Updated: Jan 5, 2021
Real estate remains as an appealing asset class for investors because of the tremendous opportunities to earn recurrent income from cash flow and potential appreciation in market value over long term. Robert Kiyosaki (author of Rich Dad Poor Dad) says that cash flow – or passive income – should be the primary focus for building infinite wealth. That's because cash flow can breed more cash flow. At a certain point, when your recurring cash flow can support your living expenses, you can confidently say you have achieved your financial freedom.
There are 3 key factors to consider to select the perfect property, especially when you are planning to invest in a different place than you are currently. The basic principles of real estate business remain unchanged anywhere in the US or even the world. Thus, you want to choose places (as your investment properties) that have high return-on-investment. To maximize the returns and minimize the risks from your real estate investment, you need to invest in properties in places with the following key factors (priorities follow the order). And that is what we did.
1. Landlord Friendly: We should treat real estate investment as a business. For any type of business, laws and regulations are the solid foundation of the success of the company. You don't want to purchase a property where the tenant breaks the house, and the landlord (you) cannot evict the tenant.
We did some research to find the landlord friendly states all around the US. Based on Moris Invest, here are the Top 5 Landlord Friendly States in the United States:
1. Texas (TX)
2. Indiana (IN)
3. Colorado (CO)
4. Arizona (AZ)
5. Florida (FL)
2. Potential Appreciation: You don't want to invest in properties and end up losing asset value because the neighborhood is going downhill. Property appreciation is generally affected by job growth, population growth, and other industry factors.
After figuring out the legal structure, you need to figure out the potential appreciation rate. No one can see the future. Maybe your neighborhood will become the next Silicon Valley. However, you can predict appreciation through factors such as population growth, job growth, policies and attraction for talent.
Based on WorldPopulationReview, here are the states that with highest job growth percent
Based on QuickLoan, here are the fastest-growing cities by population growth:
Based on Investopedia, here are the 7 States states have no personal income tax:
Based on sbecouncil.org, here are the most entrepreneur-friendly state under small business policy index:
The table below shows the list of the common states and cities we found out after our research.
This table helped us to narrow down the research for the best cities in the US to invest in. So here is our Top 5:
3. Now let's dig into Cash Flow!
First, let's refresh what cash flow is. Let's say we have a property that has the following revenue and expenses. - Rental income $1,500 per month
- Mortgage payment (PITI) $900 per month
- Maintenance fee (Property management fee $150 + Vacancy allowance $150) = 400 per month
- Your total expenses will add up to $1,300
- Thus, Cash flow (net) will be $200 per month or $2,400 per year
In the above table, we identified the average cash flow for the landlord friendly states with appreciation. It's based on the median price and rent. It varies based on different properties and cities. We condensed the table below to make it easier for you.
At Real Cash, we do all property analysis in the given state and city. We do all the hard work for you so that you can focus on finding the best property for you. We use the best technology to find all the information and provide you with the best deals. Sign up today and get the best cash flow!