How did you choose your 2nd investment property (out of state investing)

Question

I'm about to close on my first investment property out of state (Las Vegas, NV) and wanted to keep the momentum going to search for my next property. What are some things that helped guide you to find the next property to invest in? Was it an article about the top rental markets, job data, friends/family? I'm interested to see what data/criteria helped you decide where to buy next rather than just asking where I should invest next. I've got it narrowed down to wanting to invest in multi-family next, but don't know where to start in terms of location. Thanks!

Eliott Elias · Answer

Being specific on your criteria. Here is my buy box,

• Creative Deals Subject to & owner finance: no more than 10% down, good loan maturity, 6%< interest rate, 5 year + balloon
• Subject to & owner finance: no more than 10% down, good loan maturity, 6%< interest rate, 5 year + balloon
• Cash: 70%*ARV-Repairs, we will use our own comps to determine ARV
• Location: Austin/Houston/Bell County

• Subject to & owner finance: no more than 10% down, good loan maturity, 6%< interest rate, 5 year + balloon

Eric Fernwood · Answer

Hello @Eric Gorostiza,

The process we followed is illustrated below. So far we've delivered over 470 well-performing investment properties using this process.

The process is straightforward. And, at every decision point there are clear metrics so you know you are making the right decision.

Starting with the location, each step in the process is built upon the previous step. The first selection (the most critical one) is based on the goal of getting off and staying off the corporate treadmill. The easy part is getting off. Any properties, in any location, that collectively generate enough income today will work. The hard part is staying off.

To stay off the treadmill, you need dependable passive income. A dependable passive income has three requirements.

• Reliable - Your income continues even in difficult economic times.
• Inflation-Compensating - Rental income increases faster than inflation, compensating for rising prices.
• Persistent - Your income will last; you and your spouse won't outlive it.

All three characteristics are primarily dependent upon the location. Below are some of the location selection criteria. If you would like background on each criteria, let me know.

• Metro population >1M
• Both the state and metro populations are increasing
• Low crime
• Low operating costs (taxes, insurance)
• Limited urban sprawl
• Metro rent and price growth rate > inflation
• Landlord/tenant rules and regulations

Once you select a location, work with local property managers to identify a tenant pool segment with a high concentration of dependable tenants. A dependable tenant is someone who

• Has stable employment in a market segment that is very likely to be stable or improve over time
• Pays all the rent on schedule
• Takes care of the property
• Does not cause problems with neighbors
• Does not engage in illegal activities while on the property
• Stays for many years

Once you select a tenant pool segment, find out where and what they rent today. Then buy similar properties. If you buy similar properties, most of the people attracted will be from the selected tenant pool. If you buy anything else, you exclude this segment with the right characteristics. The target tenant segment drives all property characteristics.

Renovation - Renovation is not about making the house appealing to you. Your tastes do not enter into it. Renovation is the process of transforming a property to be more attractive to your tenant segment, thereby increasing the rent, decreasing time to rent, and reducing maintenance costs.

Eric, this is a straightforward method for consistently selecting properties that will provide the dependable passive income you want. No guessing, no opinion, no luck required.

Let me know if you have any questions.