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Theo Hicks: Hello Best Ever listeners and welcome back to another edition of the Syndication School series, a free resource where we focus on the how-to’s of apartment syndication. As always, I’m your host Theo Hicks. Each week, we air a podcast episode that focuses on a specific aspect of the apartment syndication investment strategy. And for a lot of these episodes, we’ve given away free documents, so make sure you check out those previous episodes, as well as those free documents at syndicationschool.com.
Took a little break last week. I was feeling under the weather and decided not to record because I would have been coughing into the microphone and didn’t want to do that to our editor. But we’re back at it this week, feeling much better. I didn’t have to lose my sense of smell or taste. It was just, as my wife calls it, a man flu. But feeling good. Glad to be back and talking about apartment syndication.
So specifically, as you can tell by the title, we’re going to talk about something timely today and related to markets. So each year U-Haul, of all places, releases an annual report where they rank each state in the US, minus Hawaii, since they don’t as of yet create a car to boat a U-Haul truck… But they do include Alaska, and then they run off the 50. They added in Washington DC as a separate location. So they rank all 49 states, minus Hawaii, plus Washington DC, based off of the net gain of one-way U-Haul trucks that are entering the state, versus leaving the states, based on all of their U-haul transactions.
So whenever someone gets a U-Haul for a one-way trip, they log the destination as well as where they’re leaving from. So for each of the states, they’ll list up all of the people that were going to that market one-way, and all the people that were leaving the market. And then if it was a net gain, that means that more people booked a one-way trip to that market. If it was a net loss, it means that more people booked one-way trips out of that market.
So a little disclaimer that they have on their website, or on this post, they say that “U-Haul migration trends do not correlate directly to population or economic growth. The company’s growth data is an effective gauge of how well cities and states are attracting and maintaining residents.” So of course, they don’t track every single person who is moving out of the state or moving into the state. People might not take a U-Haul, or they might use some other service, they might fly. For example, when we moved recently, we used a third-party company that the company my wife works [unintelligible [00:06:28].02] to move. So it’s not logging every single person that’s moving. But it can give you a general idea, at least relatively speaking, where people are going, where people aren’t going, since it’s using that same data across all the markets.
And then as multifamily investors, we care a lot about the population trends when we are selecting a target market, when we are analyzing the target market we’re currently in to make sure that it is still a strong market… So you don’t want to just analyze the market once and then assume it’s always going to be good. You want to constantly be looking at it on a yearly basis. Or if you’re ready to move or expand to other markets, you want to look at population trends. And so you want to see, obviously, a market where the migration is net positive and not net negative. Meaning more people are moving there than are moving out… Because – and this applies to all real estate, but more specifically to multi-family – the people are your supply, in a sense, right? So you’ve got, on the one hand, the amount of real estate available, on the other hand, the number of people.
Obviously, each year, usually in most places, especially the big markets, the amount of real estate available is going up, or the number of units are going up. And then hopefully the number of people are going up at a faster rate, meaning that there are more people than there are actual units. So these locations with really high migration are going to have a greater demand for real estate, which means your vacancies are going to be lower, and you’ll be able to demand a higher rent.
So that’s why I think these U-Haul reports are very powerful. And again, it can help you confirm that you’re in the right market, or help you determine if you need to leave your market, or to expand to another market. Now one last thing before I actually get into the numbers is that these are statewide. Just because your state is at the bottom of the list, or at the top of the list, it doesn’t mean that you should, on the one hand, leave, if it was at the bottom of the list, or on the other hand, stay or go there if it’s at the top of the list. Because it’s still going to be very dependent on the MSA. And then within that MSA it’s going to be dependent on the neighborhood. It can depend on you following the three immutable laws of real estate investing, you having the right team, underwriting the deal properly… You guys kind of get the drill.
So the whole point here is to give you guidance and some markets to maybe investigate further. But this still doesn’t mean that you can throw everything else we’ve talked about out the window and just say, “Oh, well. In this case, Tennessee is number one. So I’m going to sell all my properties and then move to some random rural area in Tennessee, because Theo told me at Syndication School that most people are moving to this area.” So obviously you guys know that, but you always have to remind the people, just in case we’ve got some newer people who are zealous and excited to get started.
So one of the biggest changes, I kind of just mentioned, would be the state that topped the list. So for the first time since 2015, which I believe is when they started tracking this data, a non-Florida non-Texas State had the greatest gain in one way U-Haul trucks entering their state. And of all places, it was Tennessee, which is very surprising to me. Obviously, we’ve got Nashville probably leading the way in that. So the one-way my trips were up 12% year over year, which resulted in Tennessee jumping to the number one spot from the 12th spot in 2019. So a pretty big jump.
Texas, who used to hold the number one spot from 2016 to 2018, so three years in a row, they fell to second place in 2019 and remained in second place in 2020… While Florida took over Texas at the number one spot in 2019, and then dropped to number three in 2020. So top three would be number one, Tennessee, number two, Texas, and number three, Florida.
