Where Real Estate Investors Should Look In 2019
By Roger Blankenship, Forbes
Real estate professionals — and flippers in particular — spend a great deal of time analyzing the markets, but the only thing we really need to know is which way is it heading. There’s a way to make money in any market, any economy, if you are paying attention and trusting the plan.
I want to share the top 20 places real estate investors should be looking at in 2019 to maximize your success. You're going to notice one thing right away: These aren't actual locations, but principles of successful investing. I have found that these principles apply wherever you are, in whatever market. Here's where to look for investment real estate this year:
1. Where the deals are: This seems obvious until you watch people sit in one ZIP code and continue to complain that there just aren’t any deals out there. The deals have moved, and you need to move with them.
2. Where the hedge funds aren’t: I have nothing against the hedge funds, but I’ve noticed that they will pay far more for a property than I am willing to. So all it takes is one fund that is interested to keep that deal from going to a real estate flipper. My secret here is to watch what hedge funds don’t buy and consider that, and also watch where they don’t go.
3. Just behind the bleeding edge: There is always some new technique or new area that was previously blighted. Let someone else experiment there first and if they can make it work, swoop in right after.
4. Just north of the intersection between risk and return: This isn’t an actual location of course, but it’s a nice place to be. We always need to balance risk and return. The risk is always there — it’s up to us to see it and mitigate it.
5. The middle- to low-hanging fruit: Don’t worry about the difficult, the high-priced and the highly complicated projects. Let someone else do them. Focus on the easy, the light work, the projects that will let you keep your capital moving.
6. Growing populations: I never recommend buying in a town where the only people moving there are people moving back home. Shrinking populations usually mean longer times on market.
7. Midsize cities: There are hundreds of these all over the United States, and they come along with moderate prices, moderate risks and fewer investor competitors. Find one and create a "second work home."
8. Cities with multiple major employers: If a town is economically dependent on one employer or even one industry, it's smart to stay away and pursue areas with more employer diversity.
9. The South and Southwest, but not west: It’s where the population of this country is heading, except for the west coast.
10. The Midwest: There is opportunity here. Many MSAs are projecting growing populations, home prices are much lower than coastal regions enabling more activity and lower risk.
11. Where the prices are low: Low prices mean low risk. They also mean a larger pool of buyers for your project. The expensive houses make for interesting TV shows and could make flashy money, but they also carry considerable risk, especially if you are borrowing money.
12. Good schools districts: This is especially true for buy-and-hold landlords. Parents who select homes in communities with good school districts tend to extend that care to the rest of their community, which in my observation goes hand in hand with lower crime rates and higher property values.
13. Low-crime areas: There are a number of websites where investors can find information on local crime statistics, and I recommend doing this research. Of course, few regions are completely free of crime, but lower crime rates often translate to more interest among buyers or renters.
14. Emerging markets: Here’s a current buzzword that we can apply to real estate. Whatever town you are in, invest in the path of progress. Watch where your town is growing — consider the Starbucks effect — and buy ahead of that growth.
15. Steady performers: Make solid margins — numbers that perform better than other investment opportunities — and then call it a day. For me, this means newer neighborhoods and lighter rehabs. Investors following this lead will make less profit per deal, but be able to keep the money moving from project to project.
16. Where you are: Find someone in your town who is investing in real estate. Learn what they are doing. If possible, partner with them. Offer something of value for the knowledge you need. Don’t become their competitor, but find a way to apply what you’ve learned.
17. Where you can buy a house for under $10,000: This will cash flow almost anywhere. You can rent it out, sell it and finance it or arrange a least option. There are very few places in the United States where I would rule this property out.
18. In the blue ocean: There are always new strategies or areas opening up in real estate. Once they are discovered by the masses, the best opportunities go away. But the savvy investor will be paying attention to the next "new" possibility. It just might be an old approach whose time has come again.
19. Out of your self-directed IRA: Yes, there are places to be investing in as described above, and a few places to be investing out of. There are limitations, but you can generally invest in real estate with your self-directed IRA. It's possible your gains could be tax-free. Consult with your plan administrator before proceeding.
20. Out of your disposable income or investment accounts: The value of any real estate will never go to zero, but you might lose money. Therefore like any investment, only invest money you can afford to lose.
The reality is that investing opportunities are everywhere. You just need to keep your eyes open.