Market research brain stew
Hey all,
I'm placing this in the "Investor Psychology" section because I'm just sort of pontificating in this post, stream of consciousness style, ya dig? I'm not looking for any specific type of response but I welcome all replies.
I'm in the process of analyzing markets to dial in on my first multifamily property. I'm doing the value add buy and hold strategy, ye olde multifamily BRRRR. C- to low B-class value add plays.
I currently live in Chicago, which has a large number of properties available, but has a lot of negatives: astronomical taxes, population loss, jobs loss, corrupt government, crumbling infrastructure. So, based on the advice of a mentor, I expanded my market search.
Since it’ll be my first property, I want a high level of control to oversee the rehab, repositioning and running of the place even if I decide to employ a property management service, which I’ll decide based on the asset. Accordingly, I looked at cities within a few hours drive and find much the same: stagnant population metrics, unfavourable job metrics, unstable economies.
Now, I’m planning on moving out of Chicago within the next year or two and would like to quit my 9-5 around the same time. I love Chicago, I’m grateful to Chicago, but I’m fixin’ to giddyup on down the road. I haven’t committed to a location yet, but it’ll be somewhere warm with a good market.
I understand that there are deals to be had in any market. And I understand that any individual deal is less important than the market it is in. And I also understand that while the first deal is the hardest to get and that one should never take a ****** deal, once the first deal is done and the first asset elevated and stabilized it ultimately becomes the least important property in a portfolio: the real long term value of that first property is that it gets you on the field and in the game.
For the past week I’ve been chopping up market data and podcasts and dumping them into my brain to slow cook until I had something digestible.
The stew in my skull is roughly 1/3 market research (Chicago, Milwaukee, Madison, Detroit, Grand Rapids, south bend, Indianapolis, St. Louis, Des Moines, and Albuquerque on factors like job growth, population, population growth, unemployment, vacancy rate, price per door, market cap rates, major employers, major industries, average income, population demographics, &c.), 1/3 podcast interviews and video lessons, and 1/3 existential ruminations.
Since none of the larger nearby metros, nor the area in general, is very attractive, long distance investing seems more appealing. However, another major factor is that I don't have much capital of my own to begin with; I'm the one doing the legwork, and I'll either be partnering for capital or syndicating. Since this will be my first property, it makes more sense to me to have close proximity to provide quality control over the asset. The relative pros and cons of investing in Chicago balance out when compared to accessible alternative cities. Again, I understand that this first deal is really more of a gateway than an independent vehicle to financial freedom in and of itself.
I find myself wondering things like: should I just keep researching markets until I find a place with good metrics that I might like to live in a year or two and begin investing there, long distance? Should I trust the sheer size of Chicago to counterbalance the negative growth? And how much will a Jedi of an accountant be able to negate the burdensome taxes here?
I’ve been incorporating the advice I’ve heard from the podcasts to my brain stew: don’t rush, but make a move; don’t make emotional (read: fearful) decisions; the perfect [deal] is the enemy of the good [deal]. I’m playing the long game and this has been a significant mental hurdle for me: deciding whether it’s better to plant a flag here and now or to sacrifice control for more attractive market metrics.
As it stands I won't be financially able to relocate for at least another 12 months, so if I want to get in the game “now” and not “at least 12 months from now,” Chicago seems to be the place to make my first move.
Thank you for consuming my brain stew. Perhaps some of you’ve made something similar before, I’d love to know what you put in it and how it turned out. Or, if I've got it wrong, please help me understand where or how I went astray.