More specifically if possible, which neighborhood and asset type? Value add, development or stabilized play?
Wonder what everyone’s investment thesis is regarding the environment we are in today.
You are the President of your own shop and get to call the shots. What city are you buying in?
Phoenix metro.. if I had to get specific, I'd say Scottsdale.
Being from Scottsdale and owning RE here, I love this answer. What about Scottsdale (other than the beautiful weather) makes you choose this as the one city to invest in?
weather is obviously a big pro, but otherwise - strong job growth, net positive migration, seemingly sensible government/laws. some overlooked pros - close proximity to great vacation spots - California, Hawaii, Mexico, Vegas, etc (Colorado and Utah are also right next to AZ for winter sports). great airport hub for a small city. lots of hiking and nature. overall great quality of life.
Orlando, Tampa, Raleigh.
Tampa is a good spot!
What about the hurricane insurance in Florida - doesn't it bite off quite a big chunk of cash flow?
Raleigh is going nuts right now. With the MLB expansion they can bid on the baseball stadium, if that actually goes through this place will gain tons more businesses. Also being directly next to RTP helps a ton as well.
Tampa, FL due to retirement demographics + Water Street project.
Take a closer look at corporate relocation and median HH income. Tampa desperately needs well paying primary employment - not a lot of lucrative opportunities there unless you become an entrepreneur.
Retirement demographic is great for certain sectors. I think cannabis investments and coastal RV parks in Florida are a phenomenal opportunity, as are marinas.
Good point.
But aren't you concerned with how transient the income can be from RV parks and marinas? Your tenants can literally drive away overnight for any reason...Plus you're targeting very small markets, how many people own boats and RVs? Finally, its going to be a pain to exit those investments...
Currently live in Tampa and agree. However, we've seen some nice sized companies (Mosaic, Ray Jay, Dynasty Fin Partners) move HQ to Tampa/St.Pete due to low cost of living. But yes, the financial services industry here is nothing to brag about. Besides RJ, mostly boutique shops. Vinik has done a phenomenal job partnering with a development company (SPP) to bring new life to Tampa and doesn't seem to be stopping any time soon.
I completed a real estate market study in Texas where the development called for affordable housing. I think Tampa would benefit from such an opportunity.
High-end trailer/RV parks in/around Phoenix and Boise to play off of the future massive migration out of California once Communism fully takes root.
Brothel in Midland, Texas.
Why trailer parks there? I've seen a lot of people sell their condo/ small SFR in Cali to go buy a big ass house in Arizona/ Texas.
Its a play off of the affordable housing crisis in America. I don't see construction costs dropping anytime soon, so more people will be forced off the spectrum into mobile/manufactured housing. The average baby boomer doesn't have $100k+ in home equity...
If only I could find a way to fund $10m+ of LP equity into the space... My fund is completely sold on the thesis.
Everyone's assuming they're limited to the US. The best returns are going to be places in the developing world:
Africa: huge population boom and migration to urban areas. Lagos, Ouagadougou, Dar es Salaam, Kampala, Lusaka, Luanda, etc. Near term returns may not be the best, but sitting on land plots for the next decade or two will bring in huge profits, assuming you can keep stability. High risk and high reward.
Central/South America: population already centralized in the urban areas, but rock-bottom prices and similar growth potential to Africa. San Salvador, Bogota, Cartagena, Guyaquil and Quito, Guadalajara, Juarez, Tegucigalpa, Guatemala City are the poor but rising cities. Mexico City, Sao Paulo, Santiago, Lima, Panama City, Buenos Aires are the established players that keep growing. As the majority destitute-poor populations slowly rise into the middle class over the coming decades having footholds in these cities will pay off big time, though similarly unstable risks as Africa.
Personally, Luanda, Dar es Salaam, and Sao Paulo are my top choices for best future returns on investment.
Huge risk. If that was the case, Blackstone would be all over these areas and other funds as well.
Sam Zell also specifically mentions in his book to steer away from the emerging markets. Too much political risk. He regrets entering the Latin American markets etc.
I certainly haven't visited every locale I mentioned, but from the cities I have I can say that it really matters having local connections. These are places where knowing the right governing officials and local power brokers matters, and one won't get far otherwise. If you do have their blessing, however, the fruit is ripe for the picking.
Rule of thumb is that if the country's flag has green on it... caveat emptor. Not saying I agree with it, but it isn't bad advice.
