Real State

The 3 Signs of a Perfect Rental Property Market

What makes a great real estate market? If you’re a new investor, you might think that high rents and cheap home prices are all that matter, but you couldn’t be more wrong. Experienced investors search for more than just surface-level pricing when looking into where is worth investing. This is doubly true when you’re investing in short-term rentals and medium-term rentals—both of which require a specific area to succeed. So what would Ashley and Tony look for when scouting a new real estate market?

Happy Holidays and welcome back to another Rookie Reply! We hope you’ve got your presents wrapped and are ready for the greatest gift of all—Ashley Kehr’s singing voice…and some advice on real estate. This time around we’ve got a few technical questions that rookies may have trouble answering. These topics range from how to find the zoning on a rental property, whether to furnish your rental when renting by the room, when to hire an attorney for a real estate deal, and what makes the best real estate investing area!

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley :
Happy holidays. This is Real Estate Rookie, episode 246.

Tony:
In terms of market selection, there’s three big buckets that I look at. I look at permitting, the policies in that market, I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I’m getting in a market versus the average purchase price, what does that ratio look like and am I able to hit my return?

Ashley :
My name is Ashley Kehr and I’m here with my co-host Tony Robinson.

Tony:
And welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, information and stories you need to hear to kickstart your investing journey. And today I want to shout out someone who left us a review on Apple Podcast. This review says I’m a real estate agent in Minnesota looking to invest in real estate, and I think I found the perfect virtual mentor to help me get started. This is the best place to learn if you’re filling overwhelmed. We appreciate that. If you guys are listening, and haven’t yet left us an honest rating review on Apple or Spotify, wherever it is you’re listening, please do. The more reviews, the more folks that we can reach, more folks we can reach, the more folks we can help. Actually, Kehr, this episode comes out a day before Christmas, and I got to say, I think the best Christmas gift I’ve gotten so far is knowing that you have a pretty decent singing voice. That was a nice little intro right there.

Ashley :
You know what? I’m shocked that you’re saying that because my voice is not nice. So that must be the only two words that I can sing. When I was younger, I always thought that I would have a life with a mic in my hand, but I always thought it was because I was going to be a Spice Girl, not a podcaster.

Tony:
Not a podcaster.

Ashley :
So I think that’s definitely way more fitting than me actually singing.

Tony:
Wait, but our good friend Kara Beckmann, she actually just released a Christmas album. So if you guys can go support Kara Beckmann. I don’t know, producer, if you guys can put a link to Kara’s like Spotify album in the show notes, we’d love to support-

Ashley :
Yeah, Kara, I think it’s on Apple Music. I don’t know about Spotify yet, but yeah, she’s @beckmannhouse on Instagram and is an amazing designer. She has a short-term rental, she has long-term rentals and she does the most amazing luxury house flips too. So you’ll have to go and check out. This has been a passion project of hers forever. And I think it just shows too, the power of real estate investing is that you get to pursue these passion projects as you’re building up your wealth and your time freedom through real estate is that you can be able to go off and do some of the things that you’re passionate about. So Tony was recently kicked off Instagram, so that must be his passion.

Tony:
Yeah, I was banned from Instagram for three days, but I’m back now from Instagram jail, so cool. But we got a good show for you guys lined up today. So one of the last show you guys are here before Christmas, we got question on house hacking and how to make your units stand out if you’re trying to rent that extra room. We’ve got questions about zoning and what to do if you’re trying to figure out to what can I do with this property after I purchase it? We talk about a little known phrase called the Chamber of Commissioners, and what exactly does that mean, and how does it play a role as a real estate investor? And then last thing we talk about is litigation and how to deal with attorneys and how to use them as a new investor. And Ashley goes on a world class example of how she worked with her attorneys. And then we actually added a little bonus question that came from my Instagram about choosing your market and how rookies can go about doing that. So lots of good questions that popped up in today’s episode.

