Choosing a market

[Kim Handelman]

I'm starting out. I know I want to buy and hold and I know I can't manage the properties myself. Because I would like to hire a management company, I would like to start with apartment complexes. I live in CT on the shoreline and am finding it hard to find anything that will cash flow when I factor in the management fees. My question is, I know I need to research out of state markets and I've read a lot on how to do the research once I find a market but everything I've read assumes I have some sort of clue where to start. I've heard the "Mid-West" cash flows well but that's a very very large area! Any way to narrow it down? I'm hoping to choose 3 or 4 areas to do some deep research before I begin to seriously look at properties. 

[Joe Fairless]

@Kim Handelman welcome to BP and, yeah, the midwest sure is a big area. I live in NYC but invest in other markets (one of them in the midwest, Cincinnati). I'd start by identifying the best ways to qualify a market. Here are the 10 things I look for that might be helpful for you: 

1. Unemployment rate less than national average (search "city name" + "unemployment rate" in Google)  

2. Population more than 250k or more in MSA (metropolitan statistical area_ - go to census.gov for a list of MSAs 

3. Diverse job industry - go to Wikipedia page for city, chamber of commerce 

4. Recreational activities for families (ex. Six Flags) 

5. Affordable cost of living - bestplaces.net is a good resource for this 

6. Landlord friendly laws - ask a property mgmt company how long does it take to kick a resident out if they don't pay 

7. Natural resources close by that generate income for market - Google search, local newspapers, Wikipedia page 

8.  Thriving or emerging downtown - Google search 

9. Trusted and experienced team members - as @Engelo Rumora said this is muy importante 

10. Favorable absorption and rent trends - Google search, broker conversations, property mgmt 

Most important thing is job growth and projections. People need a job to pay rent. 

Hope this helps. I'm in your same situation so figured I'd tell you what I've learned to see if it helps you make things happen too.