Episode 37: How To Find Markets For Investing

Welcome to the “InFLOW Podcast.” I am your host, Michelle Bosch. How are you today? At the time of this recording, I’m actually getting ready to head out to the airport to fly with my daughter to Germany. We are going to Germany to celebrate my father’s in-law 75th birthday, which wonderfully coincides with the time when in Germany they’re celebrating Oktoberfest, so I just couldn’t be more ecstatic.

And actually the topic that I want to discuss today is how to find the right markets for land investing and apartment investing. And both of those asset classes have been instrumental for us to be…really be able to enjoy freedom of time, freedom of money, freedom of relationships to just move and go and be with family when we want to. And this is a big one for my father-in-law and we’re excited to create memories there together. And the fourth freedom which is freedom of purpose. We love teaching others, we love educating others on real estate investing, it’s been a vehicle that has been so transformational to us in our life and it really…it’s something that is close to our heart to pass that information on and educate others.

So today, I would like to start this podcast episode a little different. I know we talk about inflows of cash of ease and grace. And although I’m gonna talk about inflows of cash, I want to start it with taking a deep breath in and just, I’ve been having back to back commitments all day today and I’m taking the last 15 minutes that I have right now to really sit down here and chat with you all and just put my thoughts into this recording as a result of a conversation that I had with an amazing woman that I respect and admire today where she was asking me, you know, how do I find these markets, whether it be land or apartments?

And so let’s bring our awareness to our breath and let’s take a deep breath in. Inhale and exhale. One more time, take a deep breath in. And as you take a deep breath in, fill up your blower belly, fill up your ribcage and exhale. And one more time, take a deep breath in and exhale and relax your shoulders, relax your jaws, relax your face, your forehead, your lips. And all my goodness, I feel so much better already, I think I needed that today.

And so let me go ahead and start at the beginning then which is how to select markets for land. We started investing in land back in 2002 and 4,000 flips later, $12 million in notes and $70,000 in passive income a month just from [inaudible 00:02:59] flipping, offering seller financing, and we’ve been able now for several years, use our land investing business as a cash machine to then allocate those huge cash profits and cashflow and put those into assets that help us really long-term create passive cashflow, in this case for us has been apartments. We’ve been doing this now for three and a half years.

And so in the land space, when we started and even today in this market, the things that we look at when picking markets are the following. First of all, we decide what type of property we want to invest. And there’s three types of property, you know, when it comes to land, you can either invest in infill lots or two, invest in property or land that is in the path of growth in the outskirts of cities. And number three, you can also invest in flip land in recreational areas. And pretty much based on which type of property you go after really dictates the markets or the areas that you’re gonna go in. So if you’re gonna go for infill lots, that means that you’re gonna be inside cities. I will look for cities where there’s good population growth, where there is good employment sources, you know, and you can find all of this demographic information online. And if I’m on the path of growth, I would also look then for markets where I know cities are growing as a result of, you know, people immigrating or immigrating into those states for whatever reason. I know that there’s a lot of people leaving, for example, the northern states such as New York due to weather, due to high-level cost of housing, etc, etc, and moving basically further south. So any cities in the southern belt where there’s growth, I would go ahead and invest in areas and counties that are just outside of the main Phoenix Metro area, this is where I live. And so the City of Phoenix is in the County of Maricopa, so I would start looking at all the counties surrounding Maricopa County that are in the path of growth, for example, Pinal County to the south or Pima County, also to the south or to the north where I would be looking at Coconino County or Yavapai County.

So if I’m investing in properties and land properties that are in the outskirts of cities where there is going to be growth, then first of all, I want to find a city where there’s growth and then I want to be moving out a county or two out. A county I would say is good, one county is good. And then if you want to look at recreational properties then you want to start looking at two or three counties out from the main cities. But in general, you want to look at population trends, employment sources, crime rates, household income. Crime rates really is more important for the infill lot part because really that means that there’s a lot that is surrounded by houses in an area where it’s already built and more than likely lots that you’re dealing when they’re infill lots, they’re higher-priced property, they’re not gonna be like the property out in say for example here Lake Mead in Northern Arizona, which is a recreational area or even Yavapai County, you know, which is also up north and it’s a recreational area, a lot of hunting, a lot of people that are outdoors enthusiasts want to be out there.

So those areas will probably more than likely be properties under $100,000. Also, properties in the path of growth will be over $100,000 and depending on the area if it’s a really hot market, you will even have properties that are over $100,000 that are in the path of growth. Now infill lots, these properties will be properties that are $100,000 or higher. And pretty much if you decide which type of property you’re gonna go for, that dictates the markets that you’re gonna go in. And there’s primary markets, some of the top largest cities in the U.S. that could go after or you could go into secondary markets. So that’s kind of our thinking behind just in a nutshell how to go about in broad strokes, how to pick areas for land investing. So that’s land investing.

