Hottest Real Estate Markets - Posted by Brian

Posted by Earl on January 25, 2002 at 15:23:56:

Well, ok, I’ll try but this won’t be easy.

It isn’t just a question of identifying specific locations because a market I tell you is good now could go south a year or so from now. So it’s not so much a question of finding specific markets, as finding the ingredients that make up the good markets.

One good book in this area is ‘Buy and Hold’ by David Schumaker. I have mixed feelings about his book - basically I believe the author got lucky and called it a strategy - but he does try to identify in the book the types of things you look for in choosing an area and a market. Another good book that took a similar approach was ‘The New no-nonsense Landlord’ by Richard Jorgensen.

I’ve bought and been a landlord in central California, Pennsylvania, Maine, northern Michigan, and Florida. I’ve had properties that have doubled in value in 3 years, and properties that have had minimal appreciation in 10 years. I’ve had vacancy rates of well under 3% per year (in California) and vacancy rates of well over 20% (in Michigan - and no more, since I sold them.)
Hindsight being what it is for example, I had concentrated in California during the last 5 years, I would’ve been a star on the Carleton Sheets Infomercial. If I had concentrated in northern Michigan, I would be broke and I’d be sueing them right now. As it is I’m doing well enough and somewhere in between.

To talk about the specific ingredients of good markets would take too long - look at one of those books - and some markets are good for some types of investing - such as rehabbing, lease-option, buy and hold, etc. and also the investor’s own aptitudes, financial situation, and personality are factors too. You can help by talking to other local investors, such as a club, to see what has worked for them in your specific market.

At the risk of being too simplistic, some general things you’re looking for are good rate of population growth, a diversified economic base,properties in a reasonable price range for you,and all these things within a reasonable drive for you so that regardless of how you manage them, you can be physically close on a daily basis. If you buy in a smaller town, you want these patternns, such as growth, to be heading toward your town, instead of away from it. I made a mistake for example, of misunderstanding the growth patterns in a town - I bought in a small town an hour away from one of the fastest growing cities in the country, then after that concluded that simply due to geography, the major city was growing away from my small town, not toward it.

Also, try to find some specifics in your specific area that might be an asset for you - for example, a local bank or lender who can work well with you and can provide you with good terms, or maybe a very stable employer, such as good industry, big military base,or college(s). Network closely with specific people from these entities, such as a good bank loan officer, or the housing office at a military base. I once read of an individual for example, who made a million dollars while appearing to violate all of my above ideas - he did it in a small, rural town by finding the most flexible Mom 'n Pop bank around - and got great financing. So every area, even ones that appear to be the worst, may have some untapped resource somewhere within it.

This is grossly simple - I only hope it can help someone -
Earl

Hottest Real Estate Markets - Posted by Brian

Posted by Brian on January 24, 2002 at 18:44:36:

Hi all,

Here’s a question that I hope will stir up a insightful and useful discussion for us all:

Which markets in the US are the hottest for real estate investing?

Feel free to qualify your answer by the type of real estate (multi-family, single-family, mobile, commercial) and/or type of transaction (flipping, lease option, notes) for which you think your recommended location would be good, as well. I believe a discussion at the county/metro level would be most useful, but feel free to make your answers as specific or general as you like.

Brian

Re: Hottest Real Estate Markets - Posted by Tom B (GA)

Posted by Tom B (GA) on January 29, 2002 at 06:51:13:

For the hotest 180 markets for appreciation, check this link http://www.homestore.com/Finance/HousePriceIndex/msa_ranking329.asp

This report is based on the House Price index (HPI).

Tom

Look for Hot Deals, not Hot Markets - Posted by Paul S

Posted by Paul S on January 26, 2002 at 09:51:22:

“Hot” markets by definition have a LOT of competition. There comes a point for the small investor where it’s wise to actually avoid a “Hot” market. On the other hand, in every market there are gems. Residential and commercial gems that just need the right buyer and manager. None of us here (I definitely speak for myself) are big enough to worry about going into a given “market”. For me, I’m looking for the right deal. The basics work in every market. Flexible seller, requires low, or no down payment, below market price and/or significant positive cash flow once the deal is done. These deals are in all kinds of markets. Go deal by deal. Don’t go looking for the “Hottest market” that is my sincere suggestion.

