Quote from @Bret Halsey:
@Eric Prescott I agree and thank you that's very insightful. How do you determine the diversity/strength of a market's economy? I was planning on looking at population trends, rent growth over time, and just doing a Google search for it's future and job prospects.
Yeah, there's some sleuthing involved. You can easily Google to find which companies have large offices or headquarters in various cities (e.g., Kansas City: AMC, American Century, Cerner Corporation, Federal Reserve Bank of Kansas City, Garmin International, H&R Block, Hallmark Cards, Google, and on and on. Diverse, large employers). The other thing is getting a handle on linear markets. Most of this I've picked up here and there and not through any particular source, for example from the PREI podcast and here on BP, or from other investors. I mentioned KC, because it is a good example of a linear market, one with slow but steady growth, rather than boom and bust and over-reliance on any one industry like tech for growth.
Speaking of growth, you're right to look at population trends (inbound and outbound numbers) and rent growth over time. These are important factors.
Honestly, the one thing that has been tough for me getting into the game at this point in history is that it is much harder to find the types of properties at the types of price points that cash flow the way they did 8-12 years ago. Anyone who went large on REI in 2014 or thereabouts and played the game right until today has likely done *very* well for themselves. Things don't seem quite as straightforward now. The principles are the same, but there isn't the same kind of cash flow gravy train for starting investors that I see when I look at 2015, 2016, etc.
At the end of the day, if you narrow your search to markets that are linear, demonstrate ongoing population growth, economic diversity, and so on, and you can find solid or improving neighborhoods with properties that still return a decent cash-on-cash ratio (maybe not 1%, but .7-.8, perhaps... I'm still mulling this over myself), then you can still get some skin in the game and start building a portfolio that hopefully won't take long to grow and trade up through 1031 exchanges and so on to start purchasing the more expensive SFR, as well as MFR, which is when it appears to me you'll really start to hit your investing stride and bring in meaningful cash flow.
I'm no expert, but the the way I look at it now is that I'm gaining experience to complement all the knowledge I've gained over the past several months, earning a little extra passive income on the side, meeting people, and getting comfortable with being in the driver's seat so that I can see the opportunities ahead that will allow me to leverage my wife and I beyond the entry stage.
