How did you pick your market?

Question

I live in CA and I'm looking to start purchasing properties out of state. I'm curious how you all decided which market(s) to invest in? Did you live in that location previously, do you have family there so you have visited? Or, have you never visited the city and you just ran a market analysis and decided it was the place for you?

I have plenty of cash and assuming I find a good deal, I'm ready to pull the trigger today. I'm just having a hard time filtering down where to look for deals and network.

These are the places I have "connections with" or places I have been looking at.

Kansas City (lived there 2 years)

St Petersburg/Tampa FL (lived there 2 years)

Des Moines (went to school in Ames)

Tulsa (several podcasts discussing this location)

Nathan Gesner · Answer

I would start at the state level. Do they have laws that are fair to Landlords, or do they tend to favor Tenants? Looking back at how Landlords were treated during COVID should give you an idea. I would then consider what their court system looks like. If it takes six months to get an eviction, I wouldn't invest in that market. If it can be done in 1-2 months, then that's doable.

Then look at cities/counties that show a stable job market and populace. If they have are attracting big businesses to their area, that's even better.

Once you have a city selected, research the schools and crime to focus in on a specific neighborhood.

When you have the neighborhood, now you can start looking at specific properties.

Joseph Crunkilton · Answer

It had properties for prices I could afford and rental numbers that cash flowed. There's pros and cons for everything and you can get lost in analysis paralysis looking for the perfect one.

I worked with @Zach Lemaster and his team on my first few properties. They've been performing well and they've been key players in my success. If you're interested, check them out. Could definitely shorten your learning curve and time to the first deal.

I invest in KC and have been happy with my experience.

James Hamilton · Answer

Hi Joseph, are you using RenttoRetirement? I've been working with them for a couple months - great people who are very helpful, but I haven't pulled the trigger yet. Is investing in turnkey the right way to START your investing career? That's the main question I have in my mind. Awesome company from what I have seen though.

Marty Boardman · Answer

I live in Phoenix and own SFH/2-family rentals in Milwaukee and Green Bay. When I chose these markets (about 10 years ago) the primary metric I used was foreclosure discount. At the time the discount was about 55% (compared to 11% in Phoenix). Basically there were a lot of distressed properties I could buy, fix up, rent and refi. The job market there was stable with large employers like Harley Davidson, Caterpillar, Aurora Healthcare, Fiserv and Johnson Controls.

Another deciding factor for me was being able to fly non-stop from Phoenix. I can get from my home front door to my rental doors in about 5 hours.

Unfortunately, there's not much of a foreclosure discount in any market these days. So my starting point is median rental income/median price. The higher the median rental income (and lower median price) the more attractive the market for cash flow. This isn't a perfect science, but it's helpful for weeding out a lot of areas. From there, I look at the job market and as @Nathan Gesner mentioned, whether it's a landlord friendly state.

Good luck Yitzhak!

John Mathew · Answer

Hello! Here are a few key factors to consider when choosing a market:

• Economic conditions: Look for markets with a strong economy and job market, as these are typically indicators of a healthy real estate market.
• Population growth: Markets with a growing population tend to have more demand for housing, which can translate into higher property values and rental income.
• Affordability: Consider the cost of living in the market, including housing prices and rental rates. Markets with relatively affordable housing may offer more opportunities for investment.
• Rental demand: Markets with a high demand for rental properties can be attractive to investors, as they may be able to generate steady rental income.
• Foreclosure activity: Markets with a high number of foreclosures may offer opportunities to buy properties at a discount, but they may also be riskier due to the potential for lower property values.
• Transportation: Markets with good transportation networks, such as access to public transit or major highways, may be more attractive to renters and buyers.
• Amenities: Markets with a wide range of amenities, such as shopping, dining, and entertainment options, may be more attractive to renters and buyers.

Ultimately, the best market for you will depend on your investment goals, risk tolerance, and financial situation. It's important to do your research and carefully evaluate the potential risks and rewards of different markets before making a decision. Working with a real estate professional with local market knowledge can also be helpful in finding the right market for your investment needs.

Alex Gunnerson · Answer

Small world @Yitzhak Magoon , I went to Ames middle school. I ended up moving to Carroll IA, went to Iowa State and now I'm in Kansas City!

I'd echo a lot of what @Nathan Gesner said about doing your homework on Landlord friendly states which is a good way to quickly narrow down your options.

The next thing I would ask is what are your main goals for investing ? Are you in cash-flow building mode, trying to accumulate as much cash-flow as possible to free up your time? Are you more interested in appreciation and less concerned about cash-flow? You're probably already aware but certain areas, like KC, are great for cash flow but most likely won't yield the high appreciation that other markets like Florida or Texas might.

Eliott Elias · Answer

Pick a market that is driving distance to you. A lot you will learn by being close to it.

Dustin Street · Answer

You should definitely start where your most familiar with. Numbers are important but so is comfort. You don't want to be overwhelmed with waves of uncertainty while also tackling a new market. If you want to look into your options for KC hit me up though! I specialize in getting investors profitable properties!

Russell Brazil · Answer

I invest locally.

How did you pick your market?

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