Market or Team? Team or Market?

20 Replies

Good Evening BP,

I'm new to the site and to long distance real estate investing. I've been trying to come up with a market that has the best of both worlds, cash flow and appreciation. Every time I make a decision, I get swayed one way or another to look into a different market. First it was Indy, then Memphis, then Huntsville, them Memphis, then Knoxville and...you get the picture. When starting out, did you just pick a market and stick with it? For those of you long distance vets, did you make a final decision on the market and then reach out to potential team members or the other way around?

I say pick one, maybe two at max. Then get rolling. All markets have at least some weaknesses, and my guess is it's discovering those weaknesses that causes you to then move on to another one?

At what point are you deciding to look at another market?

Originally posted by @Taylor L. :

I say pick one, maybe two at max. Then get rolling. All markets have at least some weaknesses, and my guess is it's discovering those weaknesses that causes you to then move on to another one?

At what point are you deciding to look at another market?



With Indy, I spoke to a local agent who said that inventory is super low and prices are 30% higher than the same time last year. I moved onto Memphis, just because I've been hearing good things about it. Then I see somebody say that the it's over for Memphis....of course that's just one person's opinion. Then I remembered Huntsville from when I went on a business trip a few years ago. There were a lot of GovCons in the business park I was in, so I know there are good jobs there. I guess talking through it, these are the two that made my finals.
 

Originally posted by @Jonathan Chan :
Originally posted by @Taylor L.:

I say pick one, maybe two at max. Then get rolling. All markets have at least some weaknesses, and my guess is it's discovering those weaknesses that causes you to then move on to another one?

At what point are you deciding to look at another market?



With Indy, I spoke to a local agent who said that inventory is super low and prices are 30% higher than the same time last year. I moved onto Memphis, just because I've been hearing good things about it. Then I see somebody say that the it's over for Memphis....of course that's just one person's opinion. Then I remembered Huntsville from when I went on a business trip a few years ago. There were a lot of GovCons in the business park I was in, so I know there are good jobs there. I guess talking through it, these are the two that made my finals.
 

I think you need to do higher level market analyses of a number of markets, narrow the list to a handful, then dig deeper and narrow it down to one or two. That'll keep you from feeling too committed to one market before moving on to the next.

Say you make a list of Indy, Huntsville, Memphis, Columbia, Atlanta, Richmond, Pittsburgh, Louisville, and Lexington (names just for argument, pick whatever you want). Start with numbers. Look at job/employment growth, net migration, rent trends, industry diversity (is it just one employer or industry propping the market up?), and compare each market on your list on a pure numbers basis. No emotion. Dig into them and truly compare each market without emotion.

Regarding the negatives you named, Inventories are low basically everywhere. Covid stopped people from moving unless they really had to. If you're buying rental properties you probably won't deal with the MLS anyway.

There are still deals happening in every single market you'll look at. The only way you'll get those deals is by building that team. The only way you'll build a team is if you focus. The only way you'll focus is if you pick a market and stick with it! Memphis and Huntsville are generally well-regarded, but you need to know what to look for. Deeper study of each market is critical. 

Really there are lots of guides out there on how to pick a market and build a team. There will be headwinds in every single market you look at, guaranteed. Just be ready for it :)

Just start having conversations with local investors, realtors, property managers, etc.  and feel them out. A good team is equally important (or even more important) than the market. You can fail in a great market with a poor team.  

Originally posted by @Taylor L. :
Originally posted by @Jonathan Chan:
Originally posted by @Taylor L.:

I say pick one, maybe two at max. Then get rolling. All markets have at least some weaknesses, and my guess is it's discovering those weaknesses that causes you to then move on to another one?

At what point are you deciding to look at another market?



With Indy, I spoke to a local agent who said that inventory is super low and prices are 30% higher than the same time last year. I moved onto Memphis, just because I've been hearing good things about it. Then I see somebody say that the it's over for Memphis....of course that's just one person's opinion. Then I remembered Huntsville from when I went on a business trip a few years ago. There were a lot of GovCons in the business park I was in, so I know there are good jobs there. I guess talking through it, these are the two that made my finals.
 

I think you need to do higher level market analyses of a number of markets, narrow the list to a handful, then dig deeper and narrow it down to one or two. That'll keep you from feeling too committed to one market before moving on to the next.

Say you make a list of Indy, Huntsville, Memphis, Columbia, Atlanta, Richmond, Pittsburgh, Louisville, and Lexington (names just for argument, pick whatever you want). Start with numbers. Look at job/employment growth, net migration, rent trends, industry diversity (is it just one employer or industry propping the market up?), and compare each market on your list on a pure numbers basis. No emotion. Dig into them and truly compare each market without emotion.

Regarding the negatives you named, Inventories are low basically everywhere. Covid stopped people from moving unless they really had to. If you're buying rental properties you probably won't deal with the MLS anyway.

There are still deals happening in every single market you'll look at. The only way you'll get those deals is by building that team. The only way you'll build a team is if you focus. The only way you'll focus is if you pick a market and stick with it! Memphis and Huntsville are generally well-regarded, but you need to know what to look for. Deeper study of each market is critical. 

Really there are lots of guides out there on how to pick a market and build a team. There will be headwinds in every single market you look at, guaranteed. Just be ready for it :)

Do you feel.BBP insight provides those metrics? 

 

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

Originally posted by @Todd Dexheimer :

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

Great article but pretty hard to apply.Do you have a list of cities and neighborhood that are emerging in 2020? 