Ashley :
Yeah. And we tailor that last question to short-term rentals or long-term rentals, but it can definitely be tailored to flippers too, as to some of the key points out of that too is to choosing your market and just where to even start when picking a market, especially if you already know you’re going to invest out of state. Okay, you guys, let’s get started with our first rookie reply question. This is a house hacking question from Tony Wong. Should you furnish the house if you’re renting out rooms? So I mean, it depends. You don’t have to, you could. That is really up to you. But I think one of the most common things is that you are furnishing the common areas.
So if you end up furnishing the kitchen, the living room, you can always put that into your listing as to, there’s two couches, there’s a big dining table, room for everybody in the house to eat at. But also if you’re going to furnish the bedrooms, you can increase your rent by providing a bed, a dresser, maybe even a desk in that room, and that can increase your value. That maybe won’t be valuable to everyone. There’s probably people that already have their furniture, so they’re going to want an empty room and not willing to pay that increase. So that is completely up to you, but I think at least it’s very common to furnish the common areas of the unit.

Tony:
Yeah, that’s a great answer, Ash. I guess just to try and make that determination, take a look at some of your competition. Are there other listings that are being offered for furnished rooms or is everything an empty slate or is it the other way around where it’s like every single room that’s up for rent is also furnished, right? So I think taking a look at what the competition is doing can help guide that decision.
But ultimately, Tony, I mean there is no right or wrong answer. I think what I would look at to make that determination is what does it cost for me to furnish that room and what additional rents can I get by offering it as a furnished unit? And if the difference is nominal, if people aren’t willing to pay much more for a furnish unit versus a non unfurnished unit, then maybe spending the additional capital to furnish that room might not be worth it. But if the difference between a non furnished unit and a furnish unit is pretty big, then maybe it makes sense for you to go out and spend that extra couple of thousand bucks to furnish that room as well.

Ashley :
And since this is a holiday episode, it is Christmas Eve when this comes out, I’m literally going to twist every question into some kind of relation to Christmas holiday spirit. And I apologize if you don’t celebrate Christmas, but send me a DM with what your holiday is and if you want me to turn an episode into a holiday theme, I will definitely do it. So please send it to me. So for this one, that may include including a Christmas tree into the common area to make it all nice and warm and cozy, maybe putting Christmas lights in the window. So there’s all different kinds of things you can do. So even in the 40 unit apartment complex I managed, there was some common areas. There was a community room where it had a little kitchenette with a stove and then a large table.
So anyone that rented an apartment there, they could actually rent out for free. They just had to reserve the room and they could have parties in there for baby showers, holidays, whatever in there. So one thing that we did extra was we would put up a fake tree in there every year, and it started out with all of the tenants kind of adding their own little ornaments every year and then the tree would be brought out and everything like that. And it was just this… Especially when we were leasing in the winter, which in Buffalo, New York, not a lot of people move in the winter because of the snow. So it was nice to always take people into that room and just show them like, oh, this is a community, here’s that.
And so maybe that’s not for everyone. They just want to be kind of left alone and don’t want to talk to anyone or do anything. So thinking about ways that you can make your house hack stand out from other ones, and I think Tony hit it on the nail as to look at your comparables, what are they doing? And maybe what can you do that’s a little above and beyond, and that’s maybe a little extra but barely cost you anything. I mean, Black Friday, you can get what? A fake tree for probably $25, just a small fake tree to put up and couple dollar store decorations.

Tony:
Yeah, I love the idea of the decorations. We actually do offer, or not offer, but decorate our cabins in Tennessee for the holiday season. So every year right around Thanksgiving we’ll throw up the Christmas decorations and then after first week of January we’ll pull them all down. We don’t do it in Joshua Tree, it’s not as common out there, but in Tennessee a lot of people come out there for the holidays. But something else you said about what are some small things you can do to make the space more competitive, once you said that thoughts were just kind of running through my mind. And it’s like, if I were renting out a room, what are some of the small things I could do?
Getting obviously a smart TV would be a big one. If you could have the smart switches. So if you have an Alexa in there and it’s like, “Dim the bedroom lights to 25%”, and it can do that for you. If you get automatic roller shades, if you’re only got one or two windows in a room, it’s not going to be super expensive. But the experience with the person that’s staying there to say, “Hey Alexa, let there be light”, and the shades come up, that’s a pretty cool thing to have. Zinus brand mattresses, I love a Zinus brand mattress. So yeah, there’s a lot of little things you can do that don’t have or don’t cost a ton of money but still give you that good return on your investment.

