Criteria considered when looking for a new rental market?

Question

Hi guys! My wife and I are just getting started with real estate and are curious what to look for when it comes to investing in a new market. We are going to be doing long distance BRRR investing, as we currently live in Los Angeles and we want to stretch our dollars further. The plan right now is to nail down a specific area we’d like to invest in and then find our “Core Four” there to get the ball rolling. Thanks in advance!

Richard Bonisa · Answer

I would look up Mike D'Arrigo.  He has a great sense of what is happening in the midwest and Indianapolis as well.  He has a lot of connections and a great reputation!

Indianapolis can be tough.  I've seen a lot of bad comps, heard of rehabs that really killed deals, and I've come to know some players that I would never trust with money.

I'd steer clear of "companies" and focus on individuals.  If you make enough connections on BiggerPockets, I think you'll find people who will be willing to share some of their go-to people, as well as some to stay away from.

Check out some of the stuff James Wise has put out (if you've not seen it).  He's done a great job uncovering some of the pitfalls.

I've nothing to sell, but you might check out one of my blogs regarding best practices.  https://www.biggerpockets.com/member-blogs/12615/88171-due-diligence-is-the-key-what-can-you-doLet me know if you need anything, be happy to help!

Alora Glaze · Answer

Exciting stuff! I'm from San Diego originally and moved out of state to make my real estate goals happen - so, I understand about getting your dollars worth outside of California!

Have you taken a look at the mid-west markets?
We assist out-of-state investors primarily within central Indianapolis - our team consists of realty, project management, scopes with contractor estimates and a team of contractors for rehabs/renovations and new builds. We have a system in place to ensure financial security for our clients - just make sure to do you research of the market then find your boots-on-the-ground team to protect your investment, physically and financially.

Happy to help if you have further questions - best of luck to you!!

Kiera Underwood · Answer

@Andrew Shelton I'd love to follow your journey! I think it's ambitious to do a first deal out of state as a BRRR. There's a lot that could go wrong and a lot of bad calls your provider could make that make you a bit vulnerable. That said it takes big risk to make big dollars sometimes! I'd feel more comfortable developing a relationsihp with a team via a buy and hold in order to gain trust through a process that is less risky, but I'm excited to see where this takes you!

Mike D'Arrigo · Answer

@Andrew Shelton here are the things that I feel are most important in selecting a market.

1. Population growth2. Job growth3. Modern/diverse economy4. Favorable landlord/tenancy laws5. Low property taxes and insurance rates

Chris Sparrow · Answer

Hi Andrew,

I'm in Los Angeles and planning to do the same!  This year will be our education year, but my husband and I would really like to make some moves by the end of 2020 (or sooner if opportunity presents itself).  Looking forward to see replies from seasoned real estate investors on your question.

Good luck in 2020!

Art Perkitny · Answer

@Andrew Shelton

Data sources such as the American Community Survey, also known as the annual Census, can help you judge a location by considering key market indicators. Some of the metrics that I find valuable to understand are:

- Population Total

- Population Age

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

- Number of Building Permits Issued

- Foreclosure Rate

- School Ratings

- Crime Statistics

When you consider all the variables listed above you will be better able to judge a locations tenant quality.

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading. You wouldn't want to buy into an area that is declining rapidly and where the tenant quality is decreasing along with the area.

Let me know if you have any other questions, hope this helps!

Criteria considered when looking for a new rental market?

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