How to you select where to invest??

[Philip Tretola]

I have been doing my homework and learning about the nuts and bolts of real estate investing and realized that I don't have a very good handle on selecting where to invest.  I've looked at several areas - both local and hours away - but unsure how others decide to pick their markets.

Does anyone have any formulaic ways they narrow down where to invest?  Does someone who's done this many time before have a series of questions that they make sure to answer to assure themselves they understand the area dynamics?

Any help on this from seasoned investors would be great...thanks!  Phil

[Joel Owens]

Philip it depends on if you are holding for a few years for a run up in a market to exit or are you holding in a long term growth area for retirement etc.

Capital risk exposure comes into play as well.

If you own a 100k house out of your net worth of 2,000,000 and it goes belly up it likely will not have that great of an impact because if your other investments are sound you can recover that loss in a short period.

If you buy a 100k house and have 20k leftover and the deal goes bad it could take you under.

Investing is like taxes. Everyone's situation is unique in goals and timeframe to hit those marks.

For long term I like warm belt states where baby boomers are retiring in the tens of millions. That pushes those economies long term for sustainable growth. Median house income per year is about 52,000 a year. I like to see 80,000 or more minimum.

There is cash flow only, mixture of cash flow and appreciation, and areas that are hardly any cash flow to start but appreciation driven. The appreciation driven only you have to be careful because they cycle more with bubbles from time to time.