Ashley :
And you know what? It does kind of tie hand in hand with a short-term rental almost, I guess. There’s some compatibility there as to things you can take from a short-term rental and put into your house hack as things too. So if you are house hacking, you know what will be a… Do you give out your checklist for supplies to purchase for a short term rental, Tony?

Tony:
I do. Yeah, if you go to the realestaterobinsons.com/shoppinglist, it’s got all of our household essentials in there.

Ashley :
So if you are furnishing the living room and the kitchen, you could go ahead and use Tony’s list and then maybe create your own off of that based on what you actually need for your house. But at least that gives you a starting point is okay, I at least need to get utensils in the kitchen. It may not make sense for you to give everyone their own drawer, their own cabinet and they all have to bring their own silverware, their own spatulas, their own pans and things like that. So I think that’d be a great starting point to anyone who is looking to furnish their home is to go to Tony’s website or there’s a ton of other… The Maddens, [inaudible 00:10:43] Madden. She gives out her checklist too as to what they do. And I think Rob does too. Robuilt gives out his on robuilt.com.
So okay, let’s move on to our next question. This question is from Robin in Prentiss. The first question is, how do you find out the zoning on a property? Is this what you need to know if you want to build more houses on it?

Tony:
So I actually just had this experience, we were looking at some land and it was landed a great location that we’ve been kind of eyeing for a while and a lot of times when it’s listed they’ll put the zoning in the listing description, but the zoning itself, if it’s RL3, what the heck does that even mean? So typically what you have to do is you have to go to the city of the county’s website, they’ll have a link to their ordinances and inside of those ordinances it tells you the allowable use for each zoning like zoning description. So like, hey, this is only for rule, you can only build this there or this is zone commercial, you can do this or this is for mixed use or this is high density, this is low density.
So typically for me what I’ve seen is just going onto that city or county website is a great way to figure that out. And then the best way is just like if you can just go to the city or the county and ask them like, Hey, I’m looking at this parcel of land, can you tell me what it’s zoned for? We’ve called the county in different cities multiple times to ask those questions as well.

Ashley :
Yeah, if you go onto the GIS mapping for the county, you’ll be able to see, but I would always take Tony’s recommendation and actually call to verify, especially if that zoning is really going to rely on what your project is going to be. You can always go to the planning board and you can request to have the zoning changed, but that is something that you don’t want to commit to a project not knowing if that is going to be approved or not. So talking to the local code enforcement officer and even maybe a member on the planning board if that is something that you want to do, is to change the zoning of that property. And also finding out, because it does vary from state to state, or county to county, maybe even town to town as to what can actually be done on how a property is zoned.
So if it’s commercially zoned, are there limitations as to what kind of commercial properties can actually be put onto that property? So I think looking further and make sure exactly what those things are. And a lot of times you go to the town or the village websites, you can just pull that up and kind of read it. Very, very boring reading, but it’s in there. And so a lot of the towns that I invest in, there’s a code enforcement officer and it’s a very small town, so it’s not like they’re overloaded with stuff or you’re waiting years for permits. So I usually just send an email and ask my question and then get a response that way. I found that the easiest.

Tony:
And Robin, one thing you can do if you’re looking at a property, you’re looking at land or whatever it is, you can put as a contingency in your offer to say, contingent upon zoning allowing for X and like, hey, we’re not going to close on this land unless we can make sure that we can do what we want to do with it, we’re not going to close on this property unless the zoning supports whatever our end goal is for that property. So you can definitely write that into your contract as well. And your EMD doesn’t go hard until you’ve been able to validate that.

Ashley :
Okay. The second question is not sure how to word this next question, where can I find out information about a town and its future plans? A town was halfway burnt down and I would like to see if there has been any talk meetings about rebuilding. Would buying a property on that town be a good investment? Wow, first of all, that’s awful, the half burnt town.

Tony:
Half is burnt, yeah.

