HOW TO FIND THE RIGHT INVESTMENT IN OUT OF STATE MARKET?

[Roberto Bassi]

HI ALL!

I am a newbie investor who recently moved to San Francisco, CA from Boston. After looking around a bit to purchase a property here, I realized that this definitely not the right time to spend money on an overinflated market which I think will deflate very soon (one of the reasons being that tons of companies are leaving the city due to unsustainable costs here). One option for me is to look into different markets outside of CA, where prices are not so high and valuable opportunities are still available (eg, Denver, CO or other in mid-west). My question is how to approach those markets without any knowledge of those cities, without traveling there and actually looking at things? Are there datasets that I could look at which are not based on Redfin or Zillow? Or alternatively, do you guys have any strategy that you use and you are ok with sharing? Thanks!

[Art Perkitny]

@Roberto Bassi

What @Thomas Cummings stated above is great advice once you filter down the number of locations you are interested in investigating further. 

In order to filter down your list of potential cities to invest I suggest looking at demographic an economic data.   

Data sources such as the American Community Survey, also known as the annual Census, provide a large number of these demographic and economic indicators. Some of the metrics that I find valuable to understand are:

- Population Total

- Population Age

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

- Number of Building Permits Issued

- Foreclosure Rate

- School Ratings

- Crime Statistics

When you consider all the variables listed above you will be better able to judge a locations tenant quality.

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading. You wouldn't want to buy into an area that is declining rapidly and where the tenant profile is decreasing along with the area.

Let me know if you have any other questions, hope this helps!