I’ve lived in San Francisco since 2001 and have seen this city and the surrounding Bay Area explode. San Francisco used to be a relatively subdued town. Now, it feels like San Francisco has turned into Manhattan with sky-high real estate prices.
Seattle started heating up 5-10 years after San Francisco with the reemergence of Microsoft, the steady growth of Starbucks, and the explosive growth of Amazon. Seattle has become the new San Francisco, just with much more dreary weather.
Finally, there’s New York City, the home of Silicon Alley, not valley. New York City is the greatest city on earth for 6 months of the year. For the other 6 months, the city is either too hot or too cold. If you want to buy an affordable place in Manhattan, forget about it. Manhattan is still about 30% more expensive than San Francisco.
So where is a real estate investor who is looking to invest in the NEXT Silicon Valley for explosive growth supposed to buy? According to a website called Livability, here are the top 5 Silicon Valley alternative cities for real estate investment purposes.
Now, any savvy investor can buy property all around the country via real estate crowdfunding through established sites like Fundrise and CrowdStreet, two of the favorite platforms with the best selection.
Best Silicon Valley Alternatives For Real Estate Investing
1. Lincoln and Omaha, Neb.
Nebraska’s two most populous cities, Lincoln and Omaha, have both become havens for entrepreneurs seeking a home that’s not only affordable, but extremely supportive of new tech businesses, with organizations like the Nebraska Angels — a network of 60 active venture capitalists investing in tech businesses in the state.
The result has been successful startups such as Bulu Box, a monthly service providing samplers of premium health products, and Liberty, an Uber-like service that aims to improve mobility in rural areas. Omaha is also home to Silicon Prairie News, a new website that covers the startup scene in Nebraska and other Midwest states.
2. Huntsville and Birmingham, Ala.
Huntsville has been focusing on innovation since the 1950s, when NASA built up operations there. The city has built on its legacy as it moved into the 21st century with concerted efforts to help startups flourish with helpful resources like The Foundry, an incubator in downtown Huntsville.
In 2017, Huntsville was named the number one fastest-growing tech city by ZipRecruiter and currently has the third most technical workforce in the country, according to Bloomberg.
The state’s most populous city, Birmingham, has also received a lot of attention for its recent growth in the tech sector. Through the work of Velocity Accelerator, the Innovation Depot, and others, the city has seen successful startups launch, such as grocery delivery service Shipt and Daxko, software for health and wellness organizations.
3. Ames and Des Moines, Iowa
Move over Silicon Valley and Silicon Alley, there’s now Silicon Prairie. The capital city of Des Moines in particular is a stand out — it’s officially the fastest-growing city in the Midwest after successful efforts to recruit and attract millennials.
Livability listed Des Moines as one of our best cities for entrepreneurs of 2017 given its career opportunities and affordability, and it already ranks among the top cities for tech hiring in 2018.
Des Moines — and the nearby city of Ames, home to Iowa State University — has successfully built on its many legacy industries, from agriculture to insurance, to bring them into the digital century while also promoting new sectors.
The state’s thriving startup ecosystem puts an “Iowa nice” attitude first, where the belief is that a rising tide lifts all boats. Startup Des Moines, for example, is an organization with the mission of welcoming entrepreneurs to the community, providing ambassadors to help newcomers navigate the ecosystem.
I’ve been to Des Moines over a dozen times during my days in banking and they truly do have nice people and amazing steaks.
4. Raleigh-Durham-Chapel Hill, N.C.
This trio of cities has been an innovation center for decades, with the longstanding Research Triangle Park established more than 50 years ago anchored by North Carolina State University, Duke University and University of North Carolina-Chapel Hill.
With such a dense population of smart, young talent, both legacy tech companies like IBM and Cisco, as well as new startups, reap the talent attraction benefits.
Raleigh, Durham and Chapel Hill have all seen a huge increase in the technology sector in recent years. Raleigh alone saw a nearly 40% increase in tech jobs between 2010-2015 — second only to San Francisco— and Durham was recently named the “Startup capital of the South” by CNBC.
Bank of America is also based on North Carolina and provides a tremendous amount of capital to the ecosystem.
5. Kansas City and St. Louis, Mo.
Both Kansas City, Missouri and St. Louis — on opposite sides of the state of Missouri — routinely make headlines for their growing tech economies.
Kansas City landed on the map several years ago after becoming the first site of Google Fiber, and the sector has been growing ever since with a healthy and vibrant startup scene. Interestingly, Kansas City has been named one of the best cities for women in tech — it’s the only city in America where women on average earn more than men.
St. Louis is also a hot spot to watch, with its downtown area thriving with co-working spaces, tech incubators, VC firms and a huge number of startups, all a result of collaborative efforts among private individuals, city officials and universities hoping to invest in the city’s future.
Honorable Mention Cities To Buy Real Estate
Besides these five cities, I also like Memphis, Las Vegas, Portland, and Salt Lake City as key areas to invest in.
Real estate crowdfunding is the easiest way for any investor to participate in the growth of the new Silicon Valley cities.
I bought San Francisco property in 2003, 2004, 2007, 2014, and 2019 and have done extraordinarily well given the job growth and income growth of the region. The key is to find the next San Francisco, and I believe many are sprouting out around the country because places like San Francisco are simply too expensive.
The best real estate crowdfunding platforms today are:
1) CrowdStreet is based in Portland and connects accredited investors with a broad range of debt and equity commercial real estate investments. CrowdStreet is great because they focus primarily on 18-hour cities (secondary cities) with lower valuations, higher net rental yields, and potentially higher growth.
2) Fundrise, founded in 2012 and available for accredited investors and non-accredited investors. I’ve worked with Fundrise since the beginning, and they’ve consistently impressed me with their innovation. They are pioneers of the eREIT product. Most recently, they were the first ones to launch an Opportunity Fund in the real estate crowdfunding space to take advantage of new tax laws.
Both of these platforms are the oldest and largest real estate crowdfunding platforms today. They have the best marketplaces and the strongest underwriting of deals. Sign up and take a look around as it’s free.
I invested $810,000 in real estate crowdfunding after selling my expensive SF rental house for 30X annual rent and a 2.5% cap rate. Now I’m earning about 10% a year passively.
If Google is spending $13 billion to expand outside of SF and into the heartland and Apple is spending billions in Austin, I think it’s a wise idea to follow suit. And I have.