.com just came out and forecast that for 2024 actually prices will\u2026 Their forecasting will continue to decline. They said 12%. So is it a good time to buy right now? Well, if you can get a great discount better than 12%, probably. But I think Austin will be a great place to get to know and understand because prices appear to be coming down. They have in the city and in the Red Rock area come down about 10%. As I understand it, some markets probably even more. So this is a city that is growing. It\u2019s the new Seattle. Sorry, James, but you\u2019ve got Google, Tesla, Amazon, Apple. You\u2019ve got SpaceX, Meta expanding billions and billions of dollars coming in there.
Just Elon Musk alone with Tesla\u2019s bringing in 10,000 jobs and if you heard him on his other recent podcast, he says that brings in six X that or whatever because then there\u2019s all the services needed. So Austin\u2019s not slowing down in growth, it\u2019s just that prices went up so dramatically over the last few years that it\u2019s tapering off coming down, and that to me says there could be a buying opportunity in 2024 and would be a good time to really get to know the neighborhoods. Now if you\u2019re going to go and move there and hold, great. Especially if you can get a duplex or a fourplex, rent those other units out and hold it for the longterm, I do believe that Austin\u2026 Right now, the median home price is $459,000 compared that to Seattle, which was 699,000. I really believe Austin is the new Seattle. Again, sorry, but I think there\u2019s room for growth just not next year, not in 2024.
But when prices are down, it\u2019s a buyer\u2019s market. You want to buy in a buyer\u2019s market. So many times people get this confused and want to buy in a seller\u2019s market when everybody\u2019s buying and the seller has the power. Right now you have the power. So I would keep an eye on Austin. You\u2019re still not going to cash flow as well as some of the other cities that are also growing in Texas. That\u2019s why we focus on Dallas where the median home price is lower. We\u2019re looking at San Antonio. The market, that whole area between San Antonio and Austin is going to be one metro area like San Jose and San Francisco where that just all grew in. I think that\u2019s going to happen there between San Antonio and Austin. So lots of opportunity if you buy right and can hold it maybe good for flipping if you know the market well and not maybe this year but in the years to come.<\/p>\n
Poor, poor, Kathy. We\u2019re giving her the number one biggest correction market in the entire country to try and defend right now and you\u2019re doing a very admirable job of it. I will give you that. But-<\/p>\n
Thank you.<\/p>\n
\u2026 I\u2019m just joking because there is this kind of weird dynamic right now where with many of the markets that are seeing the biggest corrections also have some of the long-term best fundamentals, like the best population growth, the best economic growth, the best job growth. So it is actually an opportunity, I\u2019m just kind of teasing you, but I do think it\u2019s one of those markets that you have to be pretty careful with.<\/p>\n
Yes.<\/p>\n
Kathy, if you were moving to this market, you said flipping. Are there any other strategies you think people should consider?<\/p>\n
If you\u2019re in California and you\u2019re moving to Austin, it\u2019s still super cheap. So I see people doing that and I have friends doing that and they\u2019re buying homes that they can fix up and they\u2019re going to live in for a while and I think they\u2019re going to do really well, especially if you\u2019re buying in some of these areas where all that growth is happening, which is kind of everywhere honestly.
So yeah, if you\u2019re looking to live there, I think you\u2019re going to do well over the long term if you\u2019re looking to build something potentially. Honestly, I wouldn\u2019t do it in 2024. I would do towards the end because like I said, realtor.com came out with their 2024 housing forecast and it\u2019s not looking good for Austin in terms of prices. It looks like it\u2019s still coming down, but we also saw mortgage rates come down, so who knows? Who knows? You got to know. It\u2019s just like James said. He\u2019s making it work in Seattle. If James can make it work in Seattle and you know Austin well enough, I tell you right now, there\u2019s listeners and I\u2019d love to hear it in the comments. I want to hear from you guys. There\u2019s listeners who are making a ton of money in Austin. They just know it well enough to be able to make that work.<\/p>\n
I agree. I think it\u2019s a different investment mindset with a market like Austin because what Austin\u2019s going to be good for is like real wealth accumulation. If you can get in now and negotiate a really good deal because of the rates are high and there\u2019s not a lot of competition, people who are selling now need to sell or else why else would they be doing it? And so if you could get in, find yourself something now and maybe it doesn\u2019t make you a ton of money over the next one to three years, maybe it doesn\u2019t make you much at all, but if it\u2019s going to increase in value by 50, 70, a hundred thousand dollars over the next five years because as rates drop and demand goes up, people want to live in Austin because it\u2019s cool and it\u2019s fun and there\u2019s huge amenities and for all that cool and fun, you get it at a more affordable price than living in a coastal city.