I heard it best from a pretty decently sized International REPE player. He said whenever he goes down to Latin America markets to look at investments down there everyone only ask him about how to invest their money back in the US.
He was saying that is very worrisome to a potential investor.
Thing is, you have emerging markets that are doing alright politically and have been for a while. Rwanda has been very calm since the turmoils of the 1990s, Chile is also very stable and Santiago is booming for numerous sectors which attracts young entrepreneurs. Some of the Baltic states (Estonia, Latvia) are also quite calm but RoI there may be limited. I don't think EMs/developing countries should have a blanket term used; in today's market there is too much variability.
Have you seen this video?
It features https://www.vice.com/en_ca/article/znw83a/cowboy-capitalists-0000296-v2…</a">this guy.
I think Africa > South America: The US is too focused on internal squabbling to worry about South America, and the Chinese are pouring huge amounts of NSA capital into Africa, and therefore have a vested interest in maintaining regional stability (the Chinese need inexpensive, low-skilled labor to replace themselves).
The Chinese need resources, not labor. Africa is rich with commodities.
Having been there, I believe that the economic prospects were way over-hyped. With the stagnation of oil and the bust of Banco Espirito Santo, the country has its challenges.
On top of the corruption risk, currency fluctuations can wipe out profits for deals that actually perform well (look at the colombian peso : USD and brazilian real : USD over the past couple of years) and hedging is very expensive.
Dar es Salaam and Kigali in Africa Eastern Germany (Leipzig, Dresden), Czech Republic (potentially Brno & Ostrava), Romania Cartagena, Santiago in LatAm
Either relatively stable countries with interesting CoL shifts or high-growth middle class areas in poor but relatively stable emerging markets.
If I had to start over, I'd say probably one of the warmer weather states major metros. They seem to have a lot of in bound migration these days.
I'd also avoid any city that levies a city income/gross receipts tax.
Oakland has been the belle of the ball this cycle...
overpriced at this point.
It's almost as if growing taxation/bureaucracy is negatively correlated with population growth...
Development in any major southern (southeast or southwest) city. Since I have to pick one and don't feel like being a homer, I'll go with mixed use in Dallas.
Too late to join that party...
Lagos(due to Eko Atlantic project) and Accra. Growing metropolitan cities located in West Africa with established urban populations.
Eko Atlantic will not change Lagos' fate. Lagos is structurally broken (Nigeria is as a whole). There is no middle class. Their real estate market is also a scam, built on laundered government funds.
The developing countries with governments that actually invest in education and healthcare are the best bets.
Vietnam, Indonesia, Myanmar in order of least-most risky.
Vietnam sounds fun, Myanmar sounds... like a dumpster fire, except it's shooting at you
What is the investment horizon? 5 years? 10 years? 50 years?
The year after Chicago defaults and the dust on the property tax situation settles, ChiTown is going to be a great long-term investment.
Can you expound on this?
Not directly related to this, but I was personally thinking about the food needs in a lot of emerging markets (specifically South America and Africa), and was just thinking about the freight rail network around Chicago. If that could be expanded upon with more competitive infrastructure to reach ports in the South, which could then ship to much of the developing world where agricultural output isn't necessarily as robust or efficient as it is in the Midwest (or at least won't be in the mid-term), there could be a lot of opportunities related to that. I don't know enough about transporting agricultural products across vast distances like that though.
At this point in the cycle - I'd buy really good, defensible real estate. Areas with high barriers to entry and low supply (like coastal CA). Less upside but less downside risk too. Lever up 5x if you want to juice returns but at this point in a 10 year cycle you should be thinking "how will this perform in the next recession?" imo.
Crystal City, Virginia - 5 miles from DC, which means jobs in the federal government keep the area afloat during recessions and with the new amazon HQ being built there....this area is going to explode.
anywhere where you can get this and have limitless potential
My bet would be Metro Detroit. Very high end suburbs, growing industrial markets, downtown is seeing a ton of investments from many large companies... especially Quicken Loans (Dan Gilbert). You can still get ROC year 1 north of 10% on stabilized deals.
Any good brokers to talk to based out of there?
What property type?
Barry Swatzenberg (spelling?) @ CBRE is good for about anything. However Jim Montgomery at Signature knows everyone as well.