Ashley :
Yeah. I think the best place to start is the planning board because they’re going to approve any kind of development that goes into that area. So they would be the ones where people would bring their proposals as to what they want to redevelop there in that area and then they would approve it and they would kind of go through the process.
So going to that town’s webpage and looking when the planning board meetings are. Usually they are once a month, at least where I’m from. I don’t know, maybe if that’s the same everywhere. But you can also read the minutes online so they’ll have somebody take the meeting minutes that kind of goes over everything that happened during the meeting and you’re able to read those after they had the meeting too, so you could go back and look at meetings you’ve missed and see what they have, or even if you can’t attend, you can go ahead and read those meeting minutes, but the planning board would be the place to start.
Also, even just going down and talking to the town clerk, I guess it depends on how large your city is, but when you’re investing in small towns, and I’m assuming this may be a small town since half of it burnt and going and talking to the town clerk. Where my kids go to school, they actually send out a newsletter. The town there, it’s a village and the village sends out a newsletter every quarter with the water bills. And so it will go through like, oh we are in talks with so-and-so about bringing in this franchise or whatever to come in here and they update you on the new development or things that are happening.
There was recently patio homes that were being built and they’re not being paid by the builder or anything like that. They’re just trying to promote things within the community as to this development that is happening. Another place that I find out what’s going on more in the city of Buffalo is I’m subscribed to Business First. It’s a newspaper, I get it mailed to my house and I go through it where they go through real estate happenings, business happenings. So I find out some information there too as to what’s going on.

Tony:
That’s a great answer, Ash. I literally have nothing of value to add on top of that.

Ashley :
The other thing I would say is join Facebook groups. My mom is part of one that’s like Be Neighborly Springfield and so she’ll know things that are happening before I do one of the towns that I invest in because she belongs to the Facebook group because it’s everybody in there telling what they know or what’s happening or there’s a police car parked outside somewhere and everybody’s going on in these groups. So that’s really also a great way to gather information. I will say it, use it as a starting point makes you verify that information. When I was doing this new development for an investor, we were building a 40,000 square foot auto dealership and we had to have an environmental study, but we also had to have an archeologist study done because they had built a highway extension behind this property several years prior and they had found artifacts there.
So they required us to pay for an archeologist to come out from one of the city colleges and do an archeologist dig and ended up going to a phase two thing, cost us $15,000. But they went out and they marked all these red flags, went viral across the town’s Facebook, they found a dinosaur there, an Applebee’s is being built there. All these different rumors just going around and it was so funny, and all it was, there was a farmhouse that had been there, it was one of the first houses in the town from the 1700s. And when they had done that highway extension, they had started all this research on that person because they had found the barn. But now on our property they had found the house and there was the actual stone foundation still there, but it was like crazy. They knew how many cows he had, how much milk his pigs produced. It was wild. I would’ve been fascinated by it if I was not part of the team-

Tony:
The person trying to make it happen.

Ashley :
… that was paying $15,000 to try… And my project stalled to try to get this thing going. But yeah, it was just… So, make sure the Facebook thing, at least everybody knew there was something going on there, so you could see something’s being built there. But there’s other ways. If anybody would’ve went to the planning board minutes, they would’ve seen that we had approached and it was for a new dealership that was going to be built there. So that’s a funny story for you guys.

Tony:
Interesting. So no dinosaurs?

Ashley :
No dinosaur bunk because I would’ve shipped those right out to AJ Osborne.

Tony:
All right, so you ready for our next question? This one comes from Doug Smith and Doug says, what does it mean when a house is owned by the Chamber of Commissioners? So I’ve actually never heard of the phrase Chamber of Commissioners. I’ve heard of Chamber of Commerce, I’ve heard of commissioners in a county kind of level, but I’ve never heard of Chamber of Commissioners. So Doug, I can’t say with exact certainty what a Chamber of Commissioners is, but without too much context, what it sounds like is that this property is owned by some kind of public like agency. It could be someone associated with the city or the county.
And that could happen for a multitude of reasons why land or a house is owned by the local city. It could be that it was just left empty for so long and no one claimed it. Maybe there were liens or some other reason. There’s a lot of different reasons how cities and local governments end up as owners of properties. What I have found though is that typically they’re not eager owners of those properties and typically there’s some kind of auction that’ll happen to get rid of those properties that are owned by that local government. So that’s my take Ash. I don’t know if maybe you have more familiarity with Chamber of Commissioners.

