Market or Team? Team or Market?

Question

Good Evening BP,

I'm new to the site and to long distance real estate investing. I've been trying to come up with a market that has the best of both worlds, cash flow and appreciation. Every time I make a decision, I get swayed one way or another to look into a different market. First it was Indy, then Memphis, then Huntsville, them Memphis, then Knoxville and...you get the picture. When starting out, did you just pick a market and stick with it? For those of you long distance vets, did you make a final decision on the market and then reach out to potential team members or the other way around?

Taylor L. · Answer

I think you need to do higher level market analyses of a number of markets, narrow the list to a handful, then dig deeper and narrow it down to one or two. That'll keep you from feeling too committed to one market before moving on to the next.

Say you make a list of Indy, Huntsville, Memphis, Columbia, Atlanta, Richmond, Pittsburgh, Louisville, and Lexington (names just for argument, pick whatever you want). Start with numbers. Look at job/employment growth, net migration, rent trends, industry diversity (is it just one employer or industry propping the market up?), and compare each market on your list on a pure numbers basis. No emotion. Dig into them and truly compare each market without emotion.

Regarding the negatives you named, Inventories are low basically everywhere. Covid stopped people from moving unless they really had to. If you're buying rental properties you probably won't deal with the MLS anyway.

There are still deals happening in every single market you'll look at. The only way you'll get those deals is by building that team. The only way you'll build a team is if you focus. The only way you'll focus is if you pick a market and stick with it! Memphis and Huntsville are generally well-regarded, but you need to know what to look for. Deeper study of each market is critical.

Really there are lots of guides out there on how to pick a market and build a team. There will be headwinds in every single market you look at, guaranteed. Just be ready for it :)

Bastian Kneuse · Answer

Just start having conversations with local investors, realtors, property managers, etc.  and feel them out. A good team is equally important (or even more important) than the market. You can fail in a great market with a poor team.

Todd Dexheimer · Answer

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

Taylor L. · Answer

I say pick one, maybe two at max. Then get rolling. All markets have at least some weaknesses, and my guess is it's discovering those weaknesses that causes you to then move on to another one?

At what point are you deciding to look at another market?

Todd Dexheimer · Answer

Ari, check out this condensed version of finding an emerging market: https://www.biggerpockets.com/...

James Wise · Answer

Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers and turnkey operators here on Bigger Pockets. In no particular order I have listed some of the most popular markets for out of state investors

• Cincinnati, Ohio
• Dayton, Ohio
• Toledo, Ohio
• Youngstown, Ohio
• Cincinnati, Ohio
• Memphis, Tennessee
• Saint Louis, Missouri
• Indianapolis, Indiana
• Detroit, Michigan
• Erie, Pennsylvania
• Louisville, Kentucky
• Milwaukee, Wisconsin
• Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the Bigger Pockets marketplace hourly.

Note when looking at the individual markets, you can make or lose money in any of these markets. You can make or lose money at home. Don't think that one particular market will make or break you, it won't.

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.
• Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
• Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.

Ari Hadar · Answer

I was listening to your BP podcast # 248 and really enjoyed your market research method and I intend to read the book you recommended on finding out emerging real estate markets by David Lindhal... I hope I will be able to use it successfully and choose good market.

Mike D'Arrigo · Answer

@Jonathan Chan Have your clearly defined your objectives and criteria? It's rare that you can have the best of both worlds although both Indianapolis and Memphis are experiencing unusually high rates of appreciation. That won't continue indefinitely however, so your decision should be based on which market will best achieve your goals in the long term. Personally, I recommend choosing a market and then reaching out to potential teams in the market. That's just more efficient in my opinion. I'd be happy to help you in Indianapolis if that becomes your market of choice. Feel free to reach out if you just want some insight on the market to help you narrow it down.

Alex Craig · Answer

You can make just about any market work if the #'s work with the right team, but not the other way around.

Ari Hadar · Answer

It's very hard to know this and it seems like the stock market that you can't enter the low and get out in the high because you can never know it only in  hindsight.... How can I find analysis to that about Cleveland neighborhoods for instance?

Market or Team? Team or Market?

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