This guy knows. I'm biased because I grew up there, but Dan Gilbert alone is turning downtown Detroit into quite the place. Nice suburbs for sure, can confirm.
Atlanta and the South in general. Jobs are rapidly growing down south and people are following. Warmer weather to boast too. Cheaper living. Better taxes.
The rich in high tax states will eventually get tired of being taxed excessively and move down south. As those families move out, the states will have to raise taxes to compensate, forcing more rich families to leave. Some 180,000 families in California alone are responsible for nearly 50% of income taxes paid and nearly 1/3 of tax revenue. Once they start to leave, California will finally implode on itself.
Don't you think your about 30 years too late on this call? This is already happening. And as pointed out by many people on older threads, people aren't rational actors and make decisions based on things other than net take home pay. There are reasons to live in NYC or California or the northeast in general that go beyond "how much are my taxes" and many of those won't change.
For example, Florida may be a magnet for retirees because of its tax/bankruptcy laws and its weather, but the school system is one of the worst funded and under-performing in the country. Liberal states tend to have vastly better school systems than conservative ones, in large part because more money gets allocated. I'd argue that for professionals with kids (which is obviously a large population), school quality is equally important as tax burden.
Still a long way to go in Atlanta
Imagine sincerely believing this
What’s not to believe? The 180,000 families paying half the income tax? Or the rich getting tired of being taxed so heavily and moving out of the state?
There will be a huge departure tax very soon for rich families trying to leave California.
My hometown has half a million people in the county, with a downtown that was vacant for many years. The downtown is turning around, with a robotics factory, ~10 craft breweries in a small downtown area, and a lot of money going into public buildings/spaces. Yet you can buy houses adjacent to downtown for ~$30k, at 12-15% cap rates. If I had even a modestly significant amount of money, I would buy as many houses as I could in that market and ride the wave of gentrification over the next few years and then sell those houses off.
Detroit?
Nah, it's much smaller than Detroit, which means it's much easier to turn around.
I'm guessing somewhere in Ohio?
Columbus and Cleveland are doing well.
Close - it's in Eastern PA. Still rust-belt in some ways, but closer to major population centers driving growth.
Idk, I know it's hella risky but I'm intrigued by investing in foreign markets (Central/South America in particular. Africa is still too much of a question mark.) Saw Hines had some positions in LATAM and it got me thinking if those are feasible on a smaller level. Buddy of mine owns a hotel in Costa Rica so that got me thinking as well.
This is a terrible answer unless you're sourcing domestic capital.
In Latin America - in addition to the incremental real estate risk - you're taking on currency, tax, structure, economic, political and so many other risks. While you may be able to achieve attractive unlevered real estate returns, the extra risks you take on wipe out the returns on a net investor basis.
Detroit
Awesome answer. However, with its relationship warming with Eritrea, that could be a potential risk.
IMHO, Eritrea doesn't pose any risk to Djibouti as a competitor for FDI. Western wonks regard Eritrea as the NK of Africa.
On the other hand, Djibouti has the most foreign military bases of any country in the world. Foreign investors would most likely view that as a plus.
Have always thought Djibouti is going to blow up as it strengthens ties with Eritrea and Ethiopia, plus it's prime location on the Red Sea and shipping routes to Europe and Asia. Props for putting this on your list.
Yeah, my VN properties are killing it with all the capital flights from China to VN. We are seeing a lot of appreciation and rent increase in SFR and affordable multifamily housing. Not so much for the Luxury/ high rise condo segment because the level of income for most Vietnameses are still pretty low.
Surprised there aren’t more “Austin” responses.
That boat has sailed. There aren't a lot of good deals left in Austin.
This. Land prices have skyrocketed and heavily speculative highrise development including condos listed for over $800 psf.
If you had the capital to inject into a location i would say most cities in midwest. Cost of living is super affordable you just need a way to attract talent to build families and populate. The growth that could happen would be incredible. This would require a serious connections to make it attractive but if you succeeded the upside would be amazing.
How much capital would you need, and what sort of "build and they shall come" project or event would need to coincide? Let's say I have $1B and decide Omaha is the best spot...I'm not sure people will just come. I'm not knocking you, btw, genuinely curious what sort of 'movement' needs to happen to really skyrocket a city's desirability.
William Zeckendorf helped lead the charge for Denver all those years back. Same with Century City, CA (albeit it was a nice area when he started).
