How to choose an area/market to start in?

Question

Hello, this is my first post so I would like to start off by introducing myself. My name is Evan, I’m 24, and I am new to RE investing. I was raised to live an ordinary life but I have realized that is not for me. I just don’t want spend my entire life working a 9-5. This year I have been learning a lot about real estate investing and I am getting close to being ready to jump. I have $130k saved. I want to house hack with a duplex, triplex, or quadplex. My goal is to live in one of the units for cheap or possibly free with the right deal. That way I can save a lot more money for my next deal, I’ll get experience landlording, and I’ll have time to learn more until I’m able to purchase my next deal. I understand how to analyze deals. That said, I am struggling with picking a market/sub-market around the Atlanta GA area. How do I analyze markets/sub-markets, and choose one?

Thanks in advance! Any and all advice is much appreciated!

Marcus Auerbach · Answer

@Evan Key first of, you are asking the right questions and I can tell you are level headed (unlike a lot of posts by dreamers you see on BP).

After investing for 17 years and helping a lot of house hackers in Milwaukee over the years and seeing what they have regretted 5 years later, here is what I'd suggest:

1.) Buy a duplex, not a quad. At least here in Milwaukee you'd have a better experience. Rent per unit is higher, which makes you rent to renovate cost much better. Don't buy into the 1 roof myth, the roof is literally the only example, everything else you have 4x in a quad, but for lower rent. You can attract better tenants. You have less drama. There are fewer tenant interactions between 2 than between 4.

2.) Buy in the best area you can afford. Not because you are going to live there, but because long term it works better financially. Cheap neighborhoods don't work long term, capex exceeds cash flow over time and you'll end up trading into better areas later. Ask me how I know. Also, better tenants, higher rents, better appreciation.

3.) Year 1 cash flow is a stupid metric, especially on a house hack. You want to look at at least 10 years. I know that sounds a bit far when you are 24, but trust me on that one: play the long game. Nobody has ever regretted buying in a nice area. You'll find thousands of posts on BP asking for help who bought in cheap areas.

4.) Live there for 1-2 years and then buy another duplex. You can do that with a conventional 5% down. Write your offer with 20% down so it looks strong and then close with 5% down. Save your capital for improvements and for the next one.

Real estate investing is basically a financial time machine. You anchor debt in the past and then let time and money work for you. Extreme example to illustrate, real numbers. You could have bought a brand new house in 1960 for 15k from the builder here in Milwaukee (I have the advertising). Rent was $75. See what's happening?

Joseph Cacciapaglia · Answer

I like to look at US census numbers to look for areas with rapidly growing populations to start. Atlanta is a good market for that overall, but you'll notice that not all the census tracts in that market behave the same. You can find that info on census.gov. I also like to look at crime statistics on neighborhood scout. After that I start looking at properties to see if there are decent rent to price ratios. You can spend forever doing this in each market though, so once you find a couple that seem OK, I'd just start checking out those deals and go from there.

I happen to know a good investor focused agent in that market, so feel free to DM me, and I can put you in touch.

Jules Aton · Answer

Local areas that you know are the best places to start in my opinion. I would begin studying RE prices, taxes and ease of resale in  nice neighborhoods with top school districts and potential for appreciation where you would enjoy living.

Stephen Quesinberry · Answer

Evan, welcome. I think you've got a solid plan, and house hacking is one of the best ways to get started.

As far as picking a market, I try not to overcomplicate it. I generally gravitate toward locations that I think will be in demand for a long time. Areas with good schools, strong access to major interstates and employment centers, and places where I would personally be comfortable living. Those characteristics tend to hold up well over time.

From there, it really comes down to reps. Start looking at deals consistently and spend time driving the neighborhoods. You can learn a lot by seeing the streets, nearby retail, traffic patterns, the condition of surrounding homes, and just getting a feel for the area. The more you underwrite deals and physically visit submarkets, the more you'll start to recognize where you feel comfortable investing.

I also wouldn't feel like you have to pick the "perfect" market before you start. Narrow it down to a few submarkets that fit your criteria, then go all in on learning those. Over time, your confidence will grow because you've seen enough deals to know what good looks like.

You're in a great position at 24 with that level of savings. Stay disciplined, keep looking at deals, and let consistency build your confidence.

Bill Hampton · Answer

@Evan Key

Check out the Georgia Real Estate Investors Association, gareia dot com, for local education and networking opportunities.

Good luck investing.