Ashley :
Yeah, I’ve never heard it. I’ve heard of the Chamber of Commerce, but I’m assuming this is more of a board of commissioners maybe, but the town commissioner who maybe the property has been vacant, and the town has taken over the property. Maybe an abandoned title has been filed or something like that. And so most of the time when the town takes over a property, they are obligated to put that property up for auction. They can’t just go and sell it.
So if you did see a property that’s owned by a town, the first place you could go to is talking to the town clerk, is go right there and ask, I’ve seen this property here. But also if you look on the GIS mapping system for that county that property is in and pull up that property, you should get a mailing address too for the Chamber of Commissioners. And you can send a letter to that mailing address too and just say that you are interested in buying this property. And worst case scenario is that they send you the information of when the auction is or how they plan to sell the property.

Tony:
All right. Our last question for today comes from Alan Thomas Taylor. Alan’s question is, at what point in the process, if at all, get a buyer’s attorney when going to purchase property? Before you even make your offer? Never? This will be my first investment property. So I don’t currently have any legal paperwork drawn up, but want to make an offer on a three units property. So Ashley, New York is the state of litigation. So I’ll let you take the first answer here.

Ashley :
So if you are doing an off market property where you’re not using a real estate agent, I would definitely start with an attorney and just talk to them and at least hire an attorney so that when you are ready to do your deal, you have an attorney ready to go. And you don’t have to put a retainer down with an attorney, you just setting a meeting or calling an attorney and just saying, this is what I’m trying to do, is this something you specialize in? Have you done this for other investors? Things like that. So it says that this is your first investment property, you don’t have any legal paperwork drawn up, but you’d like to make an offer on a three unit. So you’re basically going to tell the attorney that and ask them what is the process that you would help me with when walking through this purchase and getting the contract drawn up.
So they may send you to one of their paralegals, which is perfectly capable of doing that, and it will be a lot cheaper too, because you’re paying a paralegal rate than an attorney rate. So find your attorney first and get lined up before you make the offer. And then what I usually do for off market offers is I do a letter of intent. So you can Google this and you can use a sample format online where basically it’s just saying that you intend to buy this property at this address from this person for this amount. And it’s going to state in there that this offer is contingent on attorney approval. So make sure it does say that in there. And then you’re going to have the seller sign, you’re going to sign it, and then they give it to their attorney and you’re going to give it to your attorney and they’re going to use that to drop your contract.
So if there’s any kind of contingencies, like an inspection, you’re going to want to have that in the letter of intent too. But it’s not going to be your real estate contract that you’re drawing up to purchase this property. This is just to get that offer in agreement and something to give to your attorney to actually drop the contract. A seller could change their mind. So the sooner an attorney can get that contract turned around and you get under contract, the better. So that’s why it’s important to talk to an attorney first, have them lined up so that when your offer is accepted, you can go ahead and have them go ahead and put that contract together. They’re probably going to need some information from you about the property to actually get it started. I know that my attorney always includes the SBL number for the property, which is kind of like the property tax ID number, the Parcel ID number.
They include exactly how many acres, they include, everything that’s included. So appliances, are you purchasing the appliances with this three unit, things like that. So make sure that when you talk to the attorney and when they send you the contract you’re going through and making sure that it specifies everything that you want as part of the deal and everything that you are offering as part of the deal too. And I think talk to them too about structuring the contract, maybe if you’re doing seller financing, things like that and figuring out can they help you actually set up seller financing too, where they’re putting a mortgage on the property for the seller, things like that.

Tony:
Actually, that was a masterclass and I can tell you’ve done this a couple times.

Ashley :
Yeah Quite a few.

