Investor · Nashville, TN · Member since 2013 · 47 posts · 26 votes
I'm hopefully a soon to be new investor, I'm very interested in small multifamily homes, and I've read through the "ultimate beginner's guide" as well as multiple books on the topic of investing. I found out about biggerpockets.com simply through internet research. What a great community! hopefully, I'll be very active over the coming months as I begin to learn and grow as an investor.
So i am curious about how more seasoned investors analyze a certain location. How do you decide, on the grand scale, to invest in an area? are there any common characteristics you seek?
I know some areas can have a certain "reputation" associated with them. Do you consider this in your analysis of a property or do you stick to quantifiable data?
Essentially, I'd love to hear what other investors use as location criteria, from as broad as "I choose Kansas City Metro over Overland Park" to as specific as "I choose 30th street over Troost". how do you make these choices?
Hi Ryan -- welcome! I am not sure that I qualify as a "seasoned investor" but I have bought and sold a number of single family homes in my local market over the past 15 years. I think an important aspect in looking for a particular area is how it matches up to your own goals. Every area can be good for SOMEONE, just maybe not for you. Do you plan to buy and hold or flip? Do you plan to buy distressed properties and then take them to a top-of-the-market rehab? Do you plan to buy low cost properties for all cash and get a good monthly return? Any of those might send you looking in a different direction with different criteria. It sounds like you may be considering a longer term investment with renters in place and also looking for appreciation. If that's the case then you will do better in areas where tenants are more stable and won't be moving out every year or so. The cost for turning over a property every couple of years really adds up. So good school system, good shopping, etc all contribute to keeping your tenants longer. Not the full picture for sure but a few things to consider.
I like to think in contrarian terms, and to go where others usually ignore. Areas that are 'known' as investor Meccas have some negatives- they tend to boom and bust. One day everyone is there bidding things up, the next they all bail, prices drop and all of a sudden half the homes on the block are either for sale or for rent. I prefer areas that are more prime and more in general demand. Impacted and with no place to build new homes. Of course these areas tend to be expensive and hard to cash flow, but they are a lot more stable. Food for thought.