How to Determine a good market to buy rentals?

9 Replies

Hi BP Gang, 

I am looking to purchase my second BRRR and I am looking around at different markets.

I am trying to obtain some sort of checklist or list of demographics/indicators that would help me determine the market I would like to invest in!

Any input would be much appreciated!!

Lewis

Howdy Lewis, 
I am a young professional in the College Station area but I hope my two cents helps. I believe when investing in real estate one of the main indicators you want to gauge is the economy. The underlying economic resilience of the area is derived from demographic (population) growth and median income. If any market has strong population growth and growing median income this forms a deadly duo. Not only will there ultimately be a housing shortage but incomes will be rising to elevate rents and appreciation. 

Cheers!

Thank you Daniel, this is good to know and I am going to add them both to the checklist.  I will post the checklist once I hear some other things as well.  Hopefully it will be the perfect checklist to determine which market to choose!

@Ishmael Johnson You need to just run all of the expenses. Don't forget to include a vacancy rate (I like to use between 3-5%) and a maintenance reserve to cover things like paint, appliance repairs, etc.

If the property pays for all of your expenses to hold and doesn't run you negative, it's never a bad property to look at analyzing further and how other areas compare.

Purchasing properties where it is negative cashflow forces you to hope for appreciation in order to make any decent returns.

Hi @Lewis Fisk , there are lots of great resources with information on analyzing markets on the bigger pockets network, so definitely poke around!  Here are some links for starters:

https://www.biggerpockets.com/...

https://www.biggerpockets.com/...

(or go to the BP you tube channel and search How to Analyze Real Estate Markets)

Right now? Probably just as easy to get a monkey to throw a dart at a US map and invest there. The housing market is literally on fire everywhere at the same time.

Beyond that, no one can answer your question except you. What kind of tenants do you want? How comfortable are you with long-distance investing? Do you want to self-manage? What do you like and dislike about your current property's market, tenants, neighborhood, etc? How much money do you have? What kind of return do you want? How much work do you want to do?

Any checklist someone gives you is going to be *their* checklist. You need to find your own checklist and that's going to require sitting down and doing some hard thinking and observation about those things.