Hi
What am I looking for to justify buying in an area and where is the best place to find this info?
As Im looking at new territory, for me anyway. Multi-families. And most of what Im looking at are out of my familiar area.
I usually look in the town/cities/state website. BiggerPockets. Nerdwallet and research web to find local opinions/facts...
Thanks,
Mary
Hi @Mary D.,
It really depends on what you're looking to get from owning multi's. Some people are ok focusing on cashflow, so for instance, they might buy in areas where 2% rule is more than a possibility and that's their main concern; reason why some focus on buying mobile parks. Others like a little appreciation play, so they might consider buying something that perhaps only meet .08% rule, yet they see much more upside potential in that area and decide to buy there.
I personally look for areas where it will cashflow somewhat, but there's been an uptrend in job growth, more establishments coming in where people spend their discretionary income, and areas where the township/county/city HAS WRITTEN PLANS of changing a specific area, because cashflow alone diminishes your ability to grow exponentially and scale. If you can find an area where written plans to change the community are available, and you can get in at the cusp of the initial phase of change this will be very advantageous.
So once you figure out what your personal investment profile is regarding the area class you'd like to buy in (A, B, C, D), then the type of property class (A, B, C, D), you can look at demographics/market info such that it gives meaning to the data you're look at.
With that said, here are some demographics/market data you can look into:
1) Interactive Demographics Map from the Census: Interactive Map (this map is a little finicky, but once you get used to it, you'll get valuable visual info)
2) Federal Reserve Economic Data: FRED (provides charts dating back 10, 20, 30, 40 years so you can see how things have been trending)
3) Census Quick Facts: QuickFacts (provides charts at the State, County, City level regarding various data)
4) Bureau of Labor Statistics: Labor Stats
5) Google what businesses are in that area.
Once you've narrowed down the area you'd like to invest, start analyzing properties, drive around, hang out there, talk to the locals, read local publications to see what's going on, talk to the town's economic & community development people. The more you do it, the easier it becomes and things will start to make sense. Hope this helped.
Hi @Mary D.,
It really depends on what you're looking to get from owning multi's. Some people are ok focusing on cashflow, so for instance, they might buy in areas where 2% rule is more than a possibility and that's their main concern; reason why some focus on buying mobile parks. Others like a little appreciation play, so they might consider buying something that perhaps only meet .08% rule, yet they see much more upside potential in that area and decide to buy there.
I personally look for areas where it will cashflow somewhat, but there's been an uptrend in job growth, more establishments coming in where people spend their discretionary income, and areas where the township/county/city HAS WRITTEN PLANS of changing a specific area, because cashflow alone diminishes your ability to grow exponentially and scale. If you can find an area where written plans to change the community are available, and you can get in at the cusp of the initial phase of change this will be very advantageous.
So once you figure out what your personal investment profile is regarding the area class you'd like to buy in (A, B, C, D), then the type of property class (A, B, C, D), you can look at demographics/market info such that it gives meaning to the data you're look at.
With that said, here are some demographics/market data you can look into:
1) Interactive Demographics Map from the Census: Interactive Map (this map is a little finicky, but once you get used to it, you'll get valuable visual info)
2) Federal Reserve Economic Data: FRED (provides charts dating back 10, 20, 30, 40 years so you can see how things have been trending)
3) Census Quick Facts: QuickFacts (provides charts at the State, County, City level regarding various data)
4) Bureau of Labor Statistics: Labor Stats
5) Google what businesses are in that area.
Once you've narrowed down the area you'd like to invest, start analyzing properties, drive around, hang out there, talk to the locals, read local publications to see what's going on, talk to the town's economic & community development people. The more you do it, the easier it becomes and things will start to make sense. Hope this helped.
Thank you @Johnny Kang. Wow! love the sites. Thank you so much for explaining what & how to look for this info. I dont totally get the A,B,C...areas. Can you elaborate on that?
Im primarily looking for cash flow right now. The 5 unit Im looking at is in a small town. Doesnt have much. A factory town but is with in half hour from the state capital. It needs work, outdated. So Im figuring I can update as I go and sell with appreciation and profit when the market gets better. I havent physically been in it yet. The agent says its a no brainer, it makes money but, when i asked her for financials she doesnt have anything from the seller. Also told me it was under contract in 2015 and they had a inspection... structural, mold, lead. She doesnt have a copy of that either. I asked lots of questions. She told me sellers are selling because there tired of it, have owned it for ten yrs. They live south of the town. Again when I looked at the registry of deeds it was sold in 2013. Different name actually it was a realty co. or LLC. Tax card shows a persons name that now owns it. Its been on the market for over a year so theres my red flag. Thats why Im looking into it so hard.
