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 -