Ashley:
This is the Real Estate Rookie podcast. I am Ashley Care and I’m here with Tony Jay Robinson.

Tony :
And welcome to the podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey.

Ashley:
Today we’re going to really focus on how to kickstart your investing journey. A lot of rookies don’t know what market to get started in. Should I invest locally, out of state, out of the country in space? The list is endless. I know I felt overwhelmed when I first started, which is why we’re going to be joined by Dave Meyer, the host of the bigger podcasts real estate podcast to show us a fun new tool BP has to offer to look at the housing market in a new, fun, exciting way. Maybe after going through this, Tony and I will wish we had started somewhere else. We’ll find out in today’s episode. Dave, thank you so much for being here.

Dave :
My pleasure. Thanks for having me.

Tony :
Alright, so Dave, the man that myth, the legend. Dude, I always love having you on the podcast. Can you tell the rookie audience how we’re going to be looking at market research in a new way on today’s episode? Yeah,

Dave :
So we, at BiggerPockets, we put together a lot of different data sets. We put together top cashflow markets or affordable markets. But recently I have been thinking about this question of if I were starting over, where would I have done it? Because I started investing in Denver and it was just kind of obvious at that point Denver was going to do really well, but it’s a totally different market. And so I worked with, one of my teammates name is Austin Wolf, who is a rookie and is actually looking to figure out where he’s going to make his first investment. He’s actually even considering moving from where he lives in LA to a different market to start investing and he’s a data analyst. So he and I put together all of the different data points we thought would be relevant specifically for rookies, put it into a market research document that everyone can go download for free. So that’s the data set and the idea behind bringing this data set on the show today is that we are each going to use this research and pick a market where hypothetically, if we were starting over today, we would start. So I have a market that I’m going to be sharing with all of you, and hopefully you too have done your research and homework. I’m sure you have to bring a market to share with the audience as well.

Ashley:
So this will actually be my second time choosing a market. I was on an episode with Dave and Henry on the BiggerPockets Real Estate podcast and in that episode I picked Eerie Pennsylvania, but I picked a new one this time. But this will also be Tony’s first time picking a market. So the pressure is on.

Tony :
No pressure. I mean, I already know which market I’m choosing. It’s Shreveport, Louisiana. No, I’m kidding.

Ashley:
That was on the list, Tony, that was on the list. I saw.

Tony :
I did see that. But we won’t be dipping our toes back into that water. We’re going to pick something new, but I’m excited to dive in as well.

Ashley:
Okay. So also all of the market research that Dave has done along with his team, it is available to everybody at BiggerPockets entirely free. So just go to biggerpockets.com/where to start and you can just download all this data for free. And if you need more information about the market you’re considering, just go to biggerpockets.com/markets.

Tony :
Alright, so before we get into actually the markets that we’re talking about here, Dave, for our audience who may not know, where did you actually get started? I know you are overseas right now. So did you ever invest locally? Has it always been long distance? What did it look like for you to begin with?

Dave :
I started in Denver where I moved from New York in 2009. And even though it was still in the aftermath of the housing crash, Denver was just starting to boom. And a lot of ways I got into real estate because I was in Denver and it was just so, it just seemed so apparent that real estate was going to take off because it was super cheap at the time and there were so many people moving there that it sort of pushed the fact that I was living in Denver at that time sort of pushed me into real estate. And yeah, I self-managed actually for 10 or 11 years before moving abroad.

Ashley:
Dave, would you do that again? That same thing if

Dave :
It was 2009, yeah, it worked out great. It was a really good time to buy in Denver, but if I were starting at the position I was in about a year out of college, I was waiting tables. If that was my situation, I don’t know if I could do that in Denver. I don’t think I could afford to buy, definitely not a quadplex, which is what I bought in 2009. I don’t even know if I would be able to afford a single family home at this point. So that’s sort of what got me onto this question is what would I do if I were a rookie,

Tony :
Dave, aside from living in that area, did you do any other in-depth market research to say, Hey, this is actually a market for me to invest into?

Dave :
Not really, not between different markets. I did a lot of research into the neighborhoods and where to buy and I didn’t know at the time they called this driving for dollars, but I used to just bike to work and I would take all these different routes and just try and find areas that look cool. Honestly, I was very unsophisticated. I was 23 and I mostly chose by where I wanted to hang out and where I wanted to live. But it worked because Denver’s a young city, so a lot of the rental demand actually was from people in similar financial situations to be a similar age bracket.

