Explain like I'm 5- How do you guys find a location to invest in?

Question

Hi all,

Newbie here from Brooklyn, NY. I've gone through some of the basics and determined that I'd like to start investing into a single-family home to buy & hold. Ultimately, my end goal is to learn enough about this so I can one day come back to Brooklyn and purchase a multi-family property. But last I checked, Rome wasn't built in a day. Or two.

In the simplest way I can ask- how do you pros determine a location? In my case, I have about 25K that I'm comfortably willing to invest. I'm considering somewhere in PA so I can drive out and see the areas on the weekends, but that's purely based on proximity. Also if there's any other regions you'd recommend in the north-east or mid-west, I'm all ears!

Thank you for your time,

Moosa

Jay Helms · Answer

@Moosa Shahadat - I started local, primarily because of my nature. I wanted to touch and feel and had every intention of self managing. I now no longer self manage, have a 42 unit apartment complex 2 hrs away and have a duplex that I purchased 2.5 years that, until this day, have never stepped foot into. I tell you that to emphasis no matter where you start, you'll grow from there. Just starting out I encourage you to spend some time figuring out your WHY. Why do you want to invest in real estate? Once you figure out your why and your passion, you line up your goals to support your why/passion and then your investing criteria are much easier defined to support your goals.

Dillon Hall · Answer

I heard on a BP podcast today, "Calculate three Buy & Hold deals every morning."

Select a town within your proximity, find the median home stats in the town (median price, sqft, bed/bath).

Find a home on the market that matches those stats,

Find approx. rent.

Dive deeper if you like the results, but be aware that your initial calculations could be incredibly inaccurate. Do more market research to make a more accurate Buy & Hold calculation.

If you're looking for appreciation: neighborhood quality, school ratings, crime levels, population changes, renter/owner occupant ratio. Ask "what's the value proposition of this town? What brings people here, and what makes them stay?"

Heat Map of highest allocation of distressed properties.

Then cold call the area for distressed sellers with a dialer+ data software like MojoSells or TheRedX.

Llewelyn A. · Answer

5 year old: "Uncle Llew.... What toys do you want to have when you grow up?"

Me: "I like Toys that will get me more toys!"

5 year old: "What kind of Toys are those, Uncle Llew?"

Me: "You see that really big Toy that all those people are going in? Every year, more people want that big Toy! And because they want that big Toy... I can then get more Toys!"

5 year old: "I don't understand, That's a HOUSE (*snicker*) Uncle Llew!"

Me: "I know... but one day, if you see what a few kids want... and that you think a WHOLE BUNCH of Kinds MAY WANT in the future........ then you will understand.... but probably not right now!"

OK... A 5 Year old won't understand future value increases with demand....... which is why, if you want to understand it, you need to wait until you are 10 years old!

Anthony Dooley · Answer

If you only have $25K, it isn't enough to do it right, especially within a days drive from Brooklyn. Knowing what I know, I would move out of NYC to a less expensive area, continue to save money, and learn my new market. Then you will know a deal when you see one.

Moosa Shahadat · Answer

Woah this is an overwhelming amount of advice. There's a good amount of takeaways here, but my main action item is to continue to research different regions on my own. Everyone, thank you all for the help here! Best of luck to you all on your RE endeavors. :)

Gurpreet Bhinder · Answer

Newbie to newbie - Use BP to your advantage. Leverage the connections and see who can help you analyze and provide feedback. Try meeting some folks in your area. Find a couple local BP realtors and they can guide you and tell you about the area or put you in touch with someone in the area you are interested in. Good luck!

Henri Meli · Answer

@Moosa Shahadat What are your investment goals? Would this be your very first real estate investment? Once you have the goals, you can use the criteria in your goal to set the criteria for the location. Personally, I would be hesitant to purchase my first property 1000 miles from where I live, because in addition to the real estate challenges , you will also have geographical challenges. You need to build a team remotely(PM, boots on the ground, ... etc). If you have never done it, then it is quite tough. Maybe you should consider working with someone who has done it? Maybe participate in a deal at first ... before going solo !!!

John McCormack · Answer

Hi Moosa,

I'm in the same boat in determining that now as we've been priced out here in South Florida (currently have 3 properties - a house hack duplex, a long term and a short term vacation rental) I'm also starting my education on that with David Greene's "Long Distance Real Estate Investing" which is referenced on BP quite frequently, so that's probably a great first step.

Also, just do a search on BP for "out of state/area investing" and you should get a lot of hits.  Things to maybe look for I've learned could be:  household income, median home price, job growth, industries, school/education ranking, percentage of renters in area, unemployment rates etc.

Hope this helps!

John