And so there\u2019s any place that\u2019s got a reputation like that people are going to want to move to and they\u2019re going to want to own homes. And so if you\u2019ve bought some of these properties now when you can get in at a good price and capture that appreciation, real wealth is built through appreciation and debt pay down over time. So it\u2019s more of a long-term play. You\u2019re not going to get month over month phenomenal cashflow in that market unless you are a market expert and know where exactly what pockets you can go do that in. So it\u2019s just a different strategy, but that doesn\u2019t mean you can\u2019t make money there.<\/p>\n
All right. So James, has Kathy convinced you that Austin is the new Seattle and are you going to pick up shop and start flipping homes in Austin?<\/p>\n
Hey, I do like Austin and part of the reason I like Austin too is it was a little bit more of a bubbly market and so it\u2019s getting more overcorrection. So I do think that the market\u2019s in a little bit of a panic still there. So you can get some good buys and the market\u2019s scared. There is some goodbyes there. I agree with Kathy on that, but that\u2019s the reason why Seattle is actually better than Austin. It\u2019s less bubbly, it is less\u2026 I\u2019ll be honest, it\u2019s a less cooler place to live. And so during the pandemic they saw way more surge in population than Seattle saw because it was a cool, swanky place to live.
And I get it, Austin is a really cool city. I like going there. I would invest there but Seattle\u2019s a lot more stable. We didn\u2019t get the surge because Seattle\u2019s just a little bit rainier. It doesn\u2019t have that same coolness of it, but the stability is why I like Seattle a lot better than Austin. And speaking of which though on the football, how did Texas be 12 and one and they\u2019re favored to win? Everyone\u2019s always hedging against Seattle. They gave us a 12 1\/2% chance and Texas has a 24% chance. We\u2019re going to see how this goes, but I guarantee you that the Huskies will win and I also guarantee you that Seattle will make you more money.<\/p>\n
You\u2019re going to guarantee it with your own money, James? If someone loses money, you\u2019ll reimburse them?<\/p>\n
Actually, I don\u2019t want to ever guarantee a return. So come find us and we\u2019ll help you out through the process.<\/p>\n
SCC has entered the chat.<\/p>\n
Yes, that is not a guarantee.<\/p>\n
We\u2019ll add a disclaimer at the end of the show.<\/p>\n
Stability is key and Seattle has proven over the last 18 months it\u2019s a much more stable market.<\/p>\n
All right. Well, Kathy, thank you for bringing that information for us. So far, James has represented Seattle and his hometown favorite and his alma mater, the Huskies. Kathy represented the University of Texas and the Longhorns. Now Henry, we\u2019re moving to your neck of the woods with the University of Alabama. Tell us about the Crimson Tide and Tuscaloosa.<\/p>\n
Alabama. Yeah, man, this is right in my\u2026 I live in essentially a market that\u2019s pretty similar to Alabama being Fayetteville, Arkansas. Mostly a college town but what\u2019s cool about Alabama is there\u2019s a lot more market dynamics than just the college. When you look at the economy in Tuscaloosa, Alabama, not only do you have the University of Alabama there providing tons and tons of jobs, but you\u2019ve also got the healthcare system in Alabama, and Mercedes has a manufacturing plant where they manufacture a lot of the SUVs from Mercedes in Alabama. So there\u2019s lots of jobs to go around. You\u2019ve got a fairly affordable median home price of just over $200,000, but what\u2019s cool is you\u2019ve got a median rent of $1,600. So that\u2019s a pretty good rent to purchase ratio and it\u2019s got some of the lowest\u2026 It\u2019s got lower vacancy rates than the national average.
I\u2019m sure a lot of that has to do with college or student housing, but when you couple the average salary, well, the average salary is just under 55,000 a year. So when you couple an average salary on top of good jobs, population growth that\u2019s growing year over year with a pretty decent median rent price and a pretty low average home price, it\u2019s a great place where you can actually buy properties that not only are going to cashflow, but they\u2019re going to stay rented with lower vacancy rates, meaning\u2026 And with lower vacancy rates, that just means there\u2019s less competition. If something\u2019s on the market for rent, it\u2019s typically going to get rented. And so you\u2019re able to know that I\u2019m going to have tenants consistently that are going to pay a good rent that\u2019s going to cover my mortgage plus my expenses. I\u2019m going to have great people with great jobs in more than just one industry.
