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What to consider when choosing a market to invest in

Most people invest in the area they live in. Others do extensive research and target areas they feel they can thrive. Many factors go into selecting where to invest. There are some important items to consider when choosing a market.

  1. Comfort – most people invest where they live because they are comfortable in their own backyard. You are sometimes limited in the amount and size of deals. Many savvy investors have more of an entrepreneurial approach and are open to deals anywhere and look for only slam dunk deals. They build systems, teams and knowledge in other areas.
  2. Availability of great deals – This comes down to supply vs demand. There are many factors that affect supply and demand in real estate such as interest rates, foreclosures, the local economy, job market, affordability, etc. You can find deals in any market, the numbers just have to make sense. Some markets have a lot of competition for very few good deals, other markets have an oversupply of opportunity and you can cherry pick only the best deals.
  3. Home value stability – During the real estate boom, the writing was on the wall. Affordability became so low in some of the hottest markets that there was just no way home values could stay so high. Be conscious of the trends and direction of the market, there could be a tremendous impact on the success of your deal. Some areas dropped over 40% in value in the last couple years crippling many investors who did not exit.
  4. Ability to successfully duplicate deals – When you find a market, type of deal, system and team that works, duplicate. It is called cookie cutter deals. Improve your team and system each time and do the same thing over and over. Savvy investors take an entrepreneurial role and delegate the daily processes and management to their team. Then they can concentrate on growing the business and high level decisions, while on vacation.

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3 Responses to What to consider when choosing a market to invest in

  1. Great post. I kind of agree but only in certain instances.

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  3. I understand the comfort zone of only investing where you live (ie. north side of town, only in a particular zip code, only in a particular school district), but that will greatly limit your business. An investor should educate themselves on other areas and then decide if they only want to work in their backyard. You may find that driving an extra 10 miles will give you many more deals.

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