Big gateway cities like New York and Miami are exciting and alluring. But they are also home to expensive and oversaturated markets full of real estate investors from all around the world. Rather than struggle as a little fish in a big pond why not relocate to a smaller secondary city? Secondary markets like Raleigh and Tampa Bay are some of the fastest growing areas in America. With strong job growth and an influx of driven young professionals, these markets are hungry for housing.
A deliberate strategy of relocation of investment portfolios from gateway to second tier cities can be incredibly advantageous. Traditionally, gateway cities and larger urban areas are appreciation rich but cash flow poor areas for investment real estate. When appreciation begins to slow in primary markets it is a good time to seek cash flow in smaller secondary cities. Second tier cities often come with numerous tax advantages of their own and with much less investor competition. The 1031 is the key. Carrying out a like kind exchange from a primary city to a secondary city will give you the power to maximize your real estate investing without worrying about capital gains tax.