Ashley:
So for that first property you kind of looked at where you want it to be. Why right now in today’s market is market research so important for short-term and long-term real estate goals?

Dave :
Different markets just offer different types of returns and I know it’s somewhat my fault that people think there’s a market out there. I put out all these lists of best cashflow and whatever, but in reality, different markets work different, are good for different strategies. And so it’s really important to align what market you choose with your personal financial goals. I always give the example of a mutual friend. I think we all have James Dard who operates almost exclusively in Seattle. If you ask anyone else, they’d probably say Seattle is a terrible market to invest in, but James is one of if not the most successful real estate investor I know. So I think it just shows that depending on your skillset and depending on what you’re trying to accomplish, almost any market can work. And so I think market research really starts with self-reflection and what you want to accomplish and then you can apply the market information and data that we’re offering you today to your own personal ambitions.

Ashley:
So before we get into sharing our data, what would you say your top priority is right now for your investing as to what you’re looking in a market?

Dave :
So I have an interesting, I guess less typical way of investing. I do live overseas now, and so I basically do two things at the same time. One I buy directly in the Midwest actually because I’ve been trying to find cashflow and I’ve identified some places in the Midwest where I think they offer good upside potential in terms of appreciation. But you can buy cashflow on the MLS right now, break even. Usually if you do a little bit of a cosmetic rehab, you can get it up to a pretty solid cash on cash return. So I’m doing that at the same time. This is not typically a rookie strategy, but I invest in syndications and funds, which is sort of where I take the bigger swings and try and make bigger returns in shorter periods of time. And so I look at slightly different metrics for each of those things. But when I buy directly, which is probably more applicable to this audience, I really focus on what I just said. Being able to find, break even cashflow on the MLS with a lot of upside for both cashflow and appreciation and we can get into how you determine that upside. But that’s sort of my number one criteria.

Ashley:
Oh cool. Thanks for sharing that with us. Alright, we have to take a quick break, but stick around, we’ll dive into where we’d start investing today right after this. Alright, welcome back. Before we get into more though, we’re going to go over the market research that Tony and I each picked for the dataset. So Dave sent us over to biggerpockets.com/where to start, and we were able to look at how many markets are included on there, Dave? Oh,

Dave :
I think it’s, let me count for you right now. I have it in front of me. It’s like 300 and something.

Ashley:
Okay. Yeah, so over 300 markets to select from. So Tony, we’re going to put you in the hot seat first. What market did you pick?

Tony :
So one caveat here, Ashley, we interviewed someone recently on the podcast and they were sharing how they use chat GPT to identify potential markets. And I did a quick exercise so I could share on that podcast and I went back to that chat and what I put into chat GPT, as I said, provide me a list of all the MSAs, so basic, the big cities in the US and be sure to include the name of that MSA and I want the median home price to be $250,000 or less. And then in that table also include job growth and population growth and chat GPT, spit out the super cool table with all this information. And I just kind of kept asking a different question to kind of drill it down. And there was one city that kind of caught my attention, it was Oklahoma City and when I went to the data that Dave sent, one of the cities was Oklahoma City. So as soon as I saw that I was like, okay, well that’s the city that I’m choosing.

Ashley:
That’s so funny you say that about Che GPT because when I did the show with Dave and Henry, Henry used it. So I used it this time to help with my analysis too, and it really was game changing, comparing the two times when I went through all the data.

Dave :
Interesting. I didn’t know you could do that first of all, but I will warn people. I think chat GPT was trained on data from 2022, so it might be helpful in pulling census data, but it probably won’t have the most accurate rent and other types of data in there.

Ashley:
Yeah, Tony, what I did was I actually uploaded Dave’s information, his spreadsheet into chat GPT and then asked it questions to filter it based off of that. And so then it gave me three different markets to select around based on what my criteria was.

Tony :
I love that.

Dave :
Wait, that’s awesome. But also to Ashley Henry and I did a similar version of this show and I picked Oklahoma City. We’re the same,

Tony :
We’re thinking the same way, man.

Dave :
It’s a great

Tony :
Market. It really is. And I’ll kind of get into, I know we’re going to go through that, why I like a lot, but yeah, there’s a lot in there that made me say I might actually end up buying something in Oklahoma City, so we’ll see.

Ashley:
Okay, so Tony, give us the highlights of what were the priorities that you were looking for when you selected this market that Oklahoma City stood out to you?

