Selecting your market

[Benjamin Youngblood]

Hello BP community.

I'm looking to start my first investment and I'm looking at investing in a multi family unit to get started to help financially by allowing the investment to pay for my rent. My problem is finding where I want to invest. I currently live in the Sacramento CA area, but when running the numbers on cash flow and return on investment I find that in some area like Memphis the numbers work much much better for what I'm looking for. My question is what are some tips on finding a market to get started in. I'm not constricted in terms of location since I'm in a position to relocate based on the market I would like to invest in. 

Thank you.

[Andrew Johnson]

Benjamin Youngblood I love California investors! We are all seduced by the shiny metrics like cash-on-cash returns of Memphis, Cleveland, Akron, and just about any middle American rural city. I'm not saying it's good or bad so there are some practical things to consider.

If you're investing $50K as a downpayment and you get a 10% cash-on-cash return that's $5K. With a "horrible" 5% cash-on-cash return it's $2.5K. I visit my out-of-state properties twice a year and it's more than $2.5K when you look at plane tickets, hotel stays, car rental, etc. not to mention there is added risk when you can't drive by your property from time-to-time. You can't quantify the latter but it exists.

My advice: invest where you think you'll want to own for 30 years. If that's Memphis, great. If that's Akron, awesome. If that's East St. Louis, well, I guess so. Just don't get seduced by certain returns on metrics that may (or may not) apply to you.