Finding the Right Market

[Cassidy Klundt]

Hello BP Community. Looking for advice on what to consider for my top 3 MF markets. On paper, things like higher rent to price ratio, average cap rates, and high rental %'s in the area seem to be the best data points to atleast steer me in the right direction. Is there a best top 3-5 data points to consider, when trying to narrow in on a market? I know it's a bit of a loaded question, but curious what the best practices and experienced investors say. 

As it stands, I've narrowed down my interest to Las Vegas NV (primary, I live here), Albuquerque NM, and considering Dallas, TX. On paper Dallas seems like a surefire winner, and I know its experienced tons of growth. But do I then worry about hedge funds and large investment type companies as my competition in a market like that? Same for a market like Phoenix? 

Fill me in on what you think! 

[Arn Cenedella]

@Cassidy Klundt

Assuming you are new or newer to MF, it would surprise me if you were in the market for $20M to $50M properties right out of the gate. If your price point is lower, hedge funds and large investors will not be competition for you. So wouldn’t rule out Dallas for fear of completion from big investors. 

I agree with of the factors previous commenters have stated. 

I’ll add another one - it’s logistics. How easy or hard will it be to get to your market. I would only select markets where you can get too easily and often if need be. All investors need to get to know their market and the players in that market. That takes time and a physical presence. 

I would submit market knowledge and easy of access outweigh the advantages of investing in the “best” market. 

If your price point is $1M $2M or less, my suggestion would be buy in Las Vegas because you live there and you theoretically know the neighborhoods. And you can be on site as often as needed. Las Vegas is growing no doubt. It’s perhaps not ideal due to its reliance on tourism. 

Dallas is a great market and there are plenty of others. But if you don’t know Dallas and buy a property thinking it’s a B area and it turns out to be a D, you have a problem. 

I am an Old School investor and believe in the fundamentals. Local market knowledge (more than what market) is the key to investing success. You need to know your market - where neighborhoods are trending and you need to be able to keep an eye on your property. Driving 20 minutes to be on site is far different than needing a 2 or 3 hour plane flight to get there. 

I have 45 years experience in REI and I only invest in my home market Greenville SC It's a strong market but it's not Dallas or Charlotte- but I live here I know it. My team is here. I have strong relationships with brokers PMs and vendors. Whatever I give up in "market" I gain from local market knowledge and easy access to the assets all within 30 minutes from my home.

As a newer investor, my experience tells me you will be better off staying close to home.