Market research strategy for BRRRR/Buy and Hold

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Market research strategy for BRRRR/Buy and Hold

Jason Howell
Petaluma, CA · Member since 2017 · 106 posts · 86 votes

Hello to the fantastic BP community! Life changers, you all are. But you know that. :)

I'm near completion of finalizing my fourth buy-and-hold property in Indianapolis via turn key and I continue to get this feeling that it's time I take the entire process into my own hands. Tons of reading, lot's of books (my current fave is Long Distance Real Estate Investing by David Greene, SO inspiring and information--dense!)

I have a new morning ritual that gets me up an hour before the kids. That time is 100% devoted to researching markets to get comfortable finding something that can work for me with the BRRRR strategy. No better time than now.

What is YOUR favorite strategy for market research? I have a huge list of markets that, each morning, I pick one and just start searching/reading/taking notes on any random bits I find about the area. But it feels a bit broad at the moment.

- How do you BEGIN to find something that hasn't been on your radar?

- What are the things you look at FIRST that matter MOST so you don't waste your time? (property tax? landlord laws? etc)

- What process do you go through when researching a new market? I really want to systemize my approach so it's thorough, cohesive, and not a waste of valuable time.

Areas on my list currently: Akron OH, Albany NY, Birmingham AL, Boise ID (I'm from there so there's familiarity), Cincinnati OH, Cleveland OH, Columbia SC, Delaware County PA, Memphis TN, Oklahoma City OK, Philadelphia PA, Pittsburg PA, Richmond VA, St Louis MO, Tampa FL, Wilmington DE

So yeah, a lot there and I know I'm missing many. But that's what I mean. The country is so vast. Knowing where to begin and HOW to best begin there is the big challenge at this stage.

Strategies that work for you?

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Jonathan McGee
Rental Property Investor · Memphis, TN · Member since 2017 · 155 posts · 151 votes
8y

@Jason Howell networking in your target market would be your key to success! Pulling together a solid and trusted team would be your first step. This would consist of a seasoned wholesaler or investor friendly agent, general contractor, inspector, property management, local mortgage broker and possibly a marketer or property scout. Find a deeply discounted off-market property via your wholesaler, agent or marketer, have your licensed inspector crawl through the property and supply you a report with photos, pay your contractor for a line item rehab estimate, then reach out to your property manager for potential rent rates, history of vacancies in the area and their overall opinion for a long term hold on the property.

I'd suggest sticking to B/C+ areas as buying into A class areas can easily exceed your budget and may or may not net the returns your expected. You can gradually move into the higher class suburb type areas once you've become thoroughly familiar with the market and which parts of the A class areas are worth jumping on deals. You'd also want to make sure you find a local bank branch with a mortgage broker that offers up to 80% LTV with no minimum (several lenders only lend up to 75-80% if the value is $75k or higher, anything below they only lend up to 50%).

   As stated previously by @Dean Harris several investors have seen a lot of success utilizing the BRRRR method in Memphis since you can still buy discounted off-market properties here in B/C areas, run a minimal rehab and then cash out at 80-110% of the cash you put in.

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    8y

    For what you are contemplating I think the market analysis is of lesser importance. Trying to do a remote purchase and reno is the big risk.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    8y

    @Jason Howell just out of curiosity, why are you looking for a new market since you've already established in Indianapolis?

    1Reply
  • Jonna WeberPro Member
    Moderator
    Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes
    8y

    @Jason Howell Hi from Boise!  If you ever get back here, let me know. That is certainly a broad swath to be researching.  I think the first thing is to determine what returns you are looking for...and seeing which markets may match that.  Then...you have a narrower scope.   Good luck!

    208-608-4884Podcast Guest on Show #80
    1Reply
  • Jason CoryPro Member
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    8y

    I'm in Birmingham & used to appraise before investing. I'll be glad to help you in Birmingham.

    1Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @Mike D'Arrigo:

    @Jason Howell just out of curiosity, why are you looking for a new market since you've already established in Indianapolis?

    Hey @Mike D'Arrigo ! (Working with Mike on my fourth property in Indy, BTW)

    So, it's not that I'm NOT considering Indianapolis... I suppose where I'm at is knowing that Indy is a super competitive market (and not wanting to step on any toes like yours!) that I might be wise to at least consider other markets before committing. Though you are absolutely right that it makes much sense to not spread myself outside of where I am already embedded... On one hand, I get it: do one area REALLY well... But on the other hand, diversity in market investment isn't a horrible idea either, right?

    I'd love your thoughts on this!

    1Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @Eric James:

    For what you are contemplating I think the market analysis is of lesser importance. Trying to do a remote purchase and reno is the big risk.

     No doubt there is risk (as there is with everything, to varying degrees.) But I fully intend on building a team to make it happen effectively, and traveling as needed. I want to do this right.

    0Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @Jonna Weber:

    @Jason Howell Hi from Boise!  If you ever get back here, let me know. That is certainly a broad swath to be researching.  I think the first thing is to determine what returns you are looking for...and seeing which markets may match that.  Then...you have a narrower scope.   Good luck!