Mohammed Rahman · Answer

Hey Evan,

As far as choosing a market, I'd focus on the fundamentals and not overcomplicate it. There are plenty of gurus who make it seem like you need to analyze 50 different metrics before buying your first property. In reality, many successful investors started by buying a solid property in a market they understood.

I'd look at things like job growth, population growth, local employment, vacancy rates, and whether the numbers actually work for your goals. Since you're planning to house hack, I'd also spend time driving neighborhoods, talking to local agents, and getting a feel for where you'd actually want to live for a year or two.

When I bought my first investment property, I didn't have years of experience or the perfect spreadsheet. I focused on the fundamentals, found a market I believed in, and took the leap. You'll learn far more from owning your first property than from spending another six months trying to identify the "perfect" submarket.

Analysis is important, but at some point you have to execute. It sounds like you're getting close to that point. Hope that helps, and feel free to DM me if you ever have any more questions!

Berenger Greer · Answer

"

Hello, this is my first post so I would like to start off by introducing myself. My name is Evan, I’m 24, and I am new to RE investing. I was raised to live an ordinary life but I have realized that is not for me. I just don’t want spend my entire life working a 9-5. This year I have been learning a lot about real estate investing and I am getting close to being ready to jump. I have $130k saved. I want to house hack with a duplex, triplex, or quadplex. My goal is to live in one of the units for cheap or possibly free with the right deal. That way I can save a lot more money for my next deal, I’ll get experience landlording, and I’ll have time to learn more until I’m able to purchase my next deal. I understand how to analyze deals. That said, I am struggling with picking a market/sub-market around the Atlanta GA area. How do I analyze markets/sub-markets, and choose one?

Thanks in advance! Any and all advice is much appreciated!

Thanks in advance! Any and all advice is much appreciated!"

Evan,

Very excited to hear you're taking productive steps to live a life of passive income, it is certainly worth it, but remember the income isn't always as passive as you'd think it is!

I haven't seen a single bad piece of advice yet in this thread, but as an Atlanta investor, property manager, and agent myself, I can tell you Atlanta is much much different than other markets as far as the duplex/multi family/general house hacking scene goes. "

You're going to have to get into the scene a bit differently, as if you do go the duplex route, it'll usually be purchased at a 7% or below cap rate in a good appreciating area, which will help mitigate your mortgage, but only by about half. Alternatively, you can purchase a duplex in a depreciating area, cover much more of your living expenses, but can see your home value plateau or even, well, depreciate for years to come. This also comes with longer vacancies, increased evictions, and more difficulty with tenants.

What I have done to build a quick, cash flowing, appreciating portfolio is take advantage of the many fee simple (no hoa) town homes and convert a basement/top floor into their own units and lease those out individually on month to month-year long basis. This way you'll be able to lease it for about $800-$1200 more than market rent and still own a solid asset in an appreciating market.

One of the easiest ways to accomplish this with as little money out of pocket as possible, making it more efficient when it comes to scaling year after year, is of course the FHA 203k, something I am proficient in when guiding buyers through the process. As you're most likely aware of, this allows you to bundle rehab cost with the loan, meaning you can get a mortgage + rehab/reno cost for just 3.5-5% down, saving you about 25-40k cash allowing you to repeat the process after the year long FHA probationary period, then jump into a conventional on a new home.

I have done this a few times within smyrna and have been successful. Be sure to check into local laws and ordinances for yourself.

G. Brian Davis · Answer

Congratulations on getting started. I'd start by narrowing it down to a few markets you like, then compare deals instead of trying to compare entire markets. The right deal is usually more important than finding the "perfect" location.

Travis Goodwin · Answer

House hacking a duplex, triplex, or fourplex is one of the best ways to get started because you're building experience while keeping your living expenses down.

As far as choosing a market, I'd stop trying to find the "perfect" one. Instead, narrow it down to three or four areas and start studying them every day. Look at what duplexes and small multifamily properties are actually selling for, what they rent for, how long they stay on the market, vacancy rates, and what kind of neighborhoods you would personally feel comfortable owning in.

The market matters, but the deal matters even more. I'd rather buy a great deal in a good market than an average deal in the "hottest" market.

One last thing. Don't be in a hurry to spend that money just because you have it. Let the right deal earn your investment, not the other way around. Patience is one of the biggest advantages you have right now.

Mike B. · Answer

@Marcus Auerbach does your advice to buy in the best area you can afford apply to a first time real estate investor at age 42 buying a single family home for a long term rental?

How to choose an area/market to start in?

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