And its funny mentioned a Plan. I just read the towns plan which is scheduled for the next 2-3 years. I wasnt sure if that was a good thing but, looks like it is.
Im going to look more at the sites you suggested and again thank you for taking the time to respond. Its appreciated
Mary
Hi Mary,
I haven't owned any investment property for quite some time now, so I'm far from an expert but what the agent is telling you as opposed to your own findings should have your internal BS detector on high.
In my opinion- If she can't provide any inspection paperwork,then it wasn't inspected.Even if it was, how long ago? If not recently, problems could have arisen since then and honestly how good was the inspector? You don't know, for all you know the inspector could've been the owner's cousin.
Financials-If she can't prove it makes money then in my opinion it probably doesn't. Is it vacant or partially vacant? If its been on the market for over a year I think it's fair to say its definitely not a "no brainer" . If she's basically lying to you and telling you the owner's have had it for 10 years and you see they only had it for 3, well in your own words that's a red flag. I don't know you or your financial situation but (only if you can sustain the loss) you could always make them a low ball offer and see what they say, their probably desperate to get out.
But please,please, don't get caught up in buying something just because it's cheap- if it's cheap, it's cheap for a reason.If the area is cheap,same thing. How are the schools? What kind of people live in this area? (i.e. professionals,skilled labor,unskilled workers etc.) Are there places nearby for your prospective tenants to work? Hows the crime rate?How's the transportation? Entertainment? Shopping? Look at the place you want to buy and compare it to other places in the same area for rent (your competition) and ask yourself "would I live here?
Also, how much does it rent for as opposed to buying a house in this area? A person with half a brain,good credit,employment etc. basically the kind of person you'd want for a tenant, I can't see why that person would pay $1200 a month rent for a house that they could buy $80,000.( I'm just using those numbers as an example of an area that in my opinion wouldn't make sense to rent)
just my 2 cents-
Hey @Mary D.,
Yes, master plans are good indicators that an area will see sustainable growth, versus an area that just maybe in fact being overbuilt. Glad you found it!
@Patrick Buttermark brings up a lot of good points that I forgot to mention. I never take an agent's word at face value. Even if they provide me with all the info I'm asking for, I check & verify myself. Their job is to make a commission. Yours is to buy a property that meets your goals, and the two don't necessarily go hand-in-hand. This is why I like looking for deals myself, doing mail campaigns so I can deal directly with the sellers.
Trulia has a nice crime rate heat map. Type in the property address, click on the listing and scroll down to see the heat map. Following is an example of Manchester, NH
As far as area class, "A" location is usually where great schools are located, people have white collar professions (doctors, lawyers, business owners). "B" will be a mix of white collar & blue collar. "C" - primarily blue collar. "D" higher percentage of unemployment or under-employment. This is over simplifying it, but you get the gist of it.
Classification can also be applied to the property itself. "A" property being on the high-end, to "D" being a property you more than likely would never consider living in. Locating a "bad" property in a good neighborhood is better than a "good" property in a bad area. You can always add value to a distressed property, but you will not change the neighborhood by yourself in a few months.
Here's a link to a blog Brandon Turner wrote last year regarding this topic, with pictures: ABCD.
Question to you; how have you been analyzing properties? Do you use a spreadsheet with all the metrics?
Hey @Patrick Buttermark and @Johnny Kang. Thanks for all your feed back its helping a ton!
Patrick, your so close... the rent shows income over $3600 month and the unit is $125K. With those numbers it is a money maker BUT thats going on the agents word. And the inspection was done just last year. So im going to keep searching myself to get info. Absolutely wont count on the agents info! Oh and this has a store front which the agent says hasnt been occupied since the sellers owned it. For 10 years! what?
Johhny, Ill check out Trulia. Ive used it before guess I didnt realize it had that feature which is great!
As far as A B C areas. I kind of figured that but wasnt sure and when Im looking out of state how would I be able to tell, or whats the best way? I will definitely read Brandons article. Thanks for that.
I dont have a ton of money right now and am trying to be so careful but dont want to get paralysis of analysis. LOL
I too would rather deal straight with an owner but not happening right now.