Tony:
So Alan, we don’t know what state you’re in and every state’s going to be a little bit different. So that’s the process Ashley has to go through in New York. For me in California, whether it’s in… And I’m assuming you’re going off market here. For me in California, when I go off market, we usually just go through our escrow and title companies here. So when I have a new off-market deal, I send it to my escrow officer and then between escrow and title they drop the contract, they send it out to the seller or the buyer or whoever the other party is, and they manage pretty much everything for me. They do ask me just a few details about the transaction, but outside of that I don’t have to get too involved. So I think depending on where you’re at, whether or not you even need an attorney is probably the first question. In California, we don’t, other states you do.

Ashley :
And when you get that contract too, if it is a commercial property and it’s not just a residential contract to purchase property, if it is a commercial one, I recommend getting a new contract every time because the commercial properties can vary so much. But if your attorney sends you a residential contract, and they send you almost like a Word Doc of it where you can go and change things in, what I recommend too is that you go in and you put in the information and then send it to your attorney to review and say, does this look correct? Here’s the letter of intent, did I put everything in okay? And that saves you in attorney fees by doing it yourself, inputting the information.
For my operating agreement, for a loan agreement, things like that, I have just sample contracts where it’s highlighted in yellow, the things that get changed every single time. Then I just go through and fill them in. And then if there’s anything extra that’s different from the norm, then I go and find out what spot should that be put in, or I ask my attorney and then I get that final attorney just glance over, send back, good to go. And then I take it to the seller to sign.

Tony:
We do the same exact thing, Ashley, for our JV agreements. So we sit down with our attorney usually once or twice a year to make updates to the actual agreements. But when it’s done, same exact, and there’s just yellow boxes that we have that we need to go in and fill out every time we have a new partnership. And that’s so much more cost effective than having your attorney do that legwork every single time you submit an offer or have a new partnership or whatever it is. So when you reach out to your attorney specifically ask them like, Hey, when we’re done, can you give me a template that I can use for future transactions? That way they can show you where you need to fill in that information. I think we got time for maybe one more question.

Ashley :
Yeah.

Tony:
I have one that popped up in my Instagram DMs. So let me take this. This one comes from Nathan LaPortes and Nathan says, Hey Tony, Nathan here. I’m a first time potential buyer for a rental property. I’ve been listening to your podcast, I’m watching your YouTube piano for a little bit. And I’m really interested in buying myself a duplex in hopes of listening one side as a short-term rental and the other side as a medium term. The question is, what is the best way to search out and make sure that I’m buying in the best area with the best chances of returns? What resources do we have, or how do we go about choosing the areas to give us the best results and run our numbers the right way?
So Nathan, there’s a lot that goes into analyzing. Well, you’re not even asking about analyzing here. First you’re asking about market selection, and then within market selection, once you found a market, you have to analyze the deal. In terms of market selection there’s three big buckets that I look at. I look at permitting, the policies in that market. I look at popularity, so the traffic of folks coming into that market. And then lastly, look at profitability. So if I look at the average return that I’m getting in a market versus the average purchase price, what does that ratio look like, and am I able to hit my return? And then within a specific property, there’s really three things that I’m looking at. It’s location within that market because some parts of a city are probably better than other parts of a city.
If you’re in a lake town, being lakefront is probably better than being two miles away from the lake. If you are in an urban setting, being maybe in the heart of downtown is better than being on the outskirts. If you’re on the beach, beachfront is better than two blocks back from the beach. So every market probably has its location that makes more sense than somewhere else. So location is a big one. Next is the amenities and the design standpoint. So if you’ve got a property that really creates an amazing experience for your guest, even if you don’t have the best location, maybe you can make up for by making the property super amazing. So location, then amenities and last will be value. So how good of an experience can you give your guests in comparison to the price they paid for that property? So it’s more of a framework for you, Nathan, to look at. So in terms of choosing the market policies, popularity and profits, and then looking at the actual property, I’m evaluating location, amenities, and value. Anything to add to that?

