Strategic Real Estate Investing: Unveiling the Power of Local Markets for Optimal Returns

The saying goes that ‘Real Estate Investing Is Local.’  While home prices nationwide were down 3.3% year-over-year in March, in my home city of Charlotte, NC, home prices were up 2.6% in that same period.  Therefore, despite macroeconomic factors such as recessions, inflation, and bank collapses, the choice of the market (i.e.:  city or area) where you invest is foundational to minimizing risk and ensuring success in your investments. 

In every property we look at, we apply principles set by well-known real estate investor, Neal Bawa, who uses a data-driven approach based on historical data to determine which would perform the best.  In choosing a market, he looks at five main factors: 

1. Population growth For cities with populations between 250,000 and 1 million, at the time of this writing (April 2023) you want to see population growth greater than 10.6% between 2011 and 2020.  You can find this data by doing a search on Google of the city and for ‘population growth.’  For larger cities of greater than 1 million people (e.g.:  Phoenix, San Antonio) you want greater than 7% growth in the same period, and for smaller cities of less than 250,000, you want 15% growth.  Another rough indicator is to invest in markets in which there is greater than 1.25% population growth per year between 2000 and 2019.  You want to invest in areas where people are moving, to ensure continued demand for your rental units. 
2. Median Household Income For cities of all sizes, you want to see at least 35.2% median household income growth between 2000 and 2019.  This information can be found on city-data.com.  We use up to 2019 because that is the most updated data reported on that site.  Another indicator is to have at least 1.5% income growth per year over that time span.  Again, you want to invest in a market where there are steadily increased earnings by population, in order to be able to afford to pay rent. 
3. Median house/condo value Also found on city-data.com, you want to see at least 56% median house/condo value growth between 2000 and 2019, applicable to cities of all sizes.  Another rough metric is to aim for at least a 2% increase in value on an annual basis over that time span. 
4. Change in crime levels There is a section in city-data.com that gives a crime index over successive years, based on a number of factors.   You want to see this number generally trending downwards, with a value of less than 450 in the latest reported year.  Areas with a higher reported crime are more prone to delinquencies in making rent payments, and also other associated problems, such as safety.  
5. Job Growth What Neal Bawa found was that more recent trends in job growth (e.g.  1 year) were more important than longer-term metrics for a city in terms of predicting real estate investing success.  Thus, you want to look at cities with the highest 1-year Current Employment Statistics (CES) percent changes.  You can find this information at this site:  https://www.bls.gov/sae/ 

When initially deciding where to invest it is essential that you choose the right market where people are moving to, whose income is increasing and where the jobs are, in which property values are rising, and where crime is decreasing.  This is one of the four pillars of real estate investing. 

In the coming weeks, we will do overviews of the next pillar, which is the factors more directly affecting the properties themselves. 

If you want to talk about how you can build and preserve wealth and generate passive income like the ultra-rich, set up a time to talk with me