Now some other markets that had some pretty big jumps in the rankings would be Arizona. In 2019, Arizona ranked 20th, whereas in 2020 they are ranked 5th. The biggest jump was Colorado. So Colorado was ranked all the way in the 40s, in 2019. They were even at 42nd, so essentially almost the last in 2019. But they jumped all the way to 6th place in 2020.
And then another area with a big jump would be Nevada who was 24th in 2019 and then 8th in 2020. So again, it seems here that Texas and Florida are still strong, still a lot of people moving there. But Tennessee, Arizona, Colorado, and Nevada might be four states to investigate further and figure out where in those states people are moving. Most likely, Nashville, Phoenix, Denver, and then… For Nevada, I’m not necessarily sure where that would be. I can’t remember; that must be Reno where all the people are moving. I don’t think it’s actually Las Vegas. But you’ll back check me on that.
Now, what about the opposite end of the spectrum? What about some of the states that lost people based off of, again, U-Hauls one-way trip data? So the states that had the most net loss of one-way U-Haul trips. Not surprisingly, California was ranked 50th, the absolute worst. And that was followed by Illinois, in 49th place. So a lot of one-way U-Haul trips out of California, a lot of one-way trips out of Illinois. Again, going to places like Arizona, Colorado, Nevada, Tennessee, and the other ones in the top 10. I’ll get to it in a second.
So California, nothing new here. They have ranked 48th, 49th or 50th, since 2016. And then Illinois has basically been dead last or second to dead last since 2015. And again, this is when they started tracking this data, 2015. So maybe even longer than that California and Illinois have been at the bottom of the list. Again it doesn’t mean that every single real estate investment in Illinois and California is bad, but just overall people are leaving those states.
Other markets that had some pretty large drops in the rankings… First will be North Carolina. So North Carolina was still in the top 10, but they were third in 2018 and dropped to 9th in 2020. So not that big of a drop, but still 3rd and 9th. I wanted to highlight that. And then their neighbor, South Carolina was 4th in 2019 and then they dropped to 15th and 2020. We’ve got Utah who dropped from 8th to 17th. Alabama had a pretty big drop from 6th all the way to 22nd. Another place with a big drop would be Vermont from, 10th to 26th. Idaho from 11th to 30th, which is interesting because the rents in Boise, Idaho have been exploding this year during the COVID pandemic. And then the biggest drop would be the state of Washington, which went from 5th in 2019, all the way to 36th in 2020.
So basically the markets that did really well are Tennessee, Arizona, Colorado, and Nevada. Texas and Florida remain strong. And then California, Illinois stayed bad. And then some other markets that you might want to keep an eye on if you’re in there would be North Carolina, South Carolina, Utah, Alabama, Vermont, Idaho, and Washington. South Carolina and Utah are still in the top 20, so not that big of a deal. But Alabama dropped from the top 10 to the 20s. Same with Vermont, Idaho 11th to the 30th, and then Washington, a huge drop from 5th to 36th in 2020.
So if you want to check out the full list of 50, you can go to Google and type in just 2020 migration trends U-Haul, and it should pop up. But I’m going to go over the top 10 right now with you guys and girls, and then we will wrap up the show. So we’re going to go to the top 10, plus the ranking in 2019.
So number 10, the state of Georgia who was ranked 16th in 2019. Number nine, as I’ve already mentioned, North Carolina dropped in 9th place from 3rd. Nevada, a huge jump from 24th to 8th. Next is Missouri in 7th place, which is kind of interesting, from 13th in 2019. As I already mentioned Colorado, the biggest jump of all, 42nd place (crazy) in 2019, all the way to 6th in 2020. Another part was the big jump of Arizona, 5th place in 2020, from 20th in 2019.
And then you’ve kind of got the ones that have always been strong, which would be Ohio at 4th (they were 7th last year), Florida 3rd; as I mentioned it was 1st last year. Texas 2nd, still. And then number one, Tennessee, at 12th in 2019. So kind of all over the place.
You’ve got the South with Georgia. Maybe you consider North Carolina, South, I don’t know. And then Florida, Texas, Tennessee. We had the Midwest with Ohio. I don’t think Missouri is considered Midwest. So Missouri is kind of like an outlier. And then we’ve got the mountain, Nevada, Colorado, Arizona. Really nothing in the North-East and nothing in the West. We’ve got kind of South, and then Midwest mountain areas with the coast. I guess the East Coast, the West Coast, not really on this list.
So check out that list of all the 50, and again, this is a report done by U-Haul every single year. So that will conclude this episode. Thanks for tuning in. Make sure you check out some of our other episodes on the how-to’s of apartment syndication. Make sure you check out those free documents as well. That is at syndicationschool.com Thank you for listening. Have a Best Ever day and we’ll talk to you tomorrow.
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