How to study the market? What to look for? HELP

Question

Hello everyone, I like in Seattle, WA and just opened a construction company. We are doing Home renovations and etc. Business is going great and I’m saving up capital to purchase my first rental property. I’ve been listening to about 2-3 hours of BP podcasts daily and have been blessed tremendously.

The prices in Seattle are ridiculous, and I’m not willing to invest the amounts.

I have been looking and hearing a lot about CLEVELAND, Ohio, KANSAS CITY, Mo, and Birmingham, Alabama.

The question that I have is: How do I study the market? What to look for ?

I’ve been hearing a lot about calculating a deal whether it’s good or not, but still would love some pointers on that too, I’m a total noob so would love the the fool words to the acronyms.

I'm interested only in SFH and small MFH.

THANKS A LOT EVERYONE.

Mike D'Arrigo · Answer

You can get most of the data from the U.S. Census Bureau and the Bureau of Labor Statistics.

Mike D'Arrigo · Answer

@Paul Botsyan start by clearly defining your investment objective. All of the markets that you mentioned are primarily cash flow markets, however they are all very different. The top 3 factors that you should look at in evaluating a market are job growth, population growth and incomes. Of the markets that you've identified, Kansas City is by far the strongest on these 3 factors. KC has solid population and job growth whereas Cleveland has a declining population and Birmingham is stagnant. Other factors that you should look at are property taxes and insurance rates which have a major effect on cash flow and can vary a lot by market and also landlord/tenancy statutes.

Calvin Ozanick · Answer

One area I would highly recommend adding to that list is South Central Wisconsin. The Janesville and Beloit areas have been very successful and built up quite a bit over the years. With ABC Supply Co., Amazon and Dollar General all having large operations here, more businesses are going to continue to follow, along with the fact that the rents are very high for the typical prices in my area. To answer your second question, I think one of the biggest predictors of market strength is economic growth. If a large business is either operating in or moving to an area, it is likely to employ many people and increase economic development in the area. Each of these almost always bode well for investors.

James Wise · Answer

Welcome aboard Paul. As B-Ham was on your short list so I figured I'd drop you a link to The Ultimate Guide to Grading Birmingham Alabama Neighborhoods. Also have similar guides for Cleveland, Ohio and Kansas City, Missouri. Good luck on your investing in whichever market it is that you choose. One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible. Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.Make sure your property manager is a licensed real estate brokerage.Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.

Paul Botsyan · Answer

@Mike D'Arrigo What are some websites that have the information on job, population, income growth? Thank you so much for your time. And it looks like you own a Turnkey company and you’re doing deals in Kansas?

Stephen Brown · Answer

Mike, this is a great answer. Thank you. Property taxes would be found on the tax assessor's site, correct? Would you call inusrance companies for rates or do you have a different method?

Remington Lyman · Answer

@Paul Botsyan I would recommend connecting with real estate agents that are investors in the market you are looking at.