How to Research for the Best Local Market

Question

Hello everyone, I am only a month into my REI research and education and I've been trying to consume as much as I possibly can. After listening to many hours of podcasts and reading a few books I am understanding just how important finding a good market is, and I have a few questions about how to conduct my research...

Also, I am planning on taking the fix and flip (house flipping) approach to begin with hoping to build capital for my future rental portfolio.

Q: What are specific stats and data I should research for every market I am considering to compare them, and find which is best for me?

Q: How far away is considered "okay" as a beginner trying to find a market?

I am currently 1 hour away from Birmingham AL which is the biggest city within an hour of me so that was what I assumed I would start with. But, I have heard that Huntsville AL is one of the best cities to invest in due to it's rapid growth but it's 2 hours away from me and I'm not sure if that would be too far to have as my first market. Also, I'm not sure if Huntsville is considered a good market for rental properties only or for both strategies.

Q: Are markets that are good for buy and hold rental properties directly or inversely corelated to a good fix and flip market? Or are they not corelated at all?

Any and all feedback will help!

Thank you!

Kyler Wright.

Bradley Buxton · Answer

@Kyler Wright

Q. You have to look at the market sales, pending home sales, and rental data. What is best for you is your risk tolerance. If you have never flipped a house and want to do that, buy a live in flip. If all goes wrong, you can still live there, and there is no commute to the "best market".

Q. How far are you willing to travel to manage a flip? If you want to drive 4 hours daily or at least multiple times per week, then that is not too far. If something goes wrong, are you going to drive there at a moment's notice?

Q. If the rental market is strong and median prices are going up it's an indicator there is a demand for housing. Look at housing starts and alternatives to your used house. Can someone buy a new house 20 minutes away from your flip?

Investing where you live has many advantages to getting started. If you have the capital and are willing to burn that to experiment with different markets, then you will learn valuable lessons, positive and negative. You are running a business, and the house is your inventory. holding costs, cost overruns, gas, food, and time are all inputs in your profit return. A live in flip or fixer-upper house hack will give you experience and lower your risk.

Clayton Silva · Answer

I recently answered a similar question, but think it may help you as well:

"Most people focus on the market before they figure out the strategy/goal. That question is nearly impossible to answer without knowing what your goals are? Are you investing in the Midwest for cashflow and foregoing appreciation? Are you a high-income earner investing for tax offsets? Are you looking to make a little cashflow and go for appreciation plays. Each market comes with pros and cons, but you have start with the end goal in mind or else no market is going to get you where you want.

As someone who only invests out of state (CA price to rent is about as out of control as NY) I have different ones in different markets for different reasons. I would not recommend (from my personal anecdotal evidence) doing major rehabs from out of state as it tends to be difficult to manage.

I hope this helps but definitely define your goals and lay those out, then figure out which markets are best suited to help you achieve those goals."

How to Research for the Best Local Market

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