How about some examples? I'd love to hear about opportunities anywhere.
-W
You won't find cashflow properties at the higher price ranges in general, at least in the US.
-W
Don't tell that to the people who are finding cashflow in places like Hawaii, SF, San Diego, Seattle, Chicago, etc!
Sure ... but keep in mind that the typical "rules" don't really fit these markets for a couple reasons: vacancy is 0-2%, limited mechanicals (typically no A/C or heat because you don't need it), high entry price, etc.
Hawaii:
Purchase $715k (2012), rehab $4k, gross rents $5k per month and increase 6-10% per year (will be $5600/month by Jan 1st), current value $900k
Purchase $260k (2012), rehab $7k, gross rents $3300 per month, current value $350k
Purchase $295k (2013), rehab $12k, gross rents $3700 per month, current value $420k
SF or Cali: the most vocal proponents on BP are Amit M., Minh H, J Martin, Aaron Mazzrillo. Between them that probably have 30-50 buy and hold properties that cash flow.
Chicago: check out BP podcast 78 with Brie, plenty of opportunity on higher priced Chicago neighborhoods.
I understand that some investors would not do these deals because the cash on cash returns (normally in the 4-10% range with leverage) pale in comparison to other deals you can find in other areas of the country. But when you look at risk adjusted total returns, these provide a good balance to a pure cash flow portfolio, expecially when considering long term cheap debt, low property taxes compared to value, and rent/price growth.
Not all of these deals are mine, and are just a couple examples from other buy and hold investors I know who invest locally. We've discussed 1031 exchange to capture some gains, but at the end of the day it's hard to find a better risk adjusted total return at this point.
Lots of BP podcasts have said it - you can find deals in any market. There are several other BP podcasts about investing within a short drive of an expensive market, Lisa Phillips is the first to come to mind.