How to go about selecting a market

34 Replies

Hey there!

Been listening to the podcast for over a year, read a handful of books from Brandon and David and committed to buying my first BRRRR (ideally) in the next 90 days.

I find that Orlando is too hot for me to compete currently.

Any suggestion on how to pick a market near or far to focus on as a newbie investor?

Market analysis is a learned knowledge...and one of the most important things to know.  Unfortunately, if you're asking how to do it, it means you don't know.  Unfortunately because I'm afraid it will take you a lot longer to learn than 90 days.

Market analysis involves number$ with dollar signs in front (not percentages behind).  It involves a combination of cost to get in, profits made when you exit (through flipping or holding), based on groups of common (apples to apples) properties within a short distance of eachother that establish end value, list prices available, costs in addition to purchase price (like rehab), and the big one...what all of this establishes as your potential profit.

@Joe Villeneuve I don't think you understand the question.

I was asking a lighthearted question on what your first step is.

Are you in the camp that just randomly selects a city and then begins pulling leads to check again 1% rule, analyze a few deals to see if there is enough quantity for your goals of scale Or

If you were in a different train of thought with a more targeted approach before getting into the weeds of the numbers.

I appreciate your feedback, however I will be under contract on my first property within my 90 day personal goal.

@Chance Sweat

Hey Chance! 

Here are some things that we make sure exist in a market that we invest in:

1. Low property taxes ( really important if you are looking for more cash flow! Low taxes and low property prices are a WIN)

2. High rental demand( this will make filling units much easier if vacancies do occur, and also we have noticed that in areas where there is high rental demand, tenants will stick around much longer)

3. Landlord friendly laws ( you want to invest in a state that is more landlord friendly, this will allow you to have a much more positive experience as an investor)

4. MOST IMPORTANT ( A GOOD PROPERTY MANAGER) This is KEY, you want to work with a property manager that has a good reputation and also is able to educate you about the market. They should know the trends of the market, the demand, and overall just have a clear idea of how their market works!

Hope that helps!

Let me know if you have any questions 

Originally posted by @Chance Sweat :

@Joe Villeneuve I don't think you understand the question.

I was asking a lighthearted question on what your first step is.

Are you in the camp that just randomly selects a city and then begins pulling leads to check again 1% rule, analyze a few deals to see if there is enough quantity for your goals of scale Or

If you were in a different train of thought with a more targeted approach before getting into the weeds of the numbers.

I appreciate your feedback, however I will be under contract on my first property within my 90 day personal goal.

 ...or, none of the above.  Neither of the "camps" you mentioned are in any way what I would consider as any small part of how I would analyze a Market.  

My suggestion to you would be to focus less on the "90 days" and more on the deal.  I've seen way too many newbies get lost on the calendar, and not get found on the calculator.  They end up rationalizing a bad deal into a good one, because the date circled on the calendar is fast approaching.

Originally posted by @Chance Sweat :

@Joe Villeneuve still not answering the original question, but thanks.

 Sure I did...in my first post:

"Market analysis involves number$ with dollar signs in front (not percentages behind). It involves a combination of cost to get in, profits made when you exit (through flipping or holding), based on groups of common (apples to apples) properties within a short distance of eachother that establish end value, list prices available, costs in addition to purchase price (like rehab), and the big one...what all of this establishes as your potential profit.

It appears as though what you are looking for is a quick method (short cut) to find a market to invest in so you can close within 90 days.  They don't exist, unless you're a good darts player.  

@Joe Villeneuve again, not answering the question. It was a simple question of your preferred first step of picking a market before doing the further analysis to validate if the market makes sense for your preferred real estate goals.

Not throwing darts, not looking for shortcuts, looking for constructive advice and tried and trusted methods. Thanks for the effort.

@Chance Sweat There is more than "throwing darts" when deciding on an out-out-of-state market to invest in. @Subbie Kaur post was perfect as when narrowing down which markets to invest in a few things to look for. I would also add a fellow investor that is a Realtor to help you in that search. I help fellow investors here in the Dallas/Ft. Worth area buy and sell investment properties. The landlord laws here in Texas are among the most landlord friendly ones. Also, I can recommend some good property managers too. The job market is strong, and so is the rental market. Average days on market for a 3/2/2 is 17 days here. So that is pretty quick for an average. So your property doesn't sit on the market long before it is leased here. Good luck in your search on narrowing down which markets to invest in.

Originally posted by @Chance Sweat :

@Joe Villeneuve again, not answering the question. It was a simple question of your preferred first step of picking a market before doing the further analysis to validate if the market makes sense for your preferred real estate goals.

Not throwing darts, not looking for shortcuts, looking for constructive advice and tried and trusted methods. Thanks for the effort.