Re: Hottest Real Estate Markets - Posted by John (Las Vegas)

Posted by John (Las Vegas) on January 25, 2002 at 23:53:29:

This is very interested question. What I feel is that the best place to invest are growing areas. Places where a lot of new people are moving, want to leave, etc… All the most growing cities are the best markets in my opinion.

Best,

Definitively do title research!

Best,

John

(702) 296-0212
john@millionsaver.com

Las Vegas investor deals, fixer-uppers, OWC, lease/option…
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Re: Hottest Real Estate Markets - Posted by Earl

Posted by Earl on January 24, 2002 at 19:46:34:

This is a great question and it deserves a lot of thought. I believe in REI in general there isn’t enough discussion of the pros and cons of various markets and communities.

For example I believe a shortcoming of the Carleton Sheets course as I recall is that it had virtually no discussion I believe of how to judge various markets, communities, etc. The course did a great job of discussing specific neighborhoods to look for, and the process for doing a cash flow analysis was great, but to me it seemed to ignore that merely calculating a good cash flow on paper won’t help you if a few years later industry in your area goes south, or the community tubes for any other reason. Some of it is simple luck, some of it is trial-and-error, but it still deserves more discussion and more careful thought by beginning investors.

I think many investers simply invest close to home, without thinking through that carefully. Thus investers in some towns and regions try the Carleton Sheets course and think gee, this is easy! Why doesn’t everyone do this? But others try it in their neck of the woods and they just can’t get it to work.
I’ve invested in rentals in 5 different communities in 5 different states - and extremely diverse markets - and believe me I’ve seen the extremes in appreciation, vacancies, and things like that. People need to give more attention to the quality of their local market.
Greater use of the Internet will also impact this as investers branch farther from their home town - in the future they can be a little more selective about which towns, communities they might choose to invest in.
Just my $0.02.
Earl

Re: Look for Hot Deals, not Hot Markets - Posted by Earl

Posted by Earl on January 26, 2002 at 12:20:54:

Beware though that the ‘hot deal’ in a market that isn’t good might easily go south on you in a year or two. Believe me, I’'ve been there. Even if you’re a short term flipper or rehabber it may be a ‘hot deal’ because the seller had problems renting or selling it.

Just because the cash flow looks great now doesn’t mean the demand will still be there down the road. A great cash flow analysis that becomes a 20% vacancy rate is a lousy property and a lousy way to do business.

I agree though that most of us can’t just ‘pick and choose’ a market. The benefits of staying home near where we live for most of us overcome a lot of other drawbacks, and so we may have to ‘accept’ some limitations of a given market if we are do any of this type of investing to fulfill any of our life’s dreams.
Earl

Re: Hottest Real Estate Markets - Posted by Brian

Posted by Brian on January 24, 2002 at 20:29:01:

Thanks for your comments, Earl. Would you care to share with us in in what markets you have invested and what your experience has been like in those markets? I think from your experience you can provide some insights into those markets.

Brian

Re: Look for Hot Deals, not Hot Markets - Posted by Paul S

Posted by Paul S on January 26, 2002 at 12:55:06:

Earl,
I think we are pretty much saying the same thing. To sum up what I said- We don’t need to go trapsing about the country looking for “hot markets”- in fact most of us simply cannot do this, is a long way away from saying that we can afford to ignore obvious market warning signs like every seller is somehow flexible, houses appear to be selling below market and/or are on the market a long time, crime rates are rising, and any number of other warning signs. But to spend time in this forum discussing which geographic regions are “hot” just doesn’t seem a down to earth approach for most of us. “Hot” market talk is for developers and other speculators. I don’t see a whole lot of relationship to what they do to the small, creative investor. Best Wishes,

Paul