Evaluating a market: (First time home buyer)

5 Replies

What are the main factors YOU take into consideration to decide what market to invest in? If my area doesn't have the best market, but I find a good deal, should i still pursue?

How much more of a factor is the market, compared to the numbers on the deal? What if nobody buys/rents? 

I know I've read on here that some areas are better for renting and some are better for fix and flips.  How do you know which your area is better for?  I guess ask an agent.  Otherwise, I don't know.  Perhaps researching to see if there are a lot of fixer uppers on the market in that area.  If almost everything is move-in ready, then maybe finding a fixer upper is good.  But if you're looking at buy and hold in an area with no other renters, maybe that's not a good idea?  Keep in mind, by "area," I'm talking about neighborhoods, not whole cities.

I just recently decided to branch out from my city I normally invest in so that I could have some geographical diversity.  So, I can tell you exactly what I looked at when deciding where to go next.  Here's an article that might help as well.  

https://www.biggerpockets.com/renewsblog/cities-re...

I read that you shouldn't invest in a city that you don't want to go back to visit at least annually to check on the property.  I also wanted a city with more than one draw, like a town that's got both a military base and a college or it's known for it's tech and is also the county seat or state capital.  Personally, I wanted something at least 60k people strong as I felt like it would be easier to find renters, but I've seen plenty of threads on here where people are doing well with rentals in much smaller markets.

I went to Sperling's Best Places to Live site and looked up cities I was interested in.  I looked up the median price of a home (which knocked out some otherwise perfect cities), crime rates (just my personal preference--but lots of folks live there, so maybe it doesn't matter), size of the city, and housing stats (I wanted at least 40% of the population being renters with less than 10% vacancies).

I also went to their Wikipedia page for final decisions. Another thing I suggest is to put that city name in here as a keyword alert on your profile so you know when people area talking about it and look for any forums specifically for that city. I've learned a lot through threads and city-specific forums on here. Just last night I was reading about how my chosen city has a very strong market and some houses actually sell for above the asking price and almost none for far below. I know that just offering on MLS houses might not get me the numbers I want, so I'll have to use other ideas to find properties (like driving for dollars or calling landlords on Craigslist to see if they want to sell).

As for what happens if no one buys/rents, while I realize my opinion isn't prevalent on here, I don't buy anything I can't afford to pay for if no one wants to live there.  My risk tolerance isn't super high and I couldn't sleep at night if I was leveraged like some folks on here.  lol  I also don't buy anything where I wouldn't want to live.  (I feel like that makes it more rentable.)  But then there are LOTS of folks who make a living at just Class-C rentals, so don't take my opinion as Gospel.  lol

Good luck!

Originally posted by @Jody Schnurrenberger :

I know I've read on here that some areas are better for renting and some are better for fix and flips.  How do you know which your area is better for?  I guess ask an agent.  Otherwise, I don't know.  Perhaps researching to see if there are a lot of fixer uppers on the market in that area.  If almost everything is move-in ready, then maybe finding a fixer upper is good.  But if you're looking at buy and hold in an area with no other renters, maybe that's not a good idea?  Keep in mind, by "area," I'm talking about neighborhoods, not whole cities.

I just recently decided to branch out from my city I normally invest in so that I could have some geographical diversity.  So, I can tell you exactly what I looked at when deciding where to go next.  Here's an article that might help as well.  

https://www.biggerpockets.com/renewsblog/cities-re...

I read that you shouldn't invest in a city that you don't want to go back to visit at least annually to check on the property.  I also wanted a city with more than one draw, like a town that's got both a military base and a college or it's known for it's tech and is also the county seat or state capital.  Personally, I wanted something at least 60k people strong as I felt like it would be easier to find renters, but I've seen plenty of threads on here where people are doing well with rentals in much smaller markets.

I went to Sperling's Best Places to Live site and looked up cities I was interested in.  I looked up the median price of a home (which knocked out some otherwise perfect cities), crime rates (just my personal preference--but lots of folks live there, so maybe it doesn't matter), size of the city, and housing stats (I wanted at least 40% of the population being renters with less than 10% vacancies).

I also went to their Wikipedia page for final decisions. Another thing I suggest is to put that city name in here as a keyword alert on your profile so you know when people area talking about it and look for any forums specifically for that city. I've learned a lot through threads and city-specific forums on here. Just last night I was reading about how my chosen city has a very strong market and some houses actually sell for above the asking price and almost none for far below. I know that just offering on MLS houses might not get me the numbers I want, so I'll have to use other ideas to find properties (like driving for dollars or calling landlords on Craigslist to see if they want to sell).

As for what happens if no one buys/rents, while I realize my opinion isn't prevalent on here, I don't buy anything I can't afford to pay for if no one wants to live there.  My risk tolerance isn't super high and I couldn't sleep at night if I was leveraged like some folks on here.  lol  I also don't buy anything where I wouldn't want to live.  (I feel like that makes it more rentable.)  But then there are LOTS of folks who make a living at just Class-C rentals, so don't take my opinion as Gospel.  lol

Good luck!

 Wow! I did not expect a response like this with as much information. I greatly appreciate the insight, and resources you've given me. I will most definitely be utilizing those. Thank you! This cleared up a lot. I  had no idea I could set up key word indicators on my profile, and that sounds like a fantastic way to keep me active on the forums instead of trying to sort through the thousands of threads. 

What do you mean by leveraged like some folks on here? Are you referring to the fact that a lot of people are using loans to aquire properties? Also a great point you made was looking into neighborhoods instead of whole cities. So far I have been just looking into cities without diving in to specific neighborhoods. 

Thank you again for taking the time to help, I am very grateful. 

Do you know how to set up keyword alerts?  Hover over the white bell in the upper right corner and a dropdown box opens.  Click on Keyword Alert and it takes you where you want to go.  :-)

Yes, when I'm talking about not wanting to be leveraged like some folks on here, I'm talking about loans and such. But not just a loan/mortgage, I mean like all the money that their creditors will give them. If they discover they have $30k in equity, they'll open a HELOC to get the money to put as a down payment on another place. They use every dime they can get out of their properties to buy more.

I can't do that.  I'd never sleep.  lol  I like to have a healthy equity so if something goes bad, I've got some backup.  Plus, I like working towards being fully paid off.  And if necessary, I can refinance to a smaller payment if I have a lot of equity, but if you don't have any equity, good luck.  Some folks on here think that's a waste of equity to let it sit in your property.  I disagree. 

Neither of us is necessarily right or wrong.  In a great, strong market, they are probably more right.  If the market suddenly tanks, I may be more right.  And a lot of it comes down to risk tolerance.  I just don't have a lot.  ;-)

You first need to clarify if this is a personal home purchase or a income investment property.

A personal home is a lifestyle decision and definatly not considered a investment, it is a liability.

Personal home and income investment property are at the opposite ends of the spectrum. Combining the two is a cross between a horse and a donkey. 

Originally posted by @Thomas S. :

You first need to clarify if this is a personal home purchase or a income investment property.

A personal home is a lifestyle decision and definatly not considered a investment, it is a liability.

Personal home and income investment property are at the opposite ends of the spectrum. Combining the two is a cross between a horse and a donkey. 

 You're right, I should've clarified. It is definitely going to be an investment property. I only pointed out that it was my first time buying a home because I'm pretty sure, as a first time buyer, I am elligible for certain programs that allow me only needing 3% down. I want to utilize that as much as I can. 

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