Tony :
So actually I guess maybe one step back is I thought about the strategy that I wanted to focus on first. And for me I said, well, let’s try flipping, right? I assume you guys be looking like the long-term buy and hold strategy. So let’s look at a slightly different strategy. And for me, when I think about flipping homes, I’m not James Dard who we just talked about, who’s flipping these ultra luxury homes and doing it all crazy, right? I’m the cookie starter home type flip where I can kind of turn and burn. So I saw data here where the median home price was relatively low. I think it was just over 200,000 bucks, $238,000 for the average purchase price, the average median home price. We saw a good job growth. So it means people are coming in there. It was a good balance between white collar and blue collar.

Tony :
So you got some diversity there. A lot of different types of economic activity. You’ve got the federal government, there’s an Air Force base there. I think an employee is almost 30,000 people, some crazy number like that. You’ve got the University of Oklahoma, which isn’t too far away from there as well. It’s like 30 minutes south healthcare, a lot of healthcare facilities, Boeing because the airb base I’m assuming has a pretty big influencer or presence in that area as well. And the state government has a lot of local facilities there as well. So you got this kind of diversity of employment. But what I saw, what really kind of tipped me into going into this market is that I asked chat GPT, and again, we can still go back and validate this data, but I asked it to show me the median home price by zip code.

Tony :
And then I also asked it to include the great schools rating for that zip code. And what I found was that there was one zip code where the purchase price, the median purchase price was about 190,000 bucks. So even less than the median for the city, but it had one of the highest ratings for schools in the neighborhood. So what I saw there is like, man, here’s a zip code where someone can get in for less than what it costs on average to buy a home in that city, still put their kids into a really good school. That sounds like the perfect place to find a little starter home for the family that took ’em for the first place to go. So those are the things that I saw that kind of made me feel that this might be a good market for me to flip in.

Ashley:
I really want to highlight that point that you went in and found a specific neighborhood. Neighborhood scout.com is another great tool to go in and actually look at neighborhoods within a city and narrowing it down because it does differ so much just because you’re looking at one big city, you really have to figure out and niched out and as to what neighborhood, what specific area in that city I’m going to invest in. And the numbers do skew. Every city has their A class neighborhoods, every city has their D class neighborhoods within them. So taking that extra step once you identify the city as a whole of narrowing down and finding that neighborhood that you actually want to go into,

Dave :
I think that’s super important. I just want to say representing the dataset too is like, this is MSA level data. MSA just means metropolitan statistical area, which is just what the census calls a metro area. And the point of it is to help you pick markets to develop what I typically call a shortlist. If you’re picking from anywhere in the us, I always recommend find three to five that you’re going to do a deep dive into. The data that’s in at these metro city levels is not going to tell you where to invest. Like Tony was just saying. And sometimes people look and say, oh, the red to price ratio in, I’m just going to pick Dallas, is 0.6, that’s too low. Don’t decide based just on that because that’s the average for the city. That means there’s certain neighborhoods where the rent to price ratio is higher, certain one where it’s lower.

Dave :
So you have to go in and do a next level of analysis of data analysis and market research as Tony just gave a great example of. But the data that we have in there is stuff like rent growth, rent prices and rent growth, home prices and home growth, the rent to price ratio, which is a great proxy for cashflow. So the higher the better and the closer to 1% generally speaking is the better in terms of ability to find cash flow, at least for on market deals. We look at population growth and job growth I think are some of the main things that we included in there. We don’t want to just look at housing market conditions, but also macroeconomics and macro conditions that don’t tell you what’s going to happen in the future, but at least provide some clues as to what cities might grow the fastest.

Tony :
Now guys, I know we’re going to get into the actual markets that we’ve chosen, but I guess just one thing I want to call out before we have this discussion is that there are over 19,000 cities in the United States. There’s tons of cities and I think sometimes rookies get caught up trying to find the absolute perfect city for them to invest into when in reality there are probably hundreds if not thousands of cities that you could go into and be successful. So I don’t think the goal of this call is to help you find that one Cinderella shoe city that fits you perfectly and nothing else would fit. It’s given you the opportunity to find multiple cities and just going with the first one that matches your investment criteria.