     Hi Jonna!

    Being from Boise ID myself, and with family in the area, I'd love to do some investment there. The margins are pretty slim in my price range. Wish I had jumped in there 5-7 yrs ago but real estate wasn't even on my radar then. But I'm very familiar with the area (though it's changed considerably since I moved in 98). How competitive is it for investors from your perspective?

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    8y

    @Jason Howell I can understand wanting to possibly diversify but my thoughts are that if you've decided that it's time to take the process into your own hands, it is safer doing it in a market that you're familiar with and established in rather than going out in to uncharted waters on your first project. You might feel more comfortable with that. I like your new morning ritual BTW. 

    0Reply
  • Dean HarrisBusiness Member
    Real Estate Agent · Memphis, TN · Member since 2015 · 1k+ posts · 1k+ votes
    8y
    There are plenty of BRRRR strategy options in Memphis, TN. Make sure you source your property from a trusted and reliable source but there are really good ways to get this done yourself without having to purchase TK! Good luck and I’m happy to answer any questions you may have!
    CrestCore Realty4.713 Reviews
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    2Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y

    But seriously. For those of you who have actively began the arduous process of picking a market, what has been your RESEARCH strategy. I guess what I'm hoping for is some sort of systematic approach: I have a doc on my potential market for facts, I log property tax info, I investigate schools/hospitals in the area, I dip into MLS listings to compare neighborhoods looking specifically for "x". That sort of thing. (I understand if that's a lot to ask, but no harm in asking right?)

    Right now I'm throwing all of these random pieces of information into docs on particular areas, but I will need a way to then look at that information, that data, and then make a decision and I'm not confident I'm tracking the right info in the best possible way. And I LOVE process. it gives me a great starting point to then come up with something of my own.

    What's your process?

    1Reply
  • Mark Hughes
    Rental Property Investor · Aurora, CO · Member since 2018 · 288 posts · 117 votes
    8y
    Would love to hear more responses on this as I am also considering new markets. Thanks
    2Reply
  • Jason CoryPro Member
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    8y

    Google has an add-on for spreadsheets that will drop pins on a map. Color code the pins by sales price (under $50k, 50-100, etc.) Then do the same for rent amounts. Try to do a historical for prices & rents using the same colors.

    You'll see appreciation or depreciation for price & rent like you were looking at a monopoly board overlaying the city. 

    If that doesn't work for you call an appraiser in the market. We get around & have double top secrets on how to analyze data.

    https://batchgeo.com

    3Reply
  • Jonathan McGee
    Rental Property Investor · Memphis, TN · Member since 2017 · 155 posts · 151 votes
    8y

    @Jason Howell networking in your target market would be your key to success! Pulling together a solid and trusted team would be your first step. This would consist of a seasoned wholesaler or investor friendly agent, general contractor, inspector, property management, local mortgage broker and possibly a marketer or property scout. Find a deeply discounted off-market property via your wholesaler, agent or marketer, have your licensed inspector crawl through the property and supply you a report with photos, pay your contractor for a line item rehab estimate, then reach out to your property manager for potential rent rates, history of vacancies in the area and their overall opinion for a long term hold on the property.

    I'd suggest sticking to B/C+ areas as buying into A class areas can easily exceed your budget and may or may not net the returns your expected. You can gradually move into the higher class suburb type areas once you've become thoroughly familiar with the market and which parts of the A class areas are worth jumping on deals. You'd also want to make sure you find a local bank branch with a mortgage broker that offers up to 80% LTV with no minimum (several lenders only lend up to 75-80% if the value is $75k or higher, anything below they only lend up to 50%).

       As stated previously by @Dean Harris several investors have seen a lot of success utilizing the BRRRR method in Memphis since you can still buy discounted off-market properties here in B/C areas, run a minimal rehab and then cash out at 80-110% of the cash you put in.

    5Reply
  • John Leavelle
    Investor · La Vernia, TX · Member since 2015 · 1k+ posts · 865 votes
    8y

    Howdy @Jason Howell

    To answer your direct question.  I like using the website www.housingalerts.com

    You can easily see what markets are hot and which ones are not.  The basic information is free.  But they have different pay levels for more detailed analysis if you want.  Check it out see if it is what you are looking for.

    Once you identify potential markets then you can enlist the help of experienced Realtors and Investors in that area.

    Hope this helps.

    2Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @Jason Cory:

    Google has an add-on for spreadsheets that will drop pins on a map. Color code the pins by sales price (under $50k, 50-100, etc.) Then do the same for rent amounts. Try to do a historical for prices & rents using the same colors.

    You'll see appreciation or depreciation for price & rent like you were looking at a monopoly board overlaying the city. 

    If that doesn't work for you call an appraiser in the market. We get around & have double top secrets on how to analyze data.

    https://batchgeo.com

     Fantastic tip for Google Spreadsheets! This has definitely been a challenge using online tools that I've seen: Sale price compared to rental price in the same area. The data is there, but getting the visualization that shows them side by side isn't straight forward.

