You have one city to invest in. Which city and why?

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?

 

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.

 

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.

 

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.

 

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.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” - Nassim Taleb
 

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.

 
Most Helpful

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.

 

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 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).

 

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.

 
jmompi:
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.

 

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.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.
 

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.

 

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.

Go For Chambers
 
Ed Chambers:
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.

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.

 
TheDebtStar:
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.

 
TheDebtStar:
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.

Imagine sincerely believing this

 

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.

 

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.

 

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.

It is what it is.
 

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.

Cash and cash equivalents: $138,311 Financial instruments and other inventory positions owned: $448,166
 

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.

 

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.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” - Nassim Taleb
 

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.

 

Sacramento - very strong fundamentals and in the early stage of long-term growth.

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 

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 would never bet against NYC as a long-term holder. In the short-term (

Robert Clayton Dean: What is happening? Brill: I blew up the building. Robert Clayton Dean: Why? Brill: Because you made a phone call.
 

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.

 

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.

 

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