 OK.  Let me simplify my answer for you.  In summary, based on the answer I did give you, and hoped you would understand (but clearly didn't), is there is no first step that can be stated since Market Analysis relies on so many variables.

@Chance Sweat , despite the protestations of some (harumph, @Joe Villeneuve ), a good first step would be to look at every MSA in the country for a couple of key variables that are available from the Census Bureau. I've compiled such info into a big spreadsheet, and I'd be happy to send it your way. There are many markets in the country that are growing nearly as far as Orlando and, fortunately for those of us that do some homework, don't get talked about nearly as much (for example, Lexington, KY or Fayetteville, AR or Bloomington, IN).

Step two might be to choose a few markets that demonstrate strong growth and browse the available listings on trulia.com. See what retails listings go for, looks for some ignored and abused listings, etc. Check out rental listings on Trulia and Zillow, as well as apartments.com. See what SFRs rent for. Also, here on Bigger Pockets, find those market's local forums and post that you're interested in talking to local investors. Ideally, you might connect with a wholesaler who can share with you below-market properties.

Step three, once you've narrowed the list further through browsing trulia.com, would be to visit city and county websites to get a feel for the local government's development efforts. If the city looks like it's doing a lot to promote business and growth, that's a very good sign.

Step four, once you've rooted out the cities that don't have strong local governments, find the local newspaper websites and poke around.

When you've narrowed your list to one or two great markets, call brokers, property managers, and local bankers and tell them you're interested in their market and will be visiting shortly. With whichever market you have the best conversations -- that's the market you visit.

All the best,

Jonathan

@Joe Villeneuve It seems you're confusing the question, which I think is a valid one. I'm in the very same boat: the question is not how to analyze a market, but rather some tips on picking an out of state market to analyze. I.E. job growth, transportation, property taxes, strength of rental market, city services etc...

For instance, If you @JoeVillenueve were to start looking at the Phoenix market (or any market you knew nothing about) where would you start to determine whether or not you do a 30, 60, 90, 180 day deep dive? Census bureau? City websites? Zillow? Apartments.com? Brokers? Bigger pockets (Phoenix) forums?

@Jonathan Schwartz I'm in LA and would love to connect and talk shop. Long time agent, but new to the out of state investment game. Let me know the best way to reach you. Cheers. Solo

@Jonathan Schwartz

If you don't mind sharing how you gathered the information on different markets, and please share the spreadsheet that you mentioned.

Regards.

Originally posted by @Solo Scott :

@Joe Villeneuve It seems you're confusing the question, which I think is a valid one. I'm in the very same boat: the question is not how to analyze a market, but rather some tips on picking an out of state market to analyze. I.E. job growth, transportation, property taxes, strength of rental market, city services etc...

For instance, If you @JoeVillenueve were to start looking at the Phoenix market (or any market you knew nothing about) where would you start to determine whether or not you do a 30, 60, 90, 180 day deep dive? Census bureau? City websites? Zillow? Apartments.com? Brokers? Bigger pockets (Phoenix) forums?

 Start with what you're overall plan tells you you need to find as far as flip profit and/or cash flow.

Originally posted by @Solo Scott :

@Joe Villeneuve It seems you're confusing the question, which I think is a valid one. I'm in the very same boat: the question is not how to analyze a market, but rather some tips on picking an out of state market to analyze. I.E. job growth, transportation, property taxes, strength of rental market, city services etc...

For instance, If you @JoeVillenueve were to start looking at the Phoenix market (or any market you knew nothing about) where would you start to determine whether or not you do a 30, 60, 90, 180 day deep dive? Census bureau? City websites? Zillow? Apartments.com? Brokers? Bigger pockets (Phoenix) forums?

 I'm not confusing the question.  What I'm trying to tell you is there isn't a quick answer.  The answer involves more than just saying, "start here".  If you want me to tell you where to start, I'd say go (start) to Zillow and start compiling the data mentioned in my first statement.

@Chance Sweat Hi Chance! Congrats on wanting to get into a great market in/near Orlando. You asked about markets nearby and there are several and like many have mentioned, it can be a daunting task as a beginner. If you’d like to discuss further, I’d be happy to help as there are many major developments coming to Winter Garden, Clermont even Titusville. Some have broken ground and some are approved for future. Either way, we can help.. send me a message.

How we choose markets depend on several factors, 1 of the most important being high rental demand, top rated schools zones, corporations/developments bringing high salaries professionals (think tech, healthcare), also follow the new construction. New mixed-use developments offer great returns.. example, retail along with SFR and townhomes within same development. Happening a lot in Maitland, Winter Garden and Clermont.

Let me know if I can help! Good luck!