    Thank you for this awesome tip!

    1Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @Jonathan McGee:

    @Jason Howell networking in your target market would be your key to success! Pulling together a solid and trusted team would be your first step. This would consist of a seasoned wholesaler or investor friendly agent, general contractor, inspector, property management, local mortgage broker and possibly a marketer or property scout. Find a deeply discounted off-market property via your wholesaler, agent or marketer, have your licensed inspector crawl through the property and supply you a report with photos, pay your contractor for a line item rehab estimate, then reach out to your property manager for potential rent rates, history of vacancies in the area and their overall opinion for a long term hold on the property.

    I'd suggest sticking to B/C+ areas as buying into A class areas can easily exceed your budget and may or may not net the returns your expected. You can gradually move into the higher class suburb type areas once you've become thoroughly familiar with the market and which parts of the A class areas are worth jumping on deals. You'd also want to make sure you find a local bank branch with a mortgage broker that offers up to 80% LTV with no minimum (several lenders only lend up to 75-80% if the value is $75k or higher, anything below they only lend up to 50%).

       As stated previously by @Dean Harris several investors have seen a lot of success utilizing the BRRRR method in Memphis since you can still buy discounted off-market properties here in B/C areas, run a minimal rehab and then cash out at 80-110% of the cash you put in.

       If you have any questions about the Memphis market, please feel free to reach out!

     Awesome summary here! If I were to stick in the area I'm already invested in (Indianapolis) then at least a few components of the team are already secured and trusted thankfully! I have considered Memphis, absolutely. You certainly hear about it a lot in this kind of conversation.

    As an ultra competitive market, though, where it seems like so many people are (and Indy is no different in that regard), does it make more sense to find a less competitive market?

    0Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y
    Originally posted by @John Leavelle:

    Howdy @Jason Howell

    To answer your direct question.  I like using the website www.housingalerts.com

    You can easily see what markets are hot and which ones are not.  The basic information is free.  But they have different pay levels for more detailed analysis if you want.  Check it out see if it is what you are looking for.

    Once you identify potential markets then you can enlist the help of experienced Realtors and Investors in that area.

     I had not heard of this site before, thank you so much for the recommendation! This looks to be a valuable tool. Are you a paid subscriber? Seems to be a good resource perhaps once you have narrowed down the view to a few key markets.

    0Reply
  • Jason CoryPro Member
    Real Estate Broker · Birmingham, AL · Member since 2018 · 264 posts · 381 votes
    8y

    You should also look into corelogic. They recently bought the software a la mode that appraiser's use. It's only a matter of time before they have enough data from actual appraisals to provide the data service. It will be a better market when square footage, bed/bath, etc., comes from actual eyes & measurements used in the valuation process instead of courthouse records or agents. 

    1Reply
  • Calvin Lipscomb
    Brooklyn, NY · Member since 2016 · 316 posts · 130 votes
    8y
    Originally posted by @Jason Howell:
    Originally posted by @Mike D'Arrigo:

    @Jason Howell just out of curiosity, why are you looking for a new market since you've already established in Indianapolis?

    Hey @Mike D'Arrigo ! (Working with Mike on my fourth property in Indy, BTW)

    So, it's not that I'm NOT considering Indianapolis... I suppose where I'm at is knowing that Indy is a super competitive market (and not wanting to step on any toes like yours!) that I might be wise to at least consider other markets before committing. Though you are absolutely right that it makes much sense to not spread myself outside of where I am already embedded... On one hand, I get it: do one area REALLY well... But on the other hand, diversity in market investment isn't a horrible idea either, right?

    I'd love your thoughts on this!

    That is one of the purposes of BiggerPockets.  To connect with others outside your particular area to learn, grow, and make money.  And, some market diversity can not be be a

    bad idea.

    1Reply
  • Jason Howell
    OP
    Petaluma, CA · Member since 2017 · 106 posts · 86 votes
    8y

    No doubt! I understand where Mike is coming from, though. All things being equal, if I've never done this all on my own, yet I'm at least somewhat established in a given market, it simplifies things somewhat to begin in an area I know better than an area I don't know. I just know that Indy is crazy competitive. So that might make it more complicated, but obviously not impossible. I just know that I want to do it right. But hey, don't we all!

    1Reply
  • Anderson Schulle
    Turnkey Service Provider · Fort Worth, TX · Member since 2013 · 135 posts · 41 votes
    8y

    Great discussion! Following...

    2Reply
  • Portia Bright
    Professional · Hackensack, NJ · Member since 2017 · 7 posts · 1 vote
    8y

    @Jason Cory awesome tips! I use spreadsheets all day and had no idea there was such an add-on. 

    1Reply
  • Deborah BurianPro Member
    Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
    8y

    @Jason Cory Thanks for the heads up on mapping. 

    1Reply
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