Choosing a market

31 Replies

I'm starting out. I know I want to buy and hold and I know I can't manage the properties myself. Because I would like to hire a management company, I would like to start with apartment complexes. I live in CT on the shoreline and am finding it hard to find anything that will cash flow when I factor in the management fees. My question is, I know I need to research out of state markets and I've read a lot on how to do the research once I find a market but everything I've read assumes I have some sort of clue where to start. I've heard the "Mid-West" cash flows well but that's a very very large area! Any way to narrow it down? I'm hoping to choose 3 or 4 areas to do some deep research before I begin to seriously look at properties. 

I've heard the Kansas City area is great. Johnson County is said to be the Orange County of Kansas. 

Let us know where you end up, we are looking too.

I live in Johnson County and there is value here. House prices are surprisingly low compared to the coasts. Johnson County is great because of our great schools.

Hi Daniel,

Yes, the schools are amazing. My best friend moved there for the exact reason, she is in Leawood too. When Trader Joe's came to town she was elated!

Also, the proximity to downtown Kansas City and the airport make it very easy. With Hallmark, H&R Block, and excellent hospitals. The jobs are there to support a strong community and retain property values.

Kim

Cerner is also huge here. I'm not sure how many jobs they have here total, but they're building a $4.3 BILLION campus here that's supposed to bring in 16,000 new employees.

Originally posted by @Kim Handelman:

I'm starting out. I know I want to buy and hold and I know I can't manage the properties myself. Because I would like to hire a management company, I would like to start with apartment complexes. I live in CT on the shoreline and am finding it hard to find anything that will cash flow when I factor in the management fees. My question is, I know I need to research out of state markets and I've read a lot on how to do the research once I find a market but everything I've read assumes I have some sort of clue where to start. I've heard the "Mid-West" cash flows well but that's a very very large area! Any way to narrow it down? I'm hoping to choose 3 or 4 areas to do some deep research before I begin to seriously look at properties. 

Hi Kim,

Get busy networking via phone, email, events, etc...

Don't get caught up in stats and demographics of a particular area but rather focus more on the people on the ground.

Good deals can be found in every market, while trustworthy people are much harder to find.

Eventually when you start building relationships with certain individuals they will be located in different areas. The people that you click best with and feel most comfortable with then you can start doing more due diligence on the areas they are located in.

You will find that one thing leads to another but I would always start with finding the right person over area.

Thanks and have a great day.

@Kim Handelman  Good for you taking Action!

I have to second @Daniel Bennison  & @Kim Halverson   Johnson county is an Excellent place to live and invest. Plenty of fortune 500 headquarters, low crime, Great schools, low traffic and very affordable housing etc..

Landlording from a distant could be tough. No matter how good the market you choose is, your only as good as your team on the ground. 

There are great cash flow opportunities in KC as well. 

Best of luck, 

Ray 

Ray Orellano, Real Estate Agent in KS (#BR00231137)
913-998-6285

@Kim Halverson. Santa Monica - Ahhh, I used to live on 3rd st and Washington! $150 mo. RENT CONTROL! I'm sure my landlord HATED me! Thanks for the Kansas idea. Looks like others feel good about it too. 

@Daniel Bennison - great scoop on new campus and good schools. Thank you!

@Engelo Rumora - Great advice. I hope to find a partner in the area for boots on the ground help once I find a market that can get close to the 2% rule. Can't even make the 1% rule work here on the CT shoreline.

@Kim Halverson   The people on this thread have given some excellent recommendations so far.  If you are looking for cash flowing apartment complexes, there are plenty of them in Connecticut.  I know in Hartford County, where I am an investor and investor friendly realtor i help my clients find cash flowing apartment complexes.

The midwest has an advantage from the perspective that they have very good cash flowing SFR's that CT normally doesn't provide.

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

@Kim Handelman  

To make the @ work, do the following:

Hold down the shift key and type @?

Look below this Window, and you will see a list of names of people that have posted in this thread.

Click on the name of the person that you want notified via an email, that you responded to them.

If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.

Then look below this Window and click on that person's name.

Raymond

@Kim Handelman  welcome to BP and, yeah, the midwest sure is a big area. I live in NYC but invest in other markets (one of them in the midwest, Cincinnati). I'd start by identifying the best ways to qualify a market. Here are the 10 things I look for that might be helpful for you: 

1. Unemployment rate less than national average (search "city name" + "unemployment rate" in Google)  

2. Population more than 250k or more in MSA (metropolitan statistical area_ - go to census.gov for a list of MSAs 

3. Diverse job industry - go to Wikipedia page for city, chamber of commerce 

4. Recreational activities for families (ex. Six Flags) 

5. Affordable cost of living - bestplaces.net is a good resource for this 

6. Landlord friendly laws - ask a property mgmt company how long does it take to kick a resident out if they don't pay 

7. Natural resources close by that generate income for market - Google search, local newspapers, Wikipedia page 

8.  Thriving or emerging downtown - Google search 

9. Trusted and experienced team members - as @Engelo Rumora  said this is muy importante 

10. Favorable absorption and rent trends - Google search, broker conversations, property mgmt 

Most important thing is job growth and projections. People need a job to pay rent. 

Hope this helps. I'm in your same situation so figured I'd tell you what I've learned to see if it helps you make things happen too. 