Ashley:
And I think Dave’s example too of James Dard that he had opportunity and advantages in that city that other people don’t and that helps him be more successful because he already has built out a team there he is, got great operations and for him to pick up and move to another city, it wouldn’t be as tight of a ship as something he already has in place in Seattle. So staying in that market is a huge advantage to him. I agree

Dave :
With everything Tony said. Those are a lot of the reasons I had picked Oklahoma City for the previous one, but I’ll give you a preview of one of the metrics that I really like and used for the market I picked today, which is something I call the wage to price ratio, which is basically I was comparing how much money you can earn from a regular W2 job to how expensive a house is in that area. Because I’m thinking as a rookie, I’m still working, I still do work, and so I’m considering what areas can my paycheck go the furthest towards buying as much real estate as possible. And Oklahoma City came up really high on that market. It was basically four and a half years of salary is one property, whereas in Seattle I think it’s 12 or 15. And so when you’re first getting started, just that ability to save up money in every year or two years be able to buy a property, I think is a huge advantage.

Tony :
So we both like Oklahoma City, obviously some good things happening there. Ashley, I’m curious what market you’ve chosen and even more so because obviously you’ve really only invested in the greater Buffalo area with a little bit of dabbling in some other places, but what market did you land on?

Ashley:
Yeah, so I picked Morristown, Tennessee. So I went into this with kind of a goal as in I’m a new investor, kind of like Tony I set, I wanted it to not be, I wanted the median price to be around 250,000. I’m looking for some cashflow and for appreciation and my goal is to sell this property in five years and do a 10 31 exchange into a larger property that suits my goals at that time. So as a new investor, I wanted to go into this with kind of that mindset because when I started investing I thought I’m going to hold these properties forever. I’m never ever going to sell. And throughout the last couple of years I’ve been thrown getting rid of a couple here and there because there’s so much equity built up. I have mortgage pay down all this stuff. So I’m thinking that’s how I wanted to approach this.

Tony :
Alright, we have to take a quick break, but stick around. We’ll be back with more market info right after this.

Ashley:
Okay, everyone, welcome back to the show.

Tony :
I just want to add one thing. I think it’s both interesting that you and I both, before we chose the city, we thought about what our strategy and what our plan was because you’ve got to choose the city that supports the strategy and you can’t do it backwards. So just an important thing to call out for the Ricky is you got to know what you want first and then let that lead into choosing the right city.

Ashley:
Yeah. So the first one with this is that the median price point was actually a little bit higher than what I wanted. It was 278,000, but the average property taxes are $585, which me coming from New York is unbelievably low. So right there I was like, okay, you know what? It’s still affordable because the property taxes are low. Once you pay off the property, you have to pay property taxes forever, even if the property is paid off. That’s definitely a benefit is having the low property taxes. Then I looked at the percentage of blue collar jobs compared to white collar jobs or is that what they’re called? White collar? Yeah, white collar jobs. And I wanted more blue collar jobs in the area because the property that I’m going for is going to be a lower price point, is going to be more suited for blue collar neighborhoods where there’s industrial jobs, things like that.

Ashley:
And then I wanted no extreme weather in the area either. The unemployment rate was 2.9%, which is actually pretty good compared to the other cities. The rent was $1,603 on average per month. But the biggest thing that I saw on there was that the rent growth was projected for one year to be 16%, and then there wasn’t anything for the five-year growth just in five years what the monthly increase would be. And the monthly increase was in five years, 1.1% monthly. And this was in the top five of all the markets on the spreadsheet that it was in for projected rent growth in five years. So that definitely really stood out for me. The price growth in one year was 8% and in five years 62%. So I’m looking at good appreciation and I’m looking at good cashflow based on the fact that I should be able to raise rents pretty much every single year over the next five years for a good amount.

Ashley:
And then also it’s a landlord friendly state. It’s also a one hour drive to the Smoky Mountains. And then it also has a big lake near it too, lake Cherokee. So having the option of being kind of near tourist attractions, I like to, and then there’s some new development going on. There’s an aerospace place that’s putting in 28 million into the area, but over the past five years, they’ve had steady growth of adding 500 jobs per year over the last five years each year. And I thought that was pretty good considering the population is only 49,400 for the city. So it’s not like it’s a huge city, but they’re adding 500 jobs every single year. So those were the things that I really loved about Morristown, Tennessee.

Tony :
That’s a lot. I didn’t know that that 16% Ashley’s covered for my job. The 16% you said that was 16% rent growth was projected for the next five years, or was that for the next one year?

Ashley:
So one year, 16% projected, and then it didn’t have a number in there for the five year rent growth. It just said in five years it’s projected that every month you’ll be able to increase the rent by 1.1% monthly. So year five, that’s 13% really that you could increase the rent in that one. You’re in five years too. Yeah,

Tony :
A lot of good underlying things. I guess actually maybe one follow up question to that. Were you able to drill down maybe on a neighborhood basis or was it just looking at the overall Morristown as a city?

