How do/did you pick and learn your market?

[Account Closed]

So first off, as a new guy I just have to say THANK YOU to every BP member, I have never learned so much in such a short time!

Second of all, apologies for the long post, I have been reading and listening to podcasts and I guess I just have a ton of questions, so please point me to any prior content if this has already been covered.

Since I am in the San Francisco area and need some time to determine the best way to come up with my down payment, I thought I would "learn my market" but first I need to pick a market and would appreciate your feedback.

Based on the podcasts and posts I have reviewed so far, it seems to me that I have a couple of choices:

1) Go a few hours from SF and start there. I have some friends from school who could be my feet on the ground and may be interested in being the property management part of the business, but I would still be able to get out to the area and get my feet on the ground as well.

2) Go turn key on a “distant state” (5 hour plane ride) using a turn key company, coupled with property management, but their seems to be a discrepancy between appraised value and what the turn key companies need to get their profit, so appreciation on resale would be at risk

3) Partner with a great property management company (although figuring out if the property management company is “great” is a whole other thing) and find a property on my own or link up with a BP wholesaler on a “distant state” property. I could probably negate the appreciation risk, but being able to assess rentability and a really good neighborhood would be difficult or take more than a trip or two.

4) Going back to Portland, OR where my vacation rental is. I have a maintenance guy, but the market there seems to be peaking and I am pretty sure I would have to do a rehab property to make the deal viable and I do not think my maintenance guy is up to the size of project we would have to do.

So I would appreciate any thoughts you all have on “picking a market” and the lessons you learned.

My questions about learning the market:

1) How did each you approach this? I have found some great spread sheets on the site and some software, but nothing seems to summarize all the reviewed properties on a single sheet to allow comparisons within a zip code or area. Are comparisons between properties unimportant? I really learn best by documenting and planning and do not want to reinvent the wheel

2) How do assess appreciation rates, do you go back 10 or 20 years, or do you not spend a lot of time on this?

3)In addition to the numbers, what else do you look at Crime?, Schools? Neighborhood upkeep? What is your tolerance and where do you go for data? City Data?

[Mike D'Arrigo]

Hi John,

Welcome to BP. I'm in the Bay Area also. You're asking a lot of great questions but the first thing you need to start with is defining your overall investment objective. Is it buy and hold for cash flow or appreciation or fix and flip. If you're looking for cash flow, you really have no choice but to go out of state. It's virtually impossible to get anything to cash flow with a decent cash on cash return here in CA. Once you make that decision, there's a lot of factors that you'll need to look at. Following are some of the main things:

1. What are the population trends? Growing or shrinking?
2. What is the unemployment rate?
3. Are incomes growing or shrinking?
4. Is there a diverse economy and diverse employer base?
5. Is there public and private investment in redevelopment and infrastructure?
6. Are real estate prices stable?
7. What is the rent/price ratio? (not good in CA)
8. Are the landlord/Tenant laws favorable to landlords?

These are some of the main things to look at. I've written a report on how to choose a market. I'll be happy to send it to you if you like.

Wishing you success.

Mike