Ashley :
Well, not to really the short term rental side, but I pulled up an article that I’d seen from Bigger Pockets for more of the long-term rental side. So the Bigger Pockets published this article, and it’s The Top 10 Real Estate Markets for Cash Flow in 2022 by Dave Meyer. So I think a great way to start out identifying a market is looking where the research tells you to go and also where other people are investing. So even before that, you need to identify what your goal is for real estate investing. Is it cash flow? Is it appreciation? Okay, so if it’s cash flow, then you’re going to look at this article, 10 Real Estate Markets for Cash Flow in 2022. If then you’re going to go, if it’s appreciation you want, it’s the long-term play you just want to cash out in 20 years after you’ve built up all this equity in these properties, then you’re going to look for the Top 10 Real Estate Markets for Appreciation.
So in this article, it goes through the top 10. And so the number one is actually Detroit with the median sale price at 63,000, the median rent 1400. And so the rent to price ratio is 2.2%. Okay, that information right there, that does not mean run to Detroit and buy property. This is a starting point. This is where you can kind of analyze that data. You have to go and verify. Just because it has that cash flow target doesn’t mean it’s going to not bring headaches, it’s not going to… These aren’t going to be properties that constantly need repairs. Are they going to be in bad areas, maybe where you have to deal with a lot of conflict, things like that. So you’re always going to want to look at other things too. Are they in good school districts, things like that. What class of tenant are you going to be getting into the property?
So maybe you want to be really passive, so maybe you want higher end properties where they’re more turnkey, they’re brand new. You don’t want to have to constantly send people to do repairs even though you’re getting a larger amount of cash flow. So think about all of these variables and what’s important to you, and then kind of work backwards from that. But you can start with where other people are investing and then kind of analyze those cities and those markets to see if they fit what you want to do, actually.

Tony:
I love that advice, Ashley. And I think a lot of times, especially new investors, they just want that magic bullet that says, pick this city, right? But there’s so many factors that go into choosing the right market for you because what’s important to Tony might not be as important to Ashley, and what’s important to Ashley might not be important to Tony. So there’s this balancing of priorities and goals and objectives that each market kind of caters towards. So I think the point of thinking about what’s important to you first is super, super critical. So Nathan, hopefully that little framework helps you make the right decision for yourself moving forward.

Ashley :
Yeah. And Tony, I have one more thing to add because I was kind of just eyeballing the cities and states, and right after I stopped talking, I saw number two, and I don’t know why not… You would’ve been talking when I looked at this whole thing, I didn’t see this before, but number two is Shreveport, Louisiana-

Tony:
No way.

Ashley :
… for cash flow. It is-

Tony:
Is it really?

Ashley :
… median sale price, 93,000, median rent 950 with rent a price ratio of 1.02%. So if-

Tony:
I knew it, I was good.

Ashley :
… you guys have been a long time listener about Shreveport, Freeport, whatever I thought it was called for two years that Tony had to invest in property. So I think right there is an example of just because that’s the best cash flow you can get, does not mean that is the optimal market to invest them.

Tony:
Yeah. Yeah. So for those of you that don’t know, I lost $30,000 on a property in Shreveport, Louisiana. It was profitable as a rental unit. We had it rented out for about a year and we were making a couple hundred bucks on it every month. Got some great financing to kind of take that deal down. But when we went to sell it, that’s when all the problems started popping up. So anyway, it was one of these rookie reply episodes, you can go back and find it, but we lost 30,000 bucks on a house in Shreveport.

Ashley :
And that also gives another example is that, yeah, you were getting the nice cash flow, but also there was lots of repairs and even if you wanted to put the house up for sale, eventually these repairs would start [inaudible 00:36:33]-

Tony:
All those things would’ve came.

Ashley :
Yeah.

Tony:
Totally, totally.

Ashley :
Well, thank you guys so much for listening to this week’s rookie reply. And I hope you guys all have a wonderful holiday season. And I completely forgot after question one that I was turning every question into a holiday theme. But I wish everyone Merry Christmas and a happy New Year, even though we’ll have an episode next week and I’ll wish you a happy new year again before that. But thank you guys so much for joining us. And I just want to say you guys are amazing and you guys had an awesome year as rookie investors and some of you have just taken off and we love hearing your guys’ story. So keep sharing them with us at the Real Estate Rookie Facebook group and we’ll see you guys on Wednesday for a show with a guest.

 

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