And so yes, it is not a sexy place like\u2026 Excuse me, yes, it is not a sexy place like Seattle or Austin, but there are still plenty of fun things to do. It\u2019s a college town. Trust me, I\u2019ve been to an Alabama football game. Them people are not short of having a good time out there. There\u2019s plenty of good times to be had out in Tuscaloosa, Alabama. So I think it\u2019s a great place to invest your money. It\u2019s got great fundamentals and market dynamics.<\/p>\n
Yeah, that sounds like my kind of market. Look at that, median home price, 208,000, median rent, 1,600. Those numbers work, especially if you\u2019ve got student housing and could rent per the room. I haven\u2019t done that, but boy I bet it could be lucrative. So I\u2019m going to thumbs up.<\/p>\n
I like this one because it\u2019s actually a college town. Obviously, there\u2019s giant universities in Washington and Seattle and in Austin, but I\u2019ve never been to Tuscaloosa but we did another show where we were representing markets and I did some research into Tuscaloosa and it does really feel like sort of the engine of that city. Henry mentioned there\u2019s car manufacturing, there are other industries, but it does really seem centered around the town and that there\u2019s a lot of attractions around the university. They\u2019re building arts facilities there. And given the spirit of the show talking about what the best college town is, I do like the idea of a place that is really sort of fueled by the university itself. Henry, tell us a little bit more about the game. How much fun did you have?<\/p>\n
Well, I mean, it was a good time had by all. We did some partying before the game and then we went to the game and I don\u2019t know if you know much about Alabama as a football team and Arkansas as a football team, but we don\u2019t really do well when we play them. So we weren\u2019t at the game the whole time because we were having more fun at the places we were at prior to the game. So we hung around, we cheered, the game was over by halftime and we went back out and drowned our sorrows.<\/p>\n
That sounds about right. Well, I\u2019m glad you at least enjoyed yourself. All right. Well, so now we\u2019ve gone through Seattle, Austin and Tuscaloosa, Alabama. So we\u2019ve sort of had two more expensive markets but great strong fundamentals, a lot of economic growth. Then Henry brought us Tuscaloosa, which is more of a college town, a big city. It\u2019s almost got 278,000 people, so a big city but a much more affordable city.
And the last market that we\u2019re going to be talking about today, I will be bringing you, which is Ann Arbor, Michigan and the University of Michigan with the Wolverines. And I got to tell you guys, I am very excited that Kailyn, our producer assigned me the University of Michigan because I have been to a grand total of one college football game in my entire life. And while I went to some D-III games at my college, but a D-I college game and it was at the University of Michigan. I was a sophomore in college and I drove to see some friends and using Henry\u2019s evaluation technique of how much fun you had at the party, I\u2019m convinced that Ann Arbor is the single best real estate market in the entire country because we had a very good time at that college football game.
But really Ann Arbor is actually a very interesting market. Sort of similar to Tuscaloosa, it\u2019s really centered around the university but has a pretty big population. It\u2019s 366,000 and it\u2019s actually one of the biggest universities in the entire country and has pretty good fundamentals. So it\u2019s a high income place. The median income is nearly 80,000, but the median home price is only 381,000. So if you compare that to just absolute garbage markets like Seattle where their median income is higher, it\u2019s, yeah, 97,000 but their median home price is 700,000. So the rent to price ratio in Michigan is a lot better. It\u2019s actually growing this year. We\u2019ve had price growth of 3%, which is certainly better than Austin, which is just crashing right now. And we also have a solid rent growth. So from where I\u2019m sitting, not only is the University of Michigan the best investing town, but it also is the favorite to win the college football playoffs with a 38.5% chance of winning. So I\u2019m feeling pretty good about Ann Arbor right now.<\/p>\n
Michigan is my second favorite college football team and I will rep them. One of those cherished items I have in my house is a signed national championship hat by Charles Woodson. And so I do rep the blue, but as far as investing goes, I think the big point that Henry and Dave are missing on their affordable markets, I get it, they\u2019re really good for cash flow. There\u2019s great rental metrics. You can do well on cash flow if that is your plan and goal.
