How to Familiarize yourself with an Out of state market

Question

Hi fellow BPers,

I'm looking to get my first deal within the next 6 months. I'm looking in the Emerson Heights area of Indianapolis (although that may be irrelevant for the post). I'm trying to be as familiar with my target city as I am with the city I live in and I'm finding it to be a little difficult as I'm on the other side of the country in NYC.

So my question to all of you: How do you become familiar with prospective markets?

I don't feel completely comfortable investing in the are without learning everything I possibly can in a market and I don't find that I'm accomplishing that by browsing Zillow.

Any help would be greatly appreciated!

Ross Denman · Answer

@Charles Mitchell I am recommending that everyone, at every experience level check out David Greene's book. While I can't say that I learned much, it is very well laid out and a great framework to start with.

One disagreement that I have with the book is that I do recommend that you visit the city. While it may not be ultimately necessary, my best clients visit the city almost every year and I have out of country investors who come out twice each year. Understanding the city and developing relationships with your team is essential.

If Indianapolis is a target, I would look at the CIREIA and IREIA calendars as well as any meetups or BP groups. Find a time where you can attend at least 2-3 groups to network with investors. Set up phone calls and luncheons. Collect business cards of professionals. Start getting recommendations from all of them.

While, I think that a realtor is an important part of your team, you do have to find the right one. 85+% or realtors know little about investing and are most familiar with the suburban and super-suburban markets. They are driven by commissions and only looking for the highest selling product. Unless you work with an investor focussed realtor, many realtors can't even point to Emerson Heights on a map.

All of my clients teams are built around the property manager. While we don't have an acquisitions department or rehab department, we help our clients build teams to acquire, rehab/renovate, lease, and manage their properties. Our success is completely tied to the success of our clients as we make money on performing units not vacant homes in war zones. Our goal is to help you find desirable properties that rent above median rates at a discount price that will cash flow while appreciating and drawing in good tenants who take care of the property while paying the overhead and paying down the debt service.

As far as technology goes, there is tons of information available to us as investors. The closer we can get to the raw data, the better we can identify patterns, but Zillow, Trulia, Redfin, Homesnap, etc. all provide data. Some is more useful than others. My main indicators are crime, schools, median income, and homeownership ratios. All of these can be found on Trulia.

There's so much more that you will learn over time, but just getting involved with someone and doing it yourself will be your best teacher.

Leslie Ungs · Answer

Charlie, I had the same question as I'm looking to invest out of state and it's been challenging to learn about my target areas.  Thanks for starting this post.

Thanks, everyone, for your helpful tips.  I've ordered David Greene's book on long distance investing too.  Looking forward to reading it for more tips.

Charles Mitchell · Answer

@Trevor Deeter I ordered the book the other day! Its on the way and should be at my place after work tonight!

David Hedges · Answer

I agree with @Courtney Jones, make a visit and drive the areas you are thinking of buying in. I always want to be sure that the area is safe for my tenants, and in the event that I had to show up, I wouldn't feel like my life might be at risk in the area where I bought the house. Also, seeing the neighborhood first hand does help in getting an idea of just what to expect in the area.

Jeb Brilliant · Answer

@Charles Mitchell I suggest going to AAA and getting a map of the city. Fly out there with a red and green highlighter. ONLY drive the streets, no freeways. Bring the map the the PM's and agents you should be meeting and ask them to mark it up for the certain areas they like/dislike. Just remember they may have different values and expectations of what they like and what you want/like. Also drive the areas you're interested in at night. Additionally once you find an agent or wholesaler to work with walk a few properties with them so you have stuff to compare to.

Lennon Lee · Answer

You have gotten some great advice here Charlie. From Zillow to broker and PMs relationship building as well as having a boots on the ground person.

All that works just fine and you definitely don't have to know the market the way you know the market you live in. That is a difficult thing to achieve and if you want to wait until you have that type of market knowledge you might end up not investing out of state.

My two cents would be the following: make it a point to schedule regular visits to your target market. Again, all the other strategies work just fine but nothing will provide market knowledge like actually visiting the market often a few days at a time. Every market has very particular dynamics that no report nor broker conversation will be able to portray.

Driving the streets, talking to locals, eating/sitting at a local cafe, and personally getting a feel for the different areas will allow you to understand those dynamics and therefore allow you have an edge over other "out-of-state" investors that just rely on those reports and long-distance phone conversations.

Ali Boone · Answer

You definitely won't get it with Zillow. I think the best thing you can do, by far, is talk to local real estate investors/folks in the area  you are looking in. They can give you first-hand insight on what all is going on, where to buy, etc. Way more than any stats or anything else can tell you. Property managers especially are good for that because they can speak to rentability and vacancy times and where they have the best luck--neighborhoods and such. Offer someone some money to talk market with you and I can't imagine that that wouldn't be the best way to get the info you're looking for!

Trevor Deeter · Answer

Hello Charlie.  I highly recommend reading Long Distance Real Estate Investing: How to buy, rehab, and manage Out-of-State Rental Properties by David Greene.  This book is a gem.

Account Closed · Answer

I would start with the type of tenant you're looking to attract. Let's say (for example) you're looking for a duplex and want hipster tenants. They would likely be attracted to an area where there are trendy restaurants, coffee bars and organic food grocers.

Now if you're looking for blue collar tenants, you might want to understand which areas are low crime and average-rated schools. Practically you can search Zilllow's map with the school and crime layers enabled. This would show you areas in that market.

Personally, I use that map search to steer clear of high crime and low-rated schools.

Jeb Brilliant · Answer

@Charles Mitchell Also if you have any questions about Indianapolis I'd be happy to chat with you about it.

How to Familiarize yourself with an Out of state market

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