Related is in Hudson Yards and DTLA (by Staples Center) revitalizing both locations.
Yes I was thinking what @SponsorPromote" had in mind. There are a reasonable amount of individuals (famous, successful, wealthy or otherwise) who are from prominent cities in the Midwest (besides Chicago) who could probably motivate a large amount of people to consider the move. It would take time but over the course of 15-20 years amazing things could happen.
Duplexes in Richmond, CA
Prices doubled since 2014/2015 and I think will grow 50% in next few years while rent will grow 7% per year
https://www.zillow.com/richmond-ca/home-values/
I would buy a 150-acre plot of land in the Hudson Valley 2hrs outside of NYC and develop 25 1,200 - 2,000 sqft homes on it
.
As someone building it, nah
But if you're interested...
Sacramento - very strong fundamentals and in the early stage of long-term growth.
Dubai: What makes real estate investment in Dubai worthwhile is the high return on investment (RoI). Rental income is considered a very important component of returns as it matures immediately in comparison to capital appreciation, which is only attainable when selling the property, or releasing sizeable equity through mortgage.
I respectfully disagree. Did you see the carnage that DAMAC is currently going through?
I think Las Vegas has some interesting dynamics at play. Clark County has been one of the fastest growing counties in the country and a lot of the growth has been generated from retirees. I know quite a few people whose parents and grandparents have moved to Vegas because they didn't want to move too far away from the family in California.
When you think about it, Vegas is kind of perfect for old people who usually have odd hours, enjoy gambling, enjoy hot weather, fixed income (no income tax in Nevada). If Pheonix could become a retiree mecca, I don't see why Vegas couldn't (in many cases it already is). Plus the chances of family members visiting are far greater than moving to the bumfuck middle of nowhere
I know there are a lot of scars from the last recession, but I could see senior housing or medical office as a property type worthy of development.
I see this in the seniors housing performance data from NIC. Las Vegas has experienced surprisingly strong absorption and rental rate growth.
You can invest anywhere once the downturn arrives.
(read: I wouldn't buy anything right now.)
What are everyone's thoughts on New York City
fuck yes bring me 1 cap deals plz
I would never bet against NYC as a long-term holder. In the short-term (5 years) is a different story.
.
Las Vegas, NV
Of course answering this question is highly dependent on strategy, property type, and timeline. Real estate values are driven by rents. IMO, the two largest drivers of commercial rents: density and income. You can have high rents in high density, low income areas (Bronx, NY) or in low density, high income areas (Greenwich, CT). The highest rents are achieved where these two converge (Soho, Manhattan).
The chances of a high income but low density area becoming a high density and high income area are pretty low, unless you can be the one actually creating that density (multi-family developer in Scottsdale, AZ). That is why, historically, by far the best places to invest have been in high barrier to entry, high density neighborhoods that could become high density, high income neighborhoods due to gentrification. What does this mean in practice? Brooklyn, Queens, Oakland, East LA, etc. None of these neighborhoods are secrets, but they remain the best places to invest. You could expand on this thesis to neighborhoods in large secondary metros too: Deep Ellum (Dallas), Fishtown (Philly), etc.
IMO, anyone investing in Tampa or Las Vegas is absolutely asking to get reckt when the cycle turns.
Wouldn't Vegas qualify as high density? With the potential to become high density high income?
Dallas Texas or Miami Florida
Why Miami?
A lot of folks here seem to be choosing new, volatile, high growth markets, and for good reason.
A market i recently visited for the first time that blew me away was Philadelphia. It is a mature, dynamic market anchored by healthcare and education, but rents (office, retail, multifamily) are extremely low (when compared to DC, Boston, NY). It's also extremely expensive to build there.
Population and job growth are not as high as a Tampa, Vegas, Phoenix, or Dallas, but it's damn near impossible to build in Philly, it has a stable economy, and you can get in at a good basis. Those are hard fundamentals to beat for any property type or investment strategy.
It's true, rents here are absurdly low. I live in an extremely walkable, trendy-ass neighborhood of philly in a new 1bdr apartment for $1,550 including a parking spot. I would pay more, I feel like im in at a steal.
I agree on the fundamentals, but - speaking from the multifamily side - the owners here are all family office, long term money that barely sell. IF you can get something under control, you will do well.
can you DM me the neighborhood please :)
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