One of the most common questions apartment investors ask is, “How do I choose the best cities to invest in apartment buildings?”
It’s a big question and a big financial decision.
If you’re not sure how to answer this question, here are some issues you’ll run into:
- You’ll get stuck in analysis paralysis. You may drag your feet and miss out on a good opportunity.
- You turn down a great deal. You’re not familiar with the city so you turn down a deal that could have made you a lot of money.
- You invest in a bad deal. A deal comes along that’s too good to pass up. You invest in it, only to realize later that the city had issues you weren’t aware of.
How can you invest in apartment buildings in a city you’re not familiar with without constantly second-guessing your decision?
How can you find cities with hidden potential that big investors aren’t looking at?
Short Answer: You learn what data matters and where to find it.
There are 5 key metrics you need to pay attention to:
- Population Growth
- Median Household Income Growth
- Median House or Condo Value Growth
- Change in Crime Levels
- Last 12 Months Job Growth Percentage
Before we dive any deeper, I want to give credit where credit is due. This information is based on the data-driven approach taught by Neal Bawa, a successful investor and syndicator.
Also, this list isn’t comprehensive, meaning there are other factors that could have an impact on whether an investment is good or not. However, these criteria are where you should start.
Some states are more tenant-friendly and others are more landlord-friendly. It doesn’t mean you can’t invest in a tenant-friendly state, but it’s worth knowing the laws when it comes to evictions, etc. If you’re not willing to deal with a state that favors tenants over landlords, save yourself time by not looking at deals there. (Later this month we’ll provide a resource to help you determine this).