But even if you\u2019re getting your cash flow and you\u2019re making $500 a month on a unit on a single family house, that\u2019s great cash flow, that\u2019s six grand for the year, on one deal in Seattle, I can create a hundred thousand dollar equity position. Once I\u2019m done renovating it, it\u2019s going to take 18 years for both of your markets to catch up after 12 months with the equity position we\u2019re going to gain. And that\u2019s why I like Seattle over Ann Arbor and over Alabama. You can get 20 years of cash flow in nine months by just strategically adding value to that building.<\/p>\n
Yeah, I would agree with that.<\/p>\n
Get the juice.<\/p>\n
They\u2019re just two different worlds, right? If you are trying to grow wealth, you\u2019re not going to do it in markets that don\u2019t grow in equity, but you will get cash flow. So it just depends on where you are. If you are wanting cash flow now and some people do, some people have already made their equity. They want to invest it and just live off the cash flow. And if that\u2019s you, that could work or if you just don\u2019t have a lot of money. At $200,000 property is going to be a little easier to get into than a higher priced one. So again, it just depends on where you are in life, but if you\u2019re trying to make equity, be in equity markets, not in cash flow markets.<\/p>\n
Dave, I\u2019m not going to argue too much with you here about Michigan. I think Michigan as a state in general is a pretty slept on real estate market that has great fundamentals outside of even Ann Arbor. It\u2019s a place where you can really, really get some cash flow and then in markets like Ann Arbor and some of the other more popular areas in Michigan, you can get cash flow and depreciation. And a lot of people just don\u2019t think about Michigan as a state to invest in because it just seems to be one of those states people forget that\u2019s a state, but it\u2019s also you\u2019ve got\u2026 It\u2019s the weather. I think people see it as this cold weather place and they don\u2019t want to live there and so they don\u2019t think about it from an investment standpoint. But Michigan in general, I think, is super slept on. Great market fundamentals. If I didn\u2019t have such a good real estate market, I would be looking at markets like Michigan and Ohio, these cold weather states that have great dynamics.<\/p>\n
Well, thank you, Henry, for supporting me. I really appreciate that. Now that we have the information for all four college markets, I want us all to vote. I know we are representing the city that we were assigned, but I\u2019d like your honest opinion. We all know what James is going to say. He\u2019s going to say Seattle but-<\/p>\n
That\u2019s easy.<\/p>\n
\u2026 let\u2019s just give him the opportunity to say the obvious. James, go ahead.<\/p>\n
Go Huskies, Seattle. I know what I know and I\u2019ve lived what I\u2019ve lived and I can tell you, it makes huge impacts to be in this major metro city.<\/p>\n
All right. So we\u2019ve got one vote for Seattle. Kathy, are you sticking with Austin or where would you vote?<\/p>\n
I really am. This is one place I might even be okay with negative cash flow. Not really but Austin is booming and the real estate prices aren\u2019t right now, but they will, they will over time. So if I had to choose between the four, it would be Austin. If I didn\u2019t, I\u2019d be right outside of Austin and maybe some of the other Texas cities.<\/p>\n
All right. Wow, two homers so far. Henry, what do you got?<\/p>\n
I\u2019m going to give two answers and neither one of them is the market that I represented. So if I was thinking now in my current investment journey where I\u2019ve already built a portfolio, I have income coming in from not just real estate but other parts of businesses that I own, it\u2019s not just about cash flow anymore for me. It\u2019s more about true wealth creation, equity, appreciation, and tax benefits. And so I would look at Austin and get in and start buying really good deals even if they negatively cash owed for me. If I got to feed a deal a hundred dollars a month but that deal is going to increase in value by 20, 30, 40, $50,000 a year and that deal is going to offset my tax bill by 40 to $50,000 a year, I mean, I\u2019m going to get way better appreciation there than I am in my current market.
And so if I had to choose one of the four as an investor that the place that I\u2019m at right now, I\u2019m going to look at Austin. If I was a new investor and I was getting in the game and wanted to get my feet wet, wanted to get some cash flow, wanted it to be more affordable, less risky, I\u2019m probably going to look at the Michigan market. I just think the fundamentals are great with the population, the economy, the average rents and the entry price for the homes. I think you\u2019re going to get a little bit of\u2026 You got to a little bit of everything, a little cash flow, a little appreciation. It\u2019s not a ton of risk, much safer play.<\/p>\n
All right. Well, I\u2019m voting for my own, which is Michigan, and this is actually genuine as well because of what Henry just said. The way where I am in my investing career, I do still want to get appreciation, but I\u2019m looking for at least modest breakeven cash flow so that I don\u2019t have to feed any money into it ideally. And so when I\u2019m looking at Michigan, I really like that. I like Alabama too because I like those cities that they\u2019re really have consistent demand due to the college atmosphere. You\u2019re always going to have professors, you\u2019re always going to have students. There\u2019s always going to be a little bit of tourism, people coming into these types of places. So I really like that. So I don\u2019t really know where this puts us because Henry voted twice.<\/p>\n
No, Henry said Austin first. Austin wins.<\/p>\n
You\u2019re just more convincing than I am, Kathy, so we\u2019re going to let Austin win. I think that\u2019s a good market.<\/p>\n
You\u2019re a smart man, Dave.<\/p>\n
You know what, good for Austin.<\/p>\n
It also has excellent food and I like hanging out in Austin, so I\u2019m willing to give it to you.
Hopefully this information helps you understand these four particular markets, but I think more importantly, we do these types of shows to help you understand how to think about different markets. Most markets in the United States can make money for investors really in any type of conditions. Just look at James, right? He is investing in a very expensive market and doing it very, very well. You look at other people who are investing in less expensive markets like Tuscaloosa and are probably also doing really well given their personal situation. And so we hope that these types of shows help you understand where you are and trying to align the right types of markets, the right types of strategies for where you are in your investing career. If you like this show, please share it with a friend or give us a good review on either Spotify or Apple. Thank you all so much for listening and we\u2019ll see you for the next episode of On The Market.<\/p>\n