Where to Start
So people ask me all the time, you know, what are you looking for to make a decision on where you want to buy, what you want to buy? So it basically comes down to four key questions for me. I’m looking for a sub-market or an area to buy where young people want to move, right? Or just you have a net migration of people in period. I tend to like when it’s younger people, I don’t want a place where people are, they can’t wait to run away from that town as soon as they graduate high school. I want something like a tech industry, a thriving startup industry, right? That’s going to draw younger people. Usually the tech industry, a startup culture, you’re going to draw higher-paid people hire higher educated people. So I like that as well. But again, it’s basically looking for a place where people are moving to.
Where Do People Want to Be (00:45)
People want to be, I live in Austin, Austin, everyone’s, everybody wants to be in Austin, so it’s a good place for us. Secondly, I want to look at the household median income. Let’s say you want your rents, you expect your rents to go to a thousand dollars per unit shortly after you take over because you’re going to do some unit upgrades or what have you. So you think your target rent is going to be a thousand dollars. Remember, we want three times the rent and income to be able to support that thousand dollar rent. So what we’re going to do is say a thousand dollar rent times 12 months, which is $12,000. So if you triple that, I want that minimum, that median household income to be $36,000 to comfortably afford the thousand dollar rent. I’m going to try to get to. So that’s another piece that I’m looking at.
Location, Location, Location (1:31)
Also, kind of an obvious thing, but not everybody really thinks about it. They fall in love with a price on a property, but do not buy in a place that’s crazy high in crime, right? So just don’t do it. Your lenders probably not going to like it if they’ll lend to you at all. Um, and it’s just gonna make your job a lot harder. Whether you self-manage or you hire a management company, somebody is going to have to manage that asset. It is going to be very tough at a very crime-ridden area. So I wouldn’t do that either. Probably the last thing that, and this is a big deal for me, and it kind of came to light when we had a government shut down. So don’t invest in an area that’s too reliant on an industry or an employer. Right? So we had a government shutdown and when that happened, if it would have gone on long enough, people would have stopped receiving paychecks from the government.
Right? So how do those people pay rent if they don’t get a paycheck? That’s a problem, right? I don’t want to get into a situation where that happens to me and as the landlord slash owner, I might have to start evicting some people and that, that hurts your heart, that that’s really painful, but you can’t lose the property either. You can not go belly up because they can’t pay their rent. So cities that were really, really reliant on government jobs might not have been the best thing. Or if you’re in a town you’re trying to buy in a town, let’s say a hundred thousand people in 25 to 30,000 of those people worked for one factory, one uh, one employer. If that employer decides to move, uh, out of the country, out of the, or if they closed their doors completely, what’s going to happen to your occupancy?
People aren’t going to be able to afford to pay their rent again because they’re, they’re not getting checks either. So that’s the other thing. So to recap, the four things really that I’m looking for, I’m looking for a place where people want to be. People are moving in yearly. I don’t want a lot of crime. I want something where the median household income will support the rent, not only where it is, but where I’m trying to take it to. And then the last thing, I’m looking for a place that doesn’t have an over reliance on one industry or one employer for their jobs. That’s it. Thanks guys.