Now apartment investing, it’s a completely different animal. Land investing is the simplification of real estate, apartment investing is, I would say the complication of real estate. And I only say complication only because there’s a lot of moving pieces, not because it’s not possible to make money. On the contrary, apartment investing is one of the ways that we’ve been able to really turbocharge our cashflow and wealth creation. We’ve been able to advance in three years probably what took us six years, so…or even seven years on the land side. So it’s been an incredible ride in terms of really turbocharging our legacy for what we call forever cashflow or passive cashflow, just cashflow that doesn’t end, that it just goes on forever, which is what allows us to have the freedom of money, of time, of relationships and purpose. So that right now I can fly with my daughter right now to Germany and celebrate with family and come back and there’ll be more money in my bank account then when I left.

So let’s now focus on finding markets to invest in for apartments. And I actually had a conversation with a friend this morning and amazing woman that I completely admire and respect and she was like, “You know what, we are looking to invest in multifamily, we’re both entrepreneurial and we want to stop exchanging dollars for hours, we want to start allocating some of our assets and create some liquidity there and start parking some of our money in assets such as apartments, multifamily, that could help us create passive cashflow.” And because she’s like, “At the end of the day, even though I’m an entrepreneur and yes I do have a lot of freedoms and I’m location free, like if I don’t work, money doesn’t come in, it’s not like an asset.” So basically she’s trying to make the transition from being an income statement wealthy person to a balance sheet wealthy person where she owns assets that actually spit cashflow for her whether she puts work into them or not.

And so on the apartment side, when we look for markets to invest, we’re also looking at population trends, we’re also looking at employment sources and trends there as well, we are looking at does the market that we’re going into have access to first-class property management? Does the market that we’re looking to go into, what are the crime rates like? What is a household, the income, what are the cap rates? Does it make sense? There’s a lot of primary markets that are currently overpriced where it doesn’t make sense right now like properties deals just don’t pencil in. So for us, since we started our main focus has been to go into secondary markets. We are in two markets where when we look at employment sources they both have an incredibly stable base of employment and that base of employment in both cases comes from government employment and one of them, I think it’s Tinker Airbase and in the other one Fort Briggs [SP]. And so these two areas for us represent economic cones of prosperity that are gonna be there that are predictably gonna be there 5, 10, 15 years down the road and that are great sources of employment. So we want to look at properties, for example, we’re looking right now at some properties that are within miles of one of these areas, one of these economic cones of prosperity that are being created by the government.

And so that’s kind of like has been our strategy and it has worked really, really well in being able to transform and really change the landscape of the tenant base, really catch up the property to market rents and do improvements on the outside to the actual physical property to make sure that any deferred maintenance that has come as a result of the prior owner neglecting or not taking care of it, that we take care of it so that we can actually continue to improve friends and improve NOI. Because the time that you improve NOI means that at some point have you wanted to sell, you are basically improving the value of the property, you’re increasing the value of the property all while still enjoying benefits that come from depreciation, so a lot of tax benefits.

So those have been the primary, just generally speaking, primary things that we look into when investing in apartments and selecting specifically markets to invest. And so I hope you found this helpful. And if you’re interested in learning more about how to invest in apartments and how we go about investing in our own deals and what we do to get our own deals, we are really passionate about educating others, I’m passionate about educating women and just helping you also begin to think a little bit different and about having stable returns. If you’ve been investing in the stock market and you’re tired of the ups and downs and want some more stable returns and want the lifestyle that comes from passive cashflow, we are incredibly passionate about educating others on this. So if you would like to learn more about how to invest in apartments yourself, please go to my Facebook group, it’s actually our Facebook group, my husband and I, and it’s called “Apartment Investing Cashflow,” “Apartment Investing Cashflow.” And there’s gonna probably be like three questions that you have to answer and then join us. We will go there regularly and give live sessions on how we go about investing in apartments, how we find the deals, how we source deals, what markets to go for, how to pick markets, how to pick property management companies, what are things that we look at in order to decide whether a property is a yay or a nay, how we go about negotiating LOIs to PSA, which is purchase and sale agreements, like pretty much everything that has to do with apartment investing. So again, that Facebook group is “Apartment Investing Cashflow,” and I love to have you there and see you there. And I hope you found this helpful and looking forward to having time with you all in the next episode of the “InFLOW Podcast.” Thank you very much. Bye bye.