How did you choose which market to invest in?

Question

New to real estate investing but I'm curious about when you first started out how you decided to a specific market you wanted to go after?

What strategies did you use to analyze your market / other markets?

Thanks!

Dan H. · Answer

I recommend all newbies start local.  I believe all markets have opportunities for those smart enough to recognize them.

In your case you live in an incredible buy n hold market that has been cannot miss for reasonably long holds for a century.

How did I choose?  I live in San Diego and did what I preach.  It has worked well for us.

Good luck

Andrew Adam · Answer

I was lucky enough to start investing in my own backyard. The numbers worked well enough and after a few years they were even better. Self managing my own properties worked well being only 10-15 min away from each property. Now the last few years I have had out of state investors contact me and say that in their research of sub markets my town comes up at the top, which is really nice to confirm my experience. All that being said I have never invested out of the city that I live.

Best of luck!

Dj Hume · Answer

I look at 3 data points:-Medium House Income

-Population Growth

-YOY Job GrowthHere's the rationalization around that. When you determine the medium house income you have a pretty good idea on what people can afford to pay with rent. Population growth will tell you if people enjoy living there or is it a dying city. Lastly, job growth.. well if there aren't any jobs why would someone move there.

What do you think about these metrics?

Trenton Polanco · Answer

@Twana Rasou Really appreciate the feedback. I'm going to keep running the number on different areas here and continue the search.

Cheers!

Dan H. · Answer

All of our more recent acquisitions (none very recent) have been in the same working class (blue collar) city in San Diego county.  I chose my working class area for proximity to where I live.  I suspect most blue collar areas would be similar in expected return.

These working class areas have better initial cash flow than white collar areas.  After a few years of holding, historically all San Diego areas have cash flow and I am less sure that the working class areas still have better cash flow.  I believe the difference in cash flow between a working class area and a white collar area narrows with time and it seems likely, with a long enough hold time, that the white collar area may eventually surpass the blue collar area in cash flow.

There is a certain convenience to having many of our units in the same area/city.  I know that I actually have a look at the properties that are closely located to each other more than I do for our properties that are more isolated from our other properties.  There is not one unit in the city where our recent acquisitions have been that I have not seen in the last few months.

If you are starting out, achieving the best initial cash flow you can (it will not be good cash flow) is likely important.  The best initial cash flow happens in working class areas.  Pick a working class area/city that is near you.

Good luck

Twana Rasoul · Answer

@Trenton Polanco I’m with @Dan Heuschele newbies should start local. I had several investments locally prior to investing OOS. After a few years of OOS investing, I personally saw first hand that my overall returns were/are much higher in San Diego so I have been liquidating OOS Ones yo investment more here.

Best of luck!

Trenton Polanco · Answer

@Andrew Adam Thanks Andrew! I believe San Diego would be an amazing place to start out I think it's all about finding the right deal. I'll keep looking.

Trenton Polanco · Answer

@Antonio Cucciniello That would be great I'd love to check out the video. Where would I find it on here or Youtube?

Antonio Cucciniello · Answer

@Trenton Polanco I have a video that outline my process... but it comes down to this: Using actual data points to not make it come down to emotions.  Emotions are the opposite of investing. I suggest you get everything down to numbers, and compare city to city based on how well you know it and the data.

Tonya Copeland · Answer

I'm a big fan of using data to do this kind of tasks. 1. Compile a list of US cities with more than 500 rentals available. 2. Find out yearly revenue, average daily rate, occupancy rates, and house prices for each cities by number of rooms. 3. Then, sort the list by net rental yield. Then, I do more in-depth research into top 20 cities. It took me less than a week to do the whole thing, as I hired a contractor from Upwork, and asked them to go Zillow to find the property price for each cities. For average daily rate and occupancy rates, I simply use the data from companies like Airbtics.

How did you choose which market to invest in?

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