Congrats you accomplished the first step on your road to wealth creation.
1. Pick a strategy and type of property----Check
Now continue on the journey
2. Pick a market
I found this to be one of the harder things to do. Start with where you grew up, where you have family and friends, where you once worked. Where the wife grew up etc. This will lead to "inside information" boots on the ground insight. What blocks or areas to stay away, natural barriers that block the path of progress (large roadways, rivers, tracks etc.) Once you have the area run the numbers on that market. Bestplaces.org is a good starting point.
A. Look for 2% job growth
B. Household growth year over year
C. Diverse employment. Diverse employment is by both sector and Job so in Detroit you had a bunch of different jobs but they were all tied to one sector. Same thing in Houston back in the eighties.
D. Business minded (friendly) Government. The local government policies will either attract or deter business. Business brings population, population brings you clients. For every 1 white collar job created there are 3 blue collar jobs created.
3. Reach out to other investors in that market and start networking ---Nothing like first hand knowledge AND future help when you run into something.
4. Start building your team-----Contact brokers and property managers start building re pore with them.
5. Landlord friendly Jurisdiction Some states evictions take 30-45 days others take years.
If you are really set on Value Add Multifamily I would suggest searching for and reading everything by a fellow BPer and investor Gino Barbara he helped me greatly when I was just starting and has continued to add value to my endeavor each and every day.
Anything else I can help with please just reach out.
@Saj Johnson I'm not to familiar with PA and Ohio. If I were thinking of going into those markets I would be looking for MSA's and / or counties with a min. population of 250K, household income of 45 and per capita of 20 to 25K. Look to see where the people are moving to, follow migration reports. So for instance I would look up Pittsburgh's numbers and see how attractive they are. Then cities like Cleveland, Cincinnati, Columbus, Youngstown etc. Compare the numbers and see which is strongest. Then search right here for those cities and see what people are saying. Reach out to a few and get a feel for that market.
@Saj Johnson Unfortunately, most good PMs don't like to take on smaller properties as it becomes very hard to manage them as it's not worth their time. You might find a part-time property manager or might do it yourself (even remotely). The PMs you will find will cost you an arm and a leg.
Hi Neil. Is Gino Barbara in Houston? Looking to get started there.
@Adam Kadane He is not. His portfolio is in the Knoxville market.
I found my property manager on Google. I googled "tampa multifamily property managers" and called about 20 of them. I narrowed it down to a handful, took them out to lunch and ultimately selected the best candidate.
You want to make sure that they specialize in the type of property you plan on purchasing. So, for your case, an SFR property manager isn't ideal (although, if you speak to one, they will probably tell you that they can handle larger properties). Nor is a larger management company that focuses on 100+ unit apartments.
You want to also make sure they have experience repositioning properties. If you do not have your own construction team to perform the renovations, you probably want a management company who has their own team or bids out projects to a handful of GCs.
Cap rates fluctuate based on market and product. You would need to first have a target market. My market, Tampa, a value add with a PM cap rates are in the 4-6 range
@Armando Payano exactly.
Although, low cap rates have a large negative effect on turnkey than value-add. In fact, lower cap rates can be a benefit for value-add. Since the value of the property increases as the NOI increases and the cap rate decreases, a property with $100,000 increase to the NOI in a 9% cap market will have a smaller value increase than a $100,000 NOI increase in a 6% cap market. That's the power of value-add over turnkey. If you can find the right deal, you can massive increase the property value!
@Saj Johnson I'm a long-time Houston-area contractor looking to move into MF and property management. PM me and maybe we can help each other out.