When choosing a metropolitan market to invest in what criteria should you use? And how should you prioritize that criteria?
Here is our criteria, prioritized in order to meet our investing objectives for long term properties.
- Population Growth & Minimum of 100,000 in population. We want to see a market getting larger over time, and that there is a big enough population to provide renters, and multiple property managers in case you have to change them.
- Economic Strength. This is employment growth and relatively low unemployment. (Course all bets are off with Covid-19.)
- Demographic Factors. Is the tenant base distressed by crime, poverty, high rents relative to income, lack of home ownership, bad schools, etc?
- Newer Properties. With older properties come upgrades and deferred maintenance, so we prefer newer if possible. Also they generally have more livable floor plans.
- Higher Cash Flow Returns. When comparing compatible markets want to see the rental income – expenses (utilities, taxes, insurance, etc.) to be on the higher side, and provide reasonable long term cash flow.
- Stable Market Cycle. Desire the market to be more stable, not heaving itself up and down (unless you are the bottom of the cycle).
- Climate & Weather Conditions. Take into account how weather will affect the market, including insurance for extreme weather (earthquakes, tornados, hurricanes, freezing temperatures, hail, fire, etc.).
- Government Oversight. How much intrusion is there from local and state governments? CA now has rent control state wide. How long does it take to evict non-paying tenants?
