Picking a Location to Start Out

[Andrew Mokotoff]

My self and a friend live in nyc and each make a fairly high income. We have plenty of savings and are interested in purchasing a property anywhere from $300k to $700k. We are fortunate that we can get an interest free loan from family to start out with a 20% down payment. We have been crunching numbers and doing research on properties that seem to be profitable, even with conservative estimates. Our one question we keep circling back to is: where should we start? New Jersey, specially Newark seems like a decent place to start, as property values are fairly low and laws generally favor the landlord compared with NYC. We’ve also looked at Norwalk. Does anyone have any suggestions for how to pick a location? Ideally we will have everything automated and have a hands off approach with property managers, so proximity isn’t the most important factor.

[Theo Hicks]

I recommend performing a formal market evaluation. Factors to analyze are:

• Unemployment: 5-year change
• Population: 5-year change
• Job diversity: ideally, no one industry employees more than 25% of the working population
• Top employers: list of top employers to keep an eye on (i.e., are they creating new jobs, cutting jobs, building new facilities, etc.)
• Supply and demand: median rents, new builds, and occupancy rates
• Crime rates

Narrow it down to a few cities. Then, you will want to do further investigations because no two neighborhoods are usually the same in larger markets.