Help Picking a Market

[Priya Gohil]

I need help picking a market. Just watched Bigger Pockets podcast/video about picking a market here as well as read through this article about markets with both appreciation and cash flow here

First lesson - keep the end in mind. So, my end goal is to replace some of my current income. Ideally, want to replace all of my income, but I'll start small. Therefore, I think I'll be placing heavier emphasis on cash flow markets. That way I can also build more capital to invest elsewhere. However, I would still like to either maintain or get some appreciation on my investment. I want to invest around 50K, looking around for properties around $250k.

Second lesson - look at market data. I'm always trying to find good data. I really like the  appreciation vs. cash flow article here, but also not sure where to look for things like where businesses are moving to and types of jobs in the area written in the same way as that article. For example, when I google, I often find those types of "Top 10 cities" without knowing where the data is coming from, what the methodology is, and what parameters are they looking at. These types of articles vary a lot. Am I being too data centric now? idk.

• Correct me if I'm wrong, I keep hearing about biggerpockets.com/insights on multiple videos and podcasts - and I thought it was a database of information you can sift through, sort, etc. similar to the excel sheet in the appreciation  vs. cash flow, but now that I've searched through the site it's just BP PRO blog articles?

Third lesson - where is your unfair advantage. Other than California, which I can't afford right now, the places I've been looking at and can afford...well, I don't know anyone in that area. So don't think I have an unfair advantage anywhere else. So I will have to go about calling property managers and real estate agents to get a better idea.

Now, everytime I watch a video, listen to podcast, read an article, look at instagram, etc. different cities attract my attention, and I can't seem to decide where to focus on. After a couple of analysis in one area, I often jump to another area completely different area then start feeling like I can't find anything.

These are cities that caught my attention since digesting all these real estate investment content.

North Carolina: Raleigh-Durham, Charlotte, High Point

• 1. For the universities and schools in the area as well the research triangle area for Apple's first East Coast campus.
• 2. High point for it's accessible entry point
  3. Also, the gains I've seen here https://www.howmoneywalks.com/... 

Tennessee: Memphis, Knoxville

• 1. In a BP video, Memphis was noted for it's RTP of 1.04%, low tax rate, and "could generate 20% can on cash return" (though where they are getting these number, idk.)
• 2. However, a bit weary about Memphis because of how much $ is moving out of that city https://www.howmoneywalks.com/... same with the cities in Pennsylvania and Minnesota

Pennsylvania: Pittsburg, Philadelphia

• In the article I mentioned before early in my post, both cities seem to have a good balance of both appreciation and cashflow.

Minnesota: Minneapolis, St. Paul

• Because it also seems like an accessible entry point.
  

How long should I stick it out to find property in a specific area, before moving on to the next? I also understand looking at a city isn't just it, but that it's about neighborhoods, and sifting through the properties, talking to the real estate agents/property managers etc. I guess, how do I decide where to commit my research to before contacting all these people and sticking it out. I feel like my tendency to look at properties include the sun belt states (Tennessee, North Carolina, etc.) Is it because of all the research I'm doing or some bias? 

[Evan Polaski]

@Priya Gohil, given your budget, I am assuming you are looking at single family or small multis (4 units or less).  As such, I would only be concerned with markets that you can get to easily/cheaply and hopefully have a direct tie to (family, frequent business trips, etc).  

Personally, I don't think any direct real estate investment is a "hands off" investment.  Even a good manager needs to be overseen, met with in person, and I like to put eyes on my rentals fairly regularly, since it is my money on the line. 

Secondly, the whole "cash flow vs appreciation" conversation is simply a lie to me. Most "cash flow" properties are high risk investments that can be underwritten to show cash flow, but actually hold high levels of tenant risk, turn over risk, Capex risk, and only show more cash flow by underwriting with the same assumptions as a high end area. In reality, "cash flow" areas to me are high turn over, higher turnover cost, and higher Capex, which all equates to the more risk for less return. I am not saying there won't be a lot of people, myself included, who have made very good money in these areas, but at the end of the day, 10 years ago, the "good cash flow" I was getting, was really just unaccounted for Capex or deferred maintenance. Where I made money was through renovations and ultimately appreciation, by buying in neighborhoods adjacent to where I lived, which I saw as gentrifying. Over the last decade, that gamble paid off and significantly helped grow my net worth and investable cash. I also had some that for 5 years, I could have just as easily put money in the S&P and saw a much higher return. Those were the ones that I would classify as "cash flow" properties, a bit more, since the markets were a little weaker than those directly adjacent to my neighborhood.