I agree with most of that up there. Like @Ray Orellano  said, Landlording from a distance could be tough. I really wouldn't recommend it if you're just starting out. Did you know that New Haven has some of the lowest vacancy rates in the country?

http://articles.courant.com/2014-01-07/business/hc-new-haven-rental-market-20140107_1_apartment-vacancy-rate-1-percent-2-8-percent

I'm in the market looking at properties everyday. There are a lot of great deals right here in our back yard.

Cameron Norfleet, Real Estate Agent

@Kim Handelman  Understand the difficulty but always prefer being local, even if using a manager it's nice to be able to be there if issues arrise.  Just out of curiosity looked in your town and saw 136 Soerry Dr. for sale at 159.9k, and I'm sure there are others especially foreclosures and estates to look at.  In my town, have seen a lot of out of town investors walk away from houses, because they took a hit where they are (especially CA) and some managers didn't treat them the best, in my humble opinion, so be careful...

Originally posted by @Joe Fairless:

@Kim Handelman  welcome to BP and, yeah, the midwest sure is a big area. I live in NYC but invest in other markets (one of them in the midwest, Cincinnati). I'd start by identifying the best ways to qualify a market. Here are the 10 things I look for that might be helpful for you: 

1. Unemployment rate less than national average (search "city name" + "unemployment rate" in Google)  

2. Population more than 250k or more in MSA (metropolitan statistical area_ - go to census.gov for a list of MSAs 

3. Diverse job industry - go to Wikipedia page for city, chamber of commerce 

4. Recreational activities for families (ex. Six Flags) 

5. Affordable cost of living - bestplaces.net is a good resource for this 

6. Landlord friendly laws - ask a property mgmt company how long does it take to kick a resident out if they don't pay 

7. Natural resources close by that generate income for market - Google search, local newspapers, Wikipedia page 

8.  Thriving or emerging downtown - Google search 

9. Trusted and experienced team members - as @Engelo Rumora said this is muy importante 

10. Favorable absorption and rent trends - Google search, broker conversations, property mgmt 

Most important thing is job growth and projections. People need a job to pay rent. 

Hope this helps. I'm in your same situation so figured I'd tell you what I've learned to see if it helps you make things happen too. 

 Thanks for the mention Joe.

Originally posted by @Kim Handelman:

@Kim Halverson. Santa Monica - Ahhh, I used to live on 3rd st and Washington! $150 mo. RENT CONTROL! I'm sure my landlord HATED me! Thanks for the Kansas idea. Looks like others feel good about it too. 

@Daniel Bennison - great scoop on new campus and good schools. Thank you!

@Engelo Rumora - Great advice. I hope to find a partner in the area for boots on the ground help once I find a market that can get close to the 2% rule. Can't even make the 1% rule work here on the CT shoreline.

 Thanks Kim,

Network in these areas: Ohio, Michigan, Indianapolis, Kansas City

These areas would be my picks.

Have a great day.

I agree with Joe F.  Start with the demographics and stats of a given market,  Despite how many penpals and soulmates may be in a given market, if I don't like the growth rate, unemployment situation, recent appreciation run-up, or excess housing inventory i'm not investing.  While good deals exist in every market, i'm not living their with excess time to ferret them out.  After you identify a market on objective criteria then its time to find the right boots on the ground to help you succeed.  You will want to have both, market trends and local helpful people, to give yourself the best chance to succeed.

I agree with @Cameron Norfleet  I think New Haven has a lot of upside and potential.

In addition to all the universities in the area - namely Yale - it's one of the top foodie cities in the country, close to NYC and there's a trend of big development happening:

1. Yale is expanding and buying up all the medical facilities in the area.

2. Yale has a development branch and is developing property to improve the area.

3. Gateway just finished their new campus a few years ago.

3. Alexion Pharmaceuticals headquarters is under construction at the 95-91 interchange. Potential for this to bring more biotech to the area.

4. Live Work Learn Play had their $395 million redevelopment of the colesium approved by the city. I'd say we are 10 years out from completion. http://articles.courant.com/2013-12-03/business/hc...

5. Again, Yale.

I'd like to hear what some of the experts think about the area. Is there a downside I'm missing? @Joe Fairless  have you considered New Haven, thoughts?

@Raymond B.   Thanks for the tip on making the @ work. I'm learning all kinds of things on BP!

@Joe Fairless   - THANKS! This is a great list! I will incorporate it into my daily searches for where to begin investing!  As for New Haven, please remember I'm a newbie but it seems to be a cash flow problem. Although it has incredibly low vacancy rates, buildings are overpriced. That and new haven has a lot of crime. @Cameron Norfleet you can probably talk to this better than I can. Do you agree? 

Hi Kim, so many experienced investors avoid the Midwest cash flow trap. I know it can be done but the road is littered with many out of state investors bodies. If you decide on the midwest perhaps get the best A area and property you can get a deal on.

thanks,

Matt

@Kim Handelman   - thanks for starting this thread.  I've been wondering this same thing myself.  There are lots of posts about how to research specific neighborhoods at the micro level once you've settled on a particular city and check out rents, crime stats, schools, etc., but I have been wondering what qualities people look for when doing their macro-level research.  

@Joe Fairless  - I second the thanks for your comprehensive list of qualities you look for.  Very helpful!

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