Determining where to buy a multi-family

35 Replies

Hi All - I've been a BiggerPockets member for a few years now with the intent of starting my real estate venture 3 years ago. Well, it didn't happen, but we just did our first investment through a syndication group in October (YAY!!). We would like to purchase our 1st multi-family in 2020. We are open to out of state investing, but are trying to figure out how to determine / narrow down what states are options for us. Would love any guidance/food for thought on this. 

Thanks! 

Joe Fairless's book on multifamily syndication has a guide on how to select markets. It's a good read and the content is actionable. It's going to take a lot of work, trips to the market, and many deal analyses!

First define your buying criteria and then conduct detailed research on data metrics pertaining to each market.  Neal Bawa has a lot of great educational content on market research.  Highly suggest checking that out. 

Hi @Sippy Hira ! congrats on your recent syndication deal. Very nice. Are you guys LPs or GPs in the deal?

As far as finding the right markets to invest in ... there are a lot of good performing markets out there. We tend to follow the jobs, wherever the path of progress may be. It doesn't matter whether they're in primary, secondary or tertiary markets. Looking for diversity there with employment. Are new jobs coming in the area as well?

We love the Southeast with our focus primarily in the Florida markets at this time. Good luck on your journey!

@Sippy Hira you need to build on your momentum! I'd get connected with someone you trust that is already syndicating. There are a lot of moving parts that can overwhelm someone on their own. Find a mentor and go for it! Feel free to reach out if you need any help. 

@Greg Dickerson - thanks! I’m sure that’s very true but i hear about people picking up properties for way cheaper in other markets than Seattle. I do feel like it might be better to start here since we’re in WA - and I’m sure we can find a deal if we look hard enough!

I will 2nd @Taylor L. post and go get yourself The Best Ever Apartment Syndication Book. The book offers a LOT of info, but goes into great depth on how to choose your market area. And spoiler alert, the census.gov is a main goto. 

@Brock Mogensen - thanks! I think this is where I’m getting a little confused. Price points are different in different markets so we’re trying to understand what’s a good entry point. Any thoughts on that? How did you determine where to invest?

@Sippy Hira as others have said, job and population growth are key.

Check out quarterly reports from Yardi Matrix for some market insight in terms of where the rent and population growth trends are

Originally posted by @Sippy Hira :

@Taylor L. - Hi Taylor. Thanks for the words of wisdom! I see that you’re here in WA aswell. Do you invest locally or out of state?

I'm actually in VA! However I do invest out of state. I do multifamily syndications.

@Sippy Hira Honestly, since you are just starting out you could look at the MSAs closer to where you are. 

The rationale behind this to get a feel of the asset class since you are trying to do this yourself. 

Remember, you probably need to analyze about 100 deals to get 1, so be prepared to kiss a ton of frogs to find that one prince :)

@Sippy Hira Different markets will have different benefits.  For example, I invest in the Milwaukee market.  This market has lower prices thus higher cashflow.  However, it might not see as much natural appreciation as other markets.  On the other hand, you can invest in a high demand market like Atlanta.  Price points will be higher there, thus lower cashflow.  However, you will most likely see greater natural appreciation there because of high growth and demand.  Of course, there are anomalies but this is a quick description of the positives and negatives regarding markets. 

Thanks all - some really great suggestions and food for thought. I'm going to take what you've all shared and put a plan in place - ie. look at census data, determine where the job growth/opportunities are, rent population growth trends, and start doing some deal analyses through the BP calculators. I think I need to get comfortable understanding what a good deal looks like, regardless of market. 

Originally posted by @Sippy Hira :

Hi All - I've been a BiggerPockets member for a few years now with the intent of starting my real estate venture 3 years ago. Well, it didn't happen, but we just did our first investment through a syndication group in October (YAY!!). We would like to purchase our 1st multi-family in 2020. We are open to out of state investing, but are trying to figure out how to determine / narrow down what states are options for us. Would love any guidance/food for thought on this. 

Thanks! 

 Sippy,

Don't buy in Cincinnati Ohio. I got a monopoly here :)

I have 1,000 apartment units and I am still buying as rents are increasing and cap rates are still relatively high (although like rest of the country, it's getting compressed).

Having said that, here's a post I just wrote about the report in Washington Post about 8 states which will have 50% of US population by 2040. Those can be good states to choose which market and sub-market to focus on.

@Michael Ealy - thanks for sending the article. Will definitely take a look at this. I know a few folks above mentioned reviewing census.gov for this type of data aswell. What resources do you leverage to inform information on jobs and growth opps? Are you open to discussing more about investment opps in OH - would love to learn more about what you've been doing (I was wowed by 1,000 units!) and pick your brain further!