All Forum Posts by: Tom Wang

Hello Tiyu,

The location is the most critical investment decision, not the property. There are more considerations than just property taxes and insurance costs. 

Below are the location criteria I followed, along with the necessary resources. The overall process is to eliminate locations that are unlikely to provide long-term dependable passive income. The cities that remain after eliminating unlikely locations are worth further investigation.

1. Metro Population >1M - There are thousands of locations to consider; too many to evaluate. So, start with metro areas with a population >1M. Small towns may rely too much on a single business or market segment. Wikipedia - https://en.wikipedia.org/wiki/...
2. Both state and metro populations are increasing - Do not consider investing if the state or metro populations are static or decreasing. Wikipedia - https://en.wikipedia.org/wiki/...
3. Low crime - Cities with high crime levels and long-term profitability are incompatible. People and businesses avoid areas with high crime. The result is a lack of job opportunities and investment. Never invest in any city on Neighborhood Scouts' list of the 100 most dangerous US cities. https://www.neighborhoodscout....
4. Low operating costs - High operating costs can turn what appears to be a profitable property into a money pit. The two most apparent overhead costs are property taxes and insurance. Look for stats with low taxes and insurance. Insurance - ValuePenguin https://www.valuepenguin.com/a..., Metro Property Taxes - LendingTree https://www.lendingtree.com/ho...
5. Limited urban sprawl - Many cities in the US, including Phoenix, Memphis, and Indianapolis, have large open areas surrounding them, enabling unlimited expansion through urban sprawl. This leads to a slow or stagnant increase in property prices and rents in established areas as people move further out and rent or buy newer homes.
6. Natural disaster risk - Natural disasters such as tornadoes, hurricanes, and earthquakes destroy communities. While insurance might rebuild your property, the bigger issue is the loss of jobs, local businesses, and essential amenities. Until the community is rebuilt, you will have an empty property, but mortgage payments, taxes, insurance, and other expenses will continue, with no income to offset these costs. The cost of homeowners insurance is the best indicator of the likelihood of a natural disaster in an area. Insurance - ValuePenguin https://www.valuepenguin.com/a...
7. Metro rent and price growth rate - To have the additional dollars you need to pay for inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. If historical rental data is unavailable, you can use the rate of appreciation in the area as a proxy, as rents tend to follow prices. However, COVID-19 distorted markets, so only consider data from 2013 to 2020. Zillow research data https://www.zillow.com/researc...
8. Landlord/tenant rules and regulations - Some locations have laws that limit how much you can raise rents, making it nearly impossible to keep pace with inflation. Similar regulations can also make it difficult to choose reliable tenants and evict non-performing ones. Don't invest in places with these restrictions. To find out if a place has these laws, talk to local property managers.

The metro areas that remain are the ones to investigate further. 

If you follow the above process, your odds of selecting a location that will get you off and keep you off the corporate treadmill are very high.

 What are you doing Pat I don't need more competition in Alamance County!? Just kidding!

Alamance County is great. I'd add that although there are some C/D class, cheaper homes, that do see good cashflow, because of the huge growth of RTP and low inventory in the area there are also A/B class homes that see cashflow and have long term appreciation upside. Those are exactly the homes I'm targeting. If you go on Zillow and look at homes for rent in the area you'll see areas where there might literally be 4 total houses for rent (South Graham, Haw River, West of Whitsett). You'll notice the few houses in this area are renting for much higher than comparable houses just a few miles away in areas like Mebane.

 For some NC reading, I will link some of the cities that Pat mentioned to you related to market data research. Hopefully there is some value in those for you if you decide to look into NC.

https://www.biggerpockets.com/... -Fayetteville

https://www.biggerpockets.com/... -Raleigh

https://www.biggerpockets.com/... -Winston-Salem

https://www.biggerpockets.com/... -Charlotte

If you ever want to chat, let me know!

Hope that is helpful,

Cheers!