My partner and I recently took steps to expand into a new real estate market. Here are the practical steps we took to make sure the process went smoothly.
4 Practical Steps for Expanding into a New Real Estate Market
Choose a real estate market to invest in.
Over the past year, my partner and I have been needing to pick another property market to scale operations and diversify. We narrowed our search down to three markets and went to each market to drive the neighborhoods we wanted to invest in. I always recommend you take a trip to wherever you plan to invest — unless you have someone you trust with boots on the ground.
Perform due diligence.
As we began evaluating and going to these markets, we spent time studying the key economic factors for those cities on our short list. Great questions to ask in this process include:
- Are there large corporations headquartered in the market?
- Is it a buyer’s or seller’s market?
- Are people moving to the market or leaving?
- How are the jobs?
- What does the crime look like?
The media offers a lot of hype, so make sure to look at the best data, to speak with local experts, and to test the sentiment on the street. You’ll learn a lot about how people really feel just by overhearing casual conversations in the gym, listening to chatter at the coffee shop, and watching activity at real estate offices.
Assemble a team.
When visiting these markets, we met with lots — and I mean lots — of local specialists. That included property managers, other investors, contractors, and so on. You’ll also want to line up attorneys, title closing agents, real estate agents, inspectors, insurance agents, and more. It will be difficult trying to do everything on your own. It’s best to assemble a team to allow for you to scale and to have that team in place in advance. BiggerPockets was a tremendous help in finding the right people to meet with in these markets.
Finding the right contractors is always one of the biggest hurdles. So I took the approach of showing up to Lowe’s and Home Depot to scout out the talent. If the contractor has a brand new 2017 pickup, then that is probably not our guy. We’re looking for a contractor who isn’t just interested in making a chunk of profit on a single project, but who will make their living across the high volume of projects we can bring to the table. Finding the right crew is still an ongoing process, but there’s some great candidates in our pipeline.
After finally narrowing it down to one market, we went all-in with learning the neighborhoods. We looked at what areas have the most upside, then started taking action. We’ve got a centralized office, and we are now in the hiring process of bringing on key team members who will add value to the company as we expand. We ended up getting a great real estate agent on board to start making offers on properties. We got some of our offers to stick that were in our targeted neighborhoods, and we are now closing on several deals.
If you were wondering, we decided to go into Dayton, Ohio. The market has increasing job growth and unemployment under the national average, and it offers great cash flow on affordable properties and a good local team.
Where will you be investing next? What are steps you take when expanding operations to another market?
Let me know with a comment!