How to narrow down an area to invest in?

Question

Good evening,

Since getting into the professional world I have been saving each month not really knowing what my plan was. I now have 150k saved and have realized that I want to try to get into real estate investing to truly try and set myself up for the future and hopefully get to a point of being more financially independent.

My main question that I'm hoping for help with is how to narrow down an area to buy my first rental in? I live in california and am open to investing out of state however it just seems so daunting to figure out what state/city/neighborhood to buy in when I've never have even been to any of these places.

My journey is just starting so I realize there is plenty for me to learn and research but I'm hoping for some help. Thanks everyone.

Scott E. · Answer

There are a ton of different ways to look at responding to this question. I recommend you start by assessing your goals.

- Are you looking for heavy cash flow today? If so, you are going to want to look in C markets that offer a lower barrier to entry, higher cash flow, but potentially more problematic properties and tenants

- Are you looking for appreciation and rent growth? If so, stick to A and B markets where you will sacrifice cash flow today but likely make up for it in appreciation over a longer period of time

- Do you want to own a bunch of SFR properties, or a couple multifamily properties?

- Will you self manage these rental properties, or hire a property manager?

- Are you open to doing renovations to add value and achieve a higher return, or do you want to pursue turn-key properties that are renovated and have tenants in place?

Kevin Tow · Answer

think about what kind of investor you want to be, hands on or hands off.

can you trust people if you are doing out of state or even two hours drive away? do you want to handle things yourself or hire property managers??

Mike Kehoe · Answer

Neal Bawa's free course on Udemy is a really good place to start. Here's the link: https://www.udemy.com/course/r...

Lorenzo Prieto · Answer

I think Scott provided some great tips. Apart from figuring out what investment strategy you'd like to go with (STR, LTR, Multifamily,) I would say narrow down the places you would like to invest in and study those local markets. Once you start to ask questions and study each market it will begin to be clear which markets are better than others.

Is there steady job growth?

How many people are moving into the area on average?

What is the average income?

Are there big companies moving to the area?

Has is the current RE market? Has it seen huge growth or is it expected to be on the rise?

William Joel Idleman · Answer

Hey Adam, maybe you should try vacationing to different areas you interested in investing.  If you do it right, those "vacations" can be a tax write off any way.  I bought property where I wanted to live.  I like San Antonio, and the beach is only two hours away.  I bought in San Antonio.  My next purchase will probably be a beach house because I want to vacation there.

How to narrow down an area to invest in?

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