Starting out in REI, Finding a market

[Jonathan Lubenko]

Hey everybody my name is Jonny and I'm an aspiring real estate investor from Fiddletown, California. I've been wanting to get into rental properties for a while now but have never been able to make the big leap into buying my first property. To help push me towards my goals I started Brandon's 90 days of intention journal. My main goal is to have a small multi-family rental property that cash flows at least 100$ a unit by the end of 90 days. I am going to try to make a habit of posting my weekly goals in the forum and seeking advice on how to best achieve them.

The goals I have set for myself this week are pretty basic but I think necessary in order to set me up for the rest of my REI journey.

Goal 1: Finish reading David Greene's Long Distance REI.

This book is perfect for the type of Investing I would like to do because the home prices in California are pretty outrageous.

Goal 2: Research out of state markets and narrow my options down to three cities by the end of the week.

After finding a couple markets that suit my criteria I'm planning on analyzing one property from each city every day.

After laying out my goals for the week I have a few questions that hopefully everybody on the forum can help me with.

Are there any other out of state investing books that you would recommend?

Do you have any tips on choosing the right market?

Should I be taking more actionable steps towards my goal?

Does anyone have any advice on how to get the most use out of the forums?

If you've read this far, thank you sincerely for your time and I hope to hear from you. It is my hope that maybe other newbies like me can follow these posts and use them as a guide for their own journey.

-Jonny

[Jon Schwartz]

@Jonathan Lubenko, I was exactly where you are about six months ago, and now I've settled on a market (outside of CA, too expensive here!) and am working with a team there. The process took me several months, but I'll give you my research so you can do it faster. Here are the steps:

1. Cast a very wide net when first assessing markets. I spent a few weeks downloading data from the Census Bureau on every MSA in the country ("MSA" stands for "metropolitan statistical area" and is a city plus the suburbs surrounding it). I made a scoring system and briefly considered every MSA with a population over 100,000 based on fundamental metrics (job growth, population growth, income growth, rent growth, and new construction). Just eyeballing numbers, I narrowed the list from 380-ish to 50-ish. I'm happy to send you my spreadsheet of MSAs. Just sent me a colleague request with a message about sending you the spreadsheet. (We need to be colleagues for me to be able to send you an attachment.)
2. Take your 50-ish markets and assess for two things: A) does the market have the kind of small multifamilies you want to buy and B) is the market convenient for you to get to. I used loopnet.com and trulia.com to check markets for the building size that interests me (10-20 units) and assessed travel to these markets from LAX (I live in LA). This sounds like a lot of work, but if you turn off social media, you'll get through it in two hours. You should end up with a short list of less than 10 markets.
3. Now do internet research on your list of 10. Go to each city's municipal website and get a feel for how engaged the local government is in development and growth. If you see a documents about redevelopment plans and expansion plans, you've got a winning market! Use google to find out what major schools, major hospitals, and Fortune 100 companies are in the market; these are all sources of steady job growth. Chances are you'll find really encourages indicators for 2 or 3 of your 10.
4. With you list narrowed to 2 or 3, it's time to work the phones! Use trulia.com to find listings that look appealing and call the brokers. Tell them you like the listing and want to buy similar properties. Get conversations started and see where they go. Ask for referrals to bankers. Look up property managers online, call them, and tell them you're planning to buy properties in their market. Call the bankers you've been referred to and ask about your loan requirements. Tell everyone that you're planning to visit in a few weeks and will call back to schedule an in-person meeting. Spend all day on the phone with your markets, and you'll probably gravitate toward one market in particular.
5. Book a flight to your chosen market and schedule in-person meetings. Pack your days with meetings. Use trulia.com to identify properties that you like and go visit them -- not necessary to inspect the properties, but to get a feel for the neighborhoods. Take notes! This way, when you're back home, you'll have a reference for what neighborhoods you did and didn't like.

By this point, you'll have a team in place and you'll be ready to make offers. These are the step I followed, and they took me to Fayetteville-Springdale-Rogers, AR -- which is the home of Walmart, Tyson Foods, and the University of Arkansas. I've made relationships with a great broker, two great property managers, three bankers, and two local investors with whom I may partner. Excited times!

Good luck -- and again, you're welcome to my spreadsheet. Shoot me a colleague request with a message about the spreadsheet.

All the best,

Jon