Serious Question? How do you narrow down a target market?!

[Amanda Moskowitz]

So I am looking to purchase my first deal.  I am fortunate enough from years in corporate that I have capital ($150K) to make the leap.  I am an architect by trade working in a global commercial real estate managing clients capital improvement projects (projects range from several million to as large as $300M) throughout my career.  I have immersed myself in reading, podcasts, etc for investing and have been exposed to real estate most of my career so analyzing a deal doesnt scare me (even though I know there is a tremendous amount to learn in this specific arena).

Any advice on how to narrow down on the markets?  MY head is spinning and jumping all over the map.  I reside in S. Florida in Boca Raton.  I keep bouncing from my area or West Palm Beach, Jacksonville, Tampa, Palm Coast......you name it.  And even out of state.  How did you get started and know the right area to start?  

Ideal goal (maybe not realistic) is to aim for $5K cashflow per month in 5 years.  Thanks for listening to my rant :)

[Evan Polaski]

@Amanda Moskowitz, here's another vote for the market you know.  For most people this is where they live.

A couple things to think about:
Assuming you are buying single family or small multifamily: your margin for error is very little. (If you own one house making $500/mo, which is probably more than you will actually get, that is $6k/yr. One bad tenant, one unexpected HVAC or roof, will quickly eat all of that profit and then some). So, trusting the PM and RE agent, and the like, at least at first adds a lot of risk. And if you are looking for a BRRR type property, expand that risk even more.

Second, again because you don't have much room for margin starting out, travel to visit that property can quickly eat a good amount of your cash flow.  Especially when you only have one, or maybe two, in a market, you will have your fixed costs: hotel, meals out, rental car and flights.  Two trips per year, even for only 1 night, can run you a couple grand or more out of that already limited cash flow.  This does start to balance out when you add more and more properties in a market, but that is money you could be building for your next one.

Third, you have no choice but to pay a PM when out of market.  10% monthly PM fees, marked up maintenance costs, typically more frequent turn over which equates to more frequent turn over repairs and leasing commissions.  It all adds up to very real money.  And, while you may choose to use a PM even locally, at least locally, you can step in temporarily if one is not working out, where out of market you need to keep a bad one on, while you interview and try to find a replacement.  Additionally, if you go to a smaller market, where you might be able to find more cash flow, you will also be limited in how many PMs you have to choose from.