How to find the right market?

Question

Hello All,

I'm just starting the whole real estate investing adventure. I am hoping to follow a buy and hold method and provide quality rentals in several different markets. I have set the goal of buying my first property by the end of 2019. I have spent the last few months listening to the podcast and reading several investing, along with talking with people I know who have invested in rental properties in the past. I feel like I am going a good grip on what the final product should look like in the metrics side of things but seem to be having an issue with finding a good market for long distance investing.

So my questions are...

How do you all go about finding the market that works for you?

Do you use the 1% rule or are there other tricks to help dwindle down the many options?

Is investing in a city better than small towns?

Thanks for all your help!

David Acosta · Answer

Hey, @Kyle Petitjean - I would suggest checking out makret reports by Marcus & Millichap and Integra Realty Resources (IRR).  Youll be able to pull some national property trends and forecasts across all property sectors.  From here I would creat a short list base on what works for your investing criteria.  It's probably also important to consider your long term vision -- is this a location that is viable for you to scale and build out a portfolio.  All the best moving this forward!

Kyle Petitjean · Answer

Thanks @Kiera Underwood and @Matthew Choi! Definitely going to add these notes in my next round of research!

Subbie Kaur · Answer

@Kyle Petitjean

Hey Kyle!

Look into some markets in the midwest, low property prices, high rents!

Now going into specific things that we look for once you find a market with low prices and high rents..

1. High Rental Demand: This makes it easy for you to keep units filled, and if there are any vacancies then you can fill the unit easily!

2. Low taxes... very important, this could really cut into your cash flow if the property taxes are HIGH

3. As an out of state investor, this could really make or break a deal... Having a good property manager is KEY. You want to make sure that your property is really familiar with the market, communicates efficiently, and keeps in contact with you as needed. One of the main reasons, our CA investors buy multiple properties from us is because they are in good hands after they have closed on a property.

4. Last but not least, Landlord friendly laws...this will allow you to have a positive investing experience.

There are many other things but once you check these off you are one step closer in making your decision.

Hope this helps! Good luck to you in your investment journey

Frank Wong · Answer

Hi Kyle,

Work backwards.

1. How much money do you have to invest?  Once you look at your finances that will eliminate some markets and you will know where you can buy.

2. Picking a market is not that important only rookies and amateurs think that. You want to focus on your process and system. You have that down you can make money in any market, any cycle, and any recession.

Focus on what is important.

Matthew Choi · Answer

Hello @Kyle Petitjean,

I would recommend doing some research on markets outside of your area and see what big changes are occurring in those places. I would recommend considering population, population age, top employers, supply and demand, and unemployment rates. After looking at these factors in the possible markets you are researching you will start to see which cities/small towns are growing and have consistent employment, which directly correlates to a market with may renters. This will help you pin point which markets you want to invest in moving forward.

In my opinion, if the numbers look good on a property and you submit a home run deal then it shouldn't matter as much if you're in a major city or small town. Obviously, it helps if you are in a major city, but there are a lot of opportunities out there in smaller areas where you can still cash flow and get your appreciation over time.

Hope this helps!

Ali Boone · Answer

Well one easy one is- throw the 1% rule out and use real numbers. That's for sure. But for your other ones--before those can be answered... what kind of properties are you wanting to invest in? Do you want to fix things up, buy rentals, do BRRRR, SFR vs. MFR, etc? And what's your budget? Those things are going to play a big role in finding the location.

Kyle Petitjean · Answer

@Taylor Roeling, I would love to invest close but since I live in LA, I am nowhere near being able to start here. I have family and friends in the midwest so I tend to like the idea of out of state investing. Plus the idea of buying cheaper properties (75k-150k) to start leads me to believe there is a little less risk for a first time investor, rather than buying a 500k property.

Taylor Roeling · Answer

@Kyle Petitjean There has been some great advice on this already! But, I would also consider if you want to invest in somewhere close to you or do out-of-state investing. Both have different pros and cons! College towns are always great markets - some times property can be more money to invest in initially, but has a pretty good ROI.

Kyle Petitjean · Answer

@Sean Larsen, Agreed. I have people I know and trust living in my prospective markets. They are giving me good insight to how the particular market looks from a local's point of view but I want to know the other factors to make sure its a home run! As @Brandon Turner always says, "A bad deal can set you back decades", and I would very much like to avoid that.

Sean Larsen · Answer

@Kyle Petitjean I'm pretty much right where you are in my process. I think the other people who have posted provided great responses I will be implementing. My selection process so far has been finding places I can afford that meet the 1% rule. After that, I will research area crime rates. Once I have a few markets identified, I will call property managers in all those markets to interview. If there's a few markets that work for your strategy, then it really comes down to having a property manager and other team members on the ground that you can trust.

How to find the right market?

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