What criteria do you use to identify your next market?

Question

I live in Portland, Oregon. I have my main residence and also a triplex here. I’ve had a few two-flats in Chicago, but I haven’t been happy with that market. I’m planning to buy another small multi-family property with 5 or fewer doors. I’m trying to identify my next market, but I’m freezing up. If I can just pick a market, I should be able to find a team. But the analysis is paralyzing me now. What criteria do you all use to identify your next market? I searched the forums, but I didn’t see any recent posts about finding my next market.

I know that we all have different real estate goals, but as with most things, there are some basic fundamentals by which we could judge a long-term buy-and-hold market. If I can start researching based on those fundamentals, I think I can get unstuck and get my momentum going again.

Jake Wiley · Answer

While not an exhaustive list, here are my starter screening aspects.  You can get most of this info pretty simply via census.gov and local chamber reports.

Population growth for the past five years.

Unemployment rates that have gone down are below average and holding.

Diversified employment base (for example, Detroits reliance on the automotive industry in the past was/is a risk)

Healthcare as a major employer is plus.   Healthcare isn't going anywhere soon.

Large employers recently moved or announced movement into the area (shows a solid plan and activity at the chamber and local govnt level.    Keep an eye on whether the local government is giving everything away, this is risky.     Take Nashville for example, one of the fastest growing cities, but the prior administration almost gave everything away to make it happen and the city was nearly put into receivership in 2019)

Some bonuses -

Great infrastructure for transportation

Recent or planned SIGNIFICANT investment in the local airport.     Believe it or not this is one of the better indicators of a market that is or soon will be strong.Decent public schools.

You can start getting an idea of where to start looking by reading reports such as the Emerging Trends in Real Estate and similar from CBRE etc.    That way you can narrow it down.

It goes without saying that often times it will be best if the properties are accessible to you reasonably (you'll have to define that.)

Once you find the market, get out there and make some friends and get a feel for what you want to do.   You'll know it when its right.

Joshua Janus · Answer

@JR Hinds When researching a market, it is important to pay attention to the factors you highlighted above as well as what brings people to the city and what will continue to do so. If the price is relatively low/sqft and the city has a growing population and job market, the demand for homes will increase which leads to home appreciation. Also see how the specific market handles STR as that brings in a large section of rei investors and can drive prices up. Here is a quick analysis of my market. Paying attention to recent and upcoming capital investments by the city can also give you a good idea of where the money is flowing in the city and you can see if it is recovering or growing. Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs. https://www.dispatch.com/story... are a few more recent investments https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0

https://columbusunderground.com/kaufman-development-purchasing-franklintons-idea-foundry-sp1/

https://highlandcountypress.com/Content/In-The-News/Headlines/Article/Development-projects-will-support-1-4-billion-in-investments-in-Ohio-communities/2/73/77342

https://columbusunderground.com/kaufman-development-purchasing-franklintons-idea-foundry-sp1/

https://highlandcountypress.com/Content/In-The-News/Headlines/Article/Development-projects-will-support-1-4-billion-in-investments-in-Ohio-communities/2/73/77342

Patrick Drury · Answer

@JR HindsWhen analyzing a market a lot of people look at job opportunities and population growth. Also, it comes down to what are you looking for cash flow, appreciation, or a hybrid. The Midwest is a great place to start looking for cash flow. I live and invest in Columbus OH, which is a great cash flow/ appreciation hybrid, and it's been seeing a lot of growth over the past few years. Columbus can attribute a lot of attention over the years to OSU, Batelle, and Columbus is the HQ for companies like L-Brands, Wendy's, White castle, and soon-to-be chipotle. On top of that, there has been lots of rumbling about Columbus OH with the announcement of the new intel plant that will be coming to Columbus. Also, as of recently, Hyperion announced in the past few months they will be moving to Columbus.

Steven Foster Wilson · Answer

Because of the affordability, great neighborhoods and schools, and good night life, Columbus has attracted a-lot of businesses to setup shop, hence the increase in population over areas like Cincinnati and Cleveland.

Columbus is the home of the Limited, Chipotle, Amazon, and Intel is now moving here. The market here is so hot it’s crazy.

JR Hinds · Answer

Thanks for the information and especially the links. I have a few sources of data, but you've added a few more. This will help me get going. BiggerPockets is a great resource and I appreciate all of you helping out.

Austin McClain · Answer

Job growth is a factor that is important when picking an area to invest in. I look at areas where companies are moving too, like what happened to Austin Texas. In Columbus Ohio, Intel just built a multi-billion dollar plant here.

https://time.com/6140476/intel...

Frank Zhang · Answer

My criteria is if the market in Florida or not. Kidding, but my market is the Daytona Beach area so I'm biased.

I base my market on the population growth, job growth, job industry diversity, current population size, rental occupancy, cost of living, potential appreciation, and price point. Cash flow is king but it is a small benefit to the potential that appreciation offers so it is a balance. Let me know if you want more detail about area.

Patrick Drury · Answer

@JR HindsNo problem!

JR Hinds · Answer

Thanks, Patrick. I appreciate the perspective.

What criteria do you use to identify your next market?

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