How the @*&#%$^ do I pick a market to invest in?

Question

I have the unfair advantage of being able to travel anywhere any time I want to. My primary occupation is an airline pilot so I get to fly free anywhere and anytime. Having said that, I'm trying to break into the MFR market. I live in Florida and have started looking at property in this state but really want to be able to do research and find some of the most lucrative markets in the country. I have the ability to go and physically look at a property and meet with team members in any market. What would be the best way to research markets and how can I put that information together to determine where I might want to concentrate my efforts?

Adam Hershman · Answer

Hey Mark,

I am certainly not an RE expert, but if you're looking to get into MFR I would suggest looking at growing communities that serve large professional work forces. I have often thought that for any multi-unit property the Minneapolis, DFW or Austin areas would be ideal, good income levels, large number of corporate HQs and good paying jobs, etc. But that's just my two cents.

The most important thing I've learned from BP is that if you have the right knowledge you can make almost any REI model work almost anywhere in the country. If you want to do it, chances are someone on these forums has done it before, in that market or one similar to it. Hopefully once you narrow down your search to a lucrative market, one of them will be kind enough to help you out!

Adam

Ali Boone · Answer

Low and slow! That's my fave :) One of the reasons I got into REI was because I eventually wanted the ability to go back to being a flight instructor and not have to worry about the pay. I knew if I tried to make a living doing it that I would start resenting the job, and I love it, so didn't want that to happen! I never wanted to go airlines but had tons of friends from flight school who did. I'm secretly trying to stalk the Catalina Flying Boats so I can figure out who to schmooze to be able to right-seat one of their DC-3s :)

Are you looking anywhere specifically right now that fits that bill?

Mark Neiger · Answer

Thanks all for the replies! I'm looking in Multi not single family so that takes some of your responses out. @Dan McDermott I agree with you on the tech savvy, major employers and university areas. That definitely brings a few areas into focus. @Ali Boone that's awesome to find a fellow pilot on here! I'm a Captain for a regional airline flying jets. It pays the bills but I'm looking to build my RE portfolio so as to not have to work for the man any more. While cooler than working a desk, having an airline job takes all the fun out of flying; that's why I'm on here. I really miss low and slow for fun! Your insights into the market stuff is spot on. Obviously strength of market, appreciation etc. is important. The problem I'm seeing is that some markets show high rent, jobs, appreciation etc. but there are so many people throwing way too much money at these places that they still aren't smart investments. I need to find the up and coming markets that aren't already being overwhelmed.

Elizabeth Colegrove · Answer

Honestly sometimes too many choices is an issue :)

My husband is active duty so we have had to choose where we have been placed. Honestly it has allowed us to be successful in every market although maybe not our originally plan.

That being said, I would pick low taxes and insurance along with a transient but growing market. Plus I would pick a place I wanted to be ! If I would be coming to check on my place often I might even get a house that can be a vacation rental when I am not there and a rental when I am .

Jay Hinrichs · Answer

@Mark Neiger

since you know the industry  buy yourself a crash pad... !! you can keep it full

We have one here in PDX were we rent to the Chinese helicopter trainee's  made a 4 bed into 9 bds and 2 to a room  18 folks paying 400 a month... And they are clean neat tidy airman.. paid all in 350k... that's in portlandia Oregun. Now try to beat that one... with a rental in Philly  LOL.

Ali Boone · Answer

Nice! A pilot! I'm one too :) Although just a flight instructor and not working for any bigger outfits professionally. Totally a side thing for me. Who do you fly for?

What market you decide on really depends on your goals. What's more important to you- cash flow, strength of market, returns, purchase price, appreciation potential, etc. You said MFRs...that will be certain markets too (like Texas markets are good for SFRs but not MFRs typically). So that'd be the first step I'd recommend...make sure you know your goals and then start looking for the markets that help fit those.

Travis Beehler · Answer

I've got a thought, and people might hate me for it, but what about Google?  I bet a quick search around would get you the info you were looking for.  I know I've had a ton of good luck with it.  Hope that helps!

Dan McDermott · Answer

@Mark Neiger I can relate, I'm also not particularly tied to a region (yet, anyway), and I'm trying to make my first move into MFRs this year while trying to choose a market I believe in.

I've broken the process down into:

• What am I looking for in a city? University town, major employers, tech center, etc are important to me.
• What does the real estate market look like? What does the MFR market look like? The actual numbers. Talk to BP members from the location, you'll quickly see a lot of congruence in terms of market perception, expected direction, and their business models 
• Will this location work for my trading business (time zone, taxes, other traders present?)
• Can I see myself living here? I'm spending the next couple of months traveling to a few of these cities and spending some time getting to know the place. Maybe a bit much, but while I might be ok with investing remotely, I'd only be comfortable if I had spent some quality time in that city. I'm currently in NM and already have had very positive conversations with some local BP members.

Best of luck figuring out where to jump in. Good to see others making the same decisions, keep us updated!

Account Closed · Answer

I make 12% cap rates in the current market in my TX city, no maintenance or landlord silliness. Love investing in TX.

Mike H. · Answer

I would also suggest you look at what typical cap rates for the various markets.

Its one thing to have a good economy and growth. But that does not always translate to a great area to invest in.

I'm pretty sure that investing in MF in California is not going to have anywhere near the type of cap rate that investing in Texas would have.

I look at Loopnet every so often and it would appear from the published cap rates that certain areas seem to sell for much better cap rates than others. To me, I would start there. Find the areas with the better cap rates first and then see if you like the area and the market.

In the very limited research I've done when comparing areas, I still think Texas has one of the better cap rates for MF than most other areas out there.

Doesn't mean you can't find good deals anywhere. But if I were to have a big chunk of cash to invest right now, that would probably be the first area I would look at just because of that fact.  At the end of the day, its about the numbers - how profitable is it and how profitable will it be in the future?

How the @*&#%$^ do I pick a market to invest in?

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