Can you tell me what you do for a campaign, equity/length of years owned... mail how many times how far apart? and what company do you use?
I guess like anything else the prep is the most important step and you make your $$$ when you buy. Is that how that goes. LOL. And my Dad "you get what you pay for"
I appreciate all the time you guys took to respond! Appreciate it!!!
Mary
Answer to your question- I use BiggerPockets analyzer. I have a formula that I learnt through one of the many guru seminars Ive been to, to get the numbers down. I grew up in a family of contractors/builders so Im familiar with alot and if not I ask as far as repairs or over all condition. I have a friend thats an Realtor and I have her look at solds, DOM, whats current. And local rents. I also use registry of deeds to get any other info that will help.
Well, doesn't sound like you're stuck in analysis paralysis. 10 years, yeah I was looking at something similar in PA to hold (5700 sq ft, 6 unit mixed-use; 4 apts & 2 commercial. this owner also had his commercial spaces vacant for over 10 years!) but we decided against it because all the plumbing & electrical would've needed to be brought up to code; a full gut job which I wasn't willing to do.
If your current objective is cashflow, and eviction laws are landlord friendly, as long as the all the income minus expenses (including mortgage) results in the return you're looking for, you can reposition the property 1~2 units at a time from the rents, etc. and the increased rents will give you a higher NOI, increasing the value of the property, do cash-out refi and use that money to BRRRR.
When looking out of state, you research areas of interest online, but will eventually have to go there to get a feel for that area. (some people do site un-seen, but I like to at some point, physically go there)
Currently I'm only mailing to properties in NY, since the margins can be fairly large but will have to park our money in PA where I can get a better IRR. So I haven't mailed for properties I want to hold in PA yet; will do that once one of my partners moves out there.
I got my initial list from Listsource (have about 100,000 properties that I haven't even made a dent on it yet), applying the following criteria:
Last purchase date 1/1/2002 (don't want anything bought during the bubble. these leads will be short sales mostly, which I've done before but don't primarily seek out.)
Equity 70+%
Age of Owners 60+(motivated sellers will be in the older age bracket)
No Corporations/LLCs
Owner Occupied AND Non-Owner Occupied (I've done equal amount of deals in both categories so I don't leave out Owner Occupied)
But don't just stick to Listsource, since a lot of people are doing it. Try to figure out a way to create your own list, by looking at delinquent taxes, landlords who've filed to evict tenants etc. I target properties with specific zoning, fire damaged properties, vacant lots. At the end of the day, you're looking for motivation.
I do repeat campaigns on a quarterly basis since my list is large, and I prefer not to hound sellers too frequently in too short of a period.
I used to order my letters from yellow letter . com (not the same as yellow letters . com), but wanted to keep my costs down (they were about $1.30/stamped letter). Probably spent about $24,000 last year on letters so I started doing them on my own. Just found out about Precanceled Stamps which will lower my marketing expenses. Had to go to 6 different post offices before someone knew what I was talking about. Will post about this on a new thread once I've tested it out.
Hope those seminars didn't cost you an arm & a leg. lol.
That's good you have a family who are contractors & builders. At least you're not having to do this blind. :)
Right. I spent enough. :/ And I can say Ive learned more by going to REIAs and BiggerPockets.
I do feel fortunate to have family experience. I have my brother left. My Dad has passed and husband at a young age. But I love any kind of real estate. And am still learning.
Holy smoke $24K. Whats the ROI on those?
I just looked at the Precanceled Stamps it looks good you need a permit. Prices look as good as post cards or better.
Ive looked at yellow letters or yellow letter. Ill have to look, either of them sell lists I believe. So you think Listsource is possibly saturated?
Can I ask where you look for delinquent taxes, registry of deeds?, landlord filing eviction, fire damage, vacant lots...
I have made lists of out of state owners near/on the ocean and older neighborhoods but honestly havent been consistent.
Again thanks so much! Feel like Im taking a course here. LOL. Its all good.
Mary
I'll PM you on the ROI (let's just say it was more than enough to cover the $24k) and firelist (I only know how to get this in NYC, but kinda wanna keep this info my little secret. I'm ok letting you know since you're in NH. lol)
@Ian Walsh thanks Ian, whats the best way to determine that? Aside of knowing the area...
Thanks,
Mary
@Mike Abramowitz
Yes, exactly.