Tips for selecting a market to invest in
Denver, CO · Member since 2021 · 4 posts · 2 votes
Hello,
I'm a newbie investor from Denver who has spent that past 6 months listening to endless podcasts and hours reading RE investing books. However, I'm having a hard time selecting a good market to invest in. Huntsville, Alabama was my number one choice since I'm familiar with the city, but it looks like the deals are pretty dried up. I'm looking for MFRs and it might just be beginner nerves keeping me from looking outside of a market I'm familiar with and keeping me from pulling the trigger on anything. Anyways, any tips or suggestions would be greatly appreciated!
Thanks!
Couldn't tell from your message whether you already own your primary residence or not. I always think that first "investment" should be the place where you live. Like others have said, house hacking in Denver is a great way to live for free. Airbnb the hell out of your basement or rent by the room. Whatever it is, establish your base and then expand.
As to where to go next? Huntsville seems interesting. Lots of people moving to the south. A highly educated workforce there. Sounds good to me. I just don't know that market that well.
In general, investors in Colorado look out of state because they want cash flow because they want to quit their jobs in 10 years or something like that. I personally like the appreciation of markets like Denver and Colorado Springs and am happy to have my butt covered and watch the values increase for the next 20 years. But I love my job and don't want to retire at 40, so cash flow doesn't mean as much to me right now.
Whatever you choose, I wish you luck! Cheers.
@Jason De Jongh Have you considered investing here in Denver?
I work with local investors getting into real estate and those moving to Colorado from out of state, and this market is only going to continue to grow. There's a lot of beauty of investing where you live: you get to know neighborhoods, are able to personally see and inspect properties, and it's easier to build a team you trust.
Another perk to investing where you live? House hacking. Buy a property where you can live in one space and rent out the other. Could be a multifamily, like a duplex,, or a single family home with a separate entrance to a basement or an ADU, where you could potentially airbnb. You can take advantage of the low down payment and interest rate required for an owner occupied loan. It's hard to beat the cash on cash return.
@Jason De Jongh I agree with @Chris Freeburg, you can always start off house hacking, even if you choose to primarily invest elsewhere. It's a stellar way to kick things off. Gotta live somewhere, right?
As far as choosing other markets, there are so many things you can consider, but you've got to start off with your goals, and why do you have those goals. For example, you mention MFR, so I am guessing your goal is cashflow. Why?
Oh, and I'm a space EE too ;)
Couldn't tell from your message whether you already own your primary residence or not. I always think that first "investment" should be the place where you live. Like others have said, house hacking in Denver is a great way to live for free. Airbnb the hell out of your basement or rent by the room. Whatever it is, establish your base and then expand.
As to where to go next? Huntsville seems interesting. Lots of people moving to the south. A highly educated workforce there. Sounds good to me. I just don't know that market that well.
In general, investors in Colorado look out of state because they want cash flow because they want to quit their jobs in 10 years or something like that. I personally like the appreciation of markets like Denver and Colorado Springs and am happy to have my butt covered and watch the values increase for the next 20 years. But I love my job and don't want to retire at 40, so cash flow doesn't mean as much to me right now.
Whatever you choose, I wish you luck! Cheers.
Keep looking in Huntsville
@James Carlson, @Steve W. and @Chris Freeburg totally agree on the house hacking idea! My wife and I are very interested in the house hacking idea. We got a bit intimated with the high prices of the house hacking market here in Denver, but maybe we aren’t being as creative as we should. We currently rent a cheap apartment and are just stockpiling our earnings (investing in crypto, should have in DOGE lol jk) to save up for a purchase so that's not a bad idea to get into house hacking prior to investing in other properties. I’m not sure I’ll be able to sell her on rent by the room since we're planning on have our first kiddo soon, but I do like your suggestions on the rent out a basement or purchase a duplex and rent out half. The tricky part is locating a decent deal in today’s wild market! Any tips on tracking down any good house hacking deals in a hot market would be GREATLY appreciated!
Cash flow would be nice but just building equity in a market like Denver that’s appreciating so rapidly is what’s most important to us! I love my job so I don't need to cash flow enough to retire. @Steve W. That's awesome you're a EE space nerd too! Us EEs gotta stick together!
Appreciate all the suggestions!
Welcome, @Jason De Jongh!
I will quickly beat a dead horse and agree with what Chris and James both said above. House hacking in your backyard is one of the best ways to begin your investment journey. It is a low-risk, high reward way to invest, and will help get over those newbie jitters. Cash flow is completely possible with the right strategies and creativeness here in Denver, but if you want to live comfortably you can do that at most likely still lower your current living cost to less than what you pay for your cheap apartment. There is a flavor for everyone when it comes to house hacking and there is no one size fits all solution! :)
Finding a deal is going to come down to your goals and criteria. I have had numerous clients that weren't seeing any "deals" until they solidified a strict goal limit for their property. Whether that be completely getting rid of your living expense, or minimizing it to less than $500 a month (or less than what you are paying now) it doesn't matter, but you need to set those standards. Once you have strong criteria for what a "deal" is to you, you'll begin to see a lot more of them pop up, and you will have a quick and easy way to analyze any properties that come through! It can be tough to determine these criteria and that's why it's important to have an agent on your side that can listen, and help you solidify some realistic criteria with you!
As for picking a market out of state, I will tell you from personal experience that hunting for the perfect market is going to hurt you in the long run. Once you have a few narrowed down, start reaching out and building your team in these markets, whichever one you can find a worthwhile team in is the one I would go to. It goes back to establishing those criteria as well, if your goal is cash flow, then how much cash flow per door? What price range? What kind of properties?
I spent 3 months exploring markets around the US, each time I thought I found "the one" I found another one that looked a bit nicer! So I finally said to myself "that's enough" and I just settled on one that I had already found a Realtor in. Less than a month later I had a deal that is now cash flowing about $300 a month. In the end, it is more important to jump in than it is to find the "perfect" market, you can always adjust later.