Identifying and analyzing prime LT buy and hold areas

[Jimmy H.]

I'd like this thread to be a place where we can bring our collective brain power together to try and determine some of the better markets for a long term buy and hold rental strategy. This can be MFH or SFR and it comes with standard disclosure that I understand that all real estate is local, you cannot predict the future, and that even buy and hold investments should be sold sometimes. Also, it should be noted that a "market" can be viewed as a city, neighborhood, or region of a state, etc.

That said, here are some of my thoughts about what factors and catalysts help to determine a markets' overall attractiveness. The primary driver in my eyes is population trends as demand for housing drives prices for homes and rents and is a general reflection of the attractiveness of living in a particular area

Population growth - among other things, largely a function of education - school quality, crime and safety, housing affordability, weather and employment. I would argue that housing affordablity is in part a function of the housing supply/demand in the area. Both crime and school quality is largely a function of not only the leadership in the area but also of tax revenues, which in turns mean that these are both a function of employment. Employment also seeks skilled workers for the type of job functions needed so it should be somewhat of a prerequisite in my book to have higher education institutions in the area.

Job growth - generally, the attractiveness of a particular area is determined at the state level where grants, taxes, other incentives are determined. also, as aforementioned, an adequate workforce pool to pull from.

In viewing investments, the buy and hold portion of the scenario is concerned with appreciation; And as we know, there must be cash flow to make the investment worth while. To get adequate cash flow, we must often seek either the "working class" neighborhoods or the "exurbs". This also indicates a contrarian view for me, as I am hesitant to invest where all the action is and property values have already risne substantially.

1)Employment
a)good current employment situation
b)regulatory and tax climate attractive for businesses to invest in and create jobs
c)workforce to attract business investment

2)Population
a)education facilities
b)competent local leadership
c)weather - "Sun Belt" trend

3)Investment analysis
a)good tenants, low crime
b)affordable housing and rents
c)low taxes - cost of ownership
d) sufficient cash flow and ROI

As Finexaminer mentioned in another post, you must start with a macro view of trends, determine areas to focus on and move closer in your analysis for a more finite view of particular areas and neighborhoods and specific properties therein.

Such analysis will make you realize why places like Colorado springs have grown tremendously. My analysis has lead me to like Colorado - like colorado springs, Carolinas - charlotte and others, and Alabama - huntsville. I also like Arizona - mesa. Arizona, Texas, and Florida look attractive as always but i tend to shy away from places like Texas because of all of the hype - perhaps some of you more knowledgable in these markets can enlighten me as to where the growth will be in these states.

Essentially I am looking for areas with good weather and affordable housing that currently have good education and employment. An area that also has an attractive environment for business investment for future job growth and low taxes and minimal tenant "friendly" laws.

Overall I have the feeling that the SE region of the US is due for growth in the coming decades, but perhaps I am biased due to my relative familiarity with the region.

What are your thoughts on specific areas you are interested in and why, as well as your thoughts on my methodology or other considerations in analyzing markets? Perhaps i'm putting too much thought into the market side of things but i realize that significant change will occur in the next 50 years - I want to ride or rather lead the wave rather than be trailing and following others to the hot markets right before they bust.

I really want to find the "under the radar" areas. Being from Lexington I know that Lexington has great education, employment, job growth, a large univerity - and seems to fit the bill in most respects. But I know many of you would never had Lexington cross your radar. It is such towns that I want to find now, and when the area begins to show up on the radar I will already be invested and get to enjoy the appreciation.

Thoughts?

PS. Pardon my utter lack of brevity