 

Originally posted by @Ari Hadar :
Originally posted by @Todd Dexheimer:

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

Great article but pretty hard to apply.Do you have a list of cities and neighborhood that are emerging in 2020? 

 

 You can find those lists all over the place, there are a few posted. Unless you find the data yourself it'll always be in question. Doing it the hard way is the right way to do it.

I've been investing out of state for the last year. I started with the people (person) first and then did the research on the market. I had been interested investing for a number of years but never pulled the trigger. By chance while I was catching up with an old friend I mentioned I wanted to start investing. My friend said you should invest in Wichita, Ks, the market where he lives. He even had a great property he owned that he wanted to sell. I quickly did the research on the market first and then the property and discovered it was a solid (not great) market to invest in. My friend who was a new realtor and property manager would manage the property for me so it was a great all around deal. I purchased that first property for $123K and it's now worth $152K after a few repairs. To me when investing out of state it's really important to find a property manager/realtor you can trust. I had known and worked with my friend for 13 years so I knew I could trust him. I've since gone on to purchase 2 additional properties that have done equally as well as the first.

I would highly recommend choosing the people first.  At the very least choose your market and go really deep on researching the people who will manage the properties for you.  I sleep really well at night knowing i have someone I trust watching over my properties.

I think team is the most important, but it does need to be in a functioning market. I work in Louisville, but I like Indianapolis, Lexington, Cincinnati, and Dayton as well. 

hi Jonathan I live in Canada and invest in the states had the same issue when 1st started. Eventually chose a half a dozen markets that worked then from this list went to work in teams. I now have well established teams in 5 markets that I share. The best market in the world is useless without a strong team a marginal market can be a great success with a great team. More then willing to share both teams and knowledge if you want to chat. More then willing to chat to anyone number is at the bottom of the post am always looking to expand my network.

Originally posted by @Todd Dexheimer :

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

I was listening to your BP podcast # 248 and really enjoyed your market research method and I intend to read the book you recommended on finding out emerging real estate markets by David Lindhal... I hope I will be able to use it successfully and choose good market. 

 

Huntsville ( Alabama) or Knoxville/chattanooga  (Tennessee)?. Which city is better for buying a Rental property? (In terms of cash flow and Appreciation). Thanks

Originally posted by @Ari Hadar :
Originally posted by @Todd Dexheimer:

Pick the market, then find the team. If you cannot find a solid team and back up options, then move on to the next market. Don't start writing LOI's until you feel that you have a good team in place and really know the market.

Check out this article on what I look for: https://www.biggerpockets.com/...

I was listening to your BP podcast # 248 and really enjoyed your market research method and I intend to read the book you recommended on finding out emerging real estate markets by David Lindhal... I hope I will be able to use it successfully and choose good market. 

 

Ari, check out this condensed version of finding an emerging market: https://www.biggerpockets.com/...

 

It's very hard to know this and it seems like the stock market that you can't enter the low and get out in the high because you can never know it only in  hindsight.... How can I find analysis to that about Cleveland neighborhoods for instance? 

@Jonathan Chan Have your clearly defined your objectives and criteria? It's rare that you can have the best of both worlds although both Indianapolis and Memphis are experiencing unusually high rates of appreciation. That won't continue indefinitely however, so your decision should be based on which market will best achieve your goals in the long term. Personally, I recommend choosing a market and then reaching out to potential teams in the market. That's just more efficient in my opinion. I'd be happy to help you in Indianapolis if that becomes your market of choice. Feel free to reach out if you just want some insight on the market to help you narrow it down.

Originally posted by @Jonathan Chan :

Good Evening BP,

I'm new to the site and to long distance real estate investing. I've been trying to come up with a market that has the best of both worlds, cash flow and appreciation. Every time I make a decision, I get swayed one way or another to look into a different market. First it was Indy, then Memphis, then Huntsville, them Memphis, then Knoxville and...you get the picture. When starting out, did you just pick a market and stick with it? For those of you long distance vets, did you make a final decision on the market and then reach out to potential team members or the other way around?

Many markets available. Cleveland is the one I am most familiar with and it's also very popular with investors across the USA so I figured you'd get some value out of reading The Ultimate Guide to Grading Cleveland Neighborhoods. I also have similar guides that you may want to look over for Kansas City, Missouri. & Birmingham, Alabama.

In addition there are tons of other turnkey markets out there besides those listed above. Many of these markets are very well represented by sellers and turnkey operators here on Bigger Pockets. In no particular order I have listed some of the most popular markets for out of state investors

  • Cincinnati, Ohio
  • Dayton, Ohio
  • Toledo, Ohio
  • Youngstown, Ohio
  • Cincinnati, Ohio
  • Memphis, Tennessee
  • Saint Louis, Missouri
  • Indianapolis, Indiana
  • Detroit, Michigan
  • Erie, Pennsylvania
  • Louisville, Kentucky
  • Milwaukee, Wisconsin
  • Jackson, Mississippi

Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the Bigger Pockets marketplace hourly.

Note when looking at the individual markets, you can make or lose money in any of these markets. You can make or lose money at home. Don't think that one particular market will make or break you, it won't.

It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.

  • Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
  • Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
  • Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
  • Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
  • Make sure your property manager is a licensed real estate brokerage.
  • Google Clayton Morris and/or Morris Invest for a cautionary tale of what not to do when buying turnkey real estate
  • Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.