Ashley:
Yeah, for this one, I didn’t pull a zip code when I did the Erie pa, PA one I did, but this one I didn’t

Tony :
Know. But I think it just goes to show that when the data’s in front of you, it becomes a lot easier to make a confident decision about where to go. And it’s like you don’t even really have to worry about anything else because the data’s telling you what the right decision is. So man, Moorestown, and

Dave :
I am definitely guilty of overanalyzing things as you could probably imagine in a lot of parts of my life, but

Tony :
Dave’s got an algorithm to help him pick his outfit in the morning, right? It’s like what

Dave :
I wish, stop giving me ideas, Tony, I’m not going to sleep tonight. But Ashley had a lot of great data points there. I recommend for people to pick five data points that they really care about, rent to price ratio, job growth, whatever it is. And to Tony’s point, just put it all in front of you and it becomes really clear like, all right, this market is the best in three out of the five of my categories, that’s great. Or I really thought Chicago was cool, but it’s actually at the bottom of the list for all three. So I’m going to eliminate that. And it doesn’t have to be super scientific. If you just get a very basic spreadsheet of five markets, five metrics, it’s going to tell you probably 90% of what you need to know.

Tony :
Dave, I couldn’t agree more, and I’ll nerd out a little bit here, but when I’m trying to choose markets on the short-term rental side, there’s really I think nine different criteria that I look at. I look at the level of competition in that market. I look at how desirable is it for me to personally want a vacation there. I look at the regulation, how restrictive is it as a market? I look at supply versus demand. How are things shifting in that market in terms of new listings coming online and people actually booking? And there’s a few other things that I look at, but what I do is I put a different weight to each one of those scores. So for me, maybe I’ll weigh cashflow slightly higher than appreciation. Maybe I’ll weigh tax benefits, being able to do a cost segregation and bonus appreciation higher than everything else. And when you apply the weights to each metric, now you can score each city, but the score becomes customized based on what’s important to you. And it becomes a super clear way to see which city actually aligns best with your individual investment strategy when you can add those weights. So again, it’s me nerding out a little bit because now we’re talking weighted averages. Who’s

Dave :
Making algorithms now, Tony?

Tony :
But it becomes an easy way, right? Because now Dave, Tony, and Ashley, we can all look at the same cities. We can score them the exact same way in terms of the competition, the regulations, but depending on how important each one of those criteria are, we might view those cities differently. So I found that to be helpful. Just want to share with the rookie audience.

Ashley:
Okay. So now Dave, we got to know Tony stole your Oklahoma City. What do you have to offer us?

Dave :
Well, this is great because when we were filming the other show, I was sort of deciding between two markets and I couldn’t decide. And finally I just picked Oklahoma City, but I get to now share my second play city, which was neck and neck. Now I’m loving this city. It’s Pittsburgh, Pennsylvania, never been there. But I know a few things about it and I’ll share some of the data with you, but I really like how affordable it is. The median home price is 219,000, which is about half of the national average. So if I were a rookie, this would be super important to me because of all the major metro areas, it’s one of the cheapest, but yet is still seeing really good job growth, is still seeing good population growth and also has a very good score for that metric I was describing earlier, which is the price to wage ratio.

Dave :
So it’s 4.6 years of your salary to get a house, which is great. And the rent to price ratio is nearly 0.7%, which for a whole metro area is actually relatively high. I did not do as well as Tony and go in and pick a neighborhood. But I think just generally that tells me there will be neighborhoods where you can find cashflow. And then this is something I just knew anecdotally, but Pittsburgh is, from what I understand, the epicenter of robotics in the United States. It’s where all the engineering schools that focus on building robots and manufacturing, not just humanoid looking robots, but manufacturing robots. And there’s just this huge high paid job boom in Pittsburgh right now. And I think that helps for just overall economic growth for the area could lead well for high-end luxury flips at some point or higher end apartments. As a rookie, I would just focus on getting any deal that would cashflow pretty well, but I think that that points to some long-term upside for the region.

Tony :
Dave, it is interesting that you pick Pittsburgh. I have a friend of mine who’s a short-term rental investor. He has properties in Crystal Beach, Texas, which is like, well-known beach destination and in southern Texas. And then he also has short-term rentals in Pittsburgh. And he doubled and really tripled down on its Pittsburgh portfolio because he found that it was easier and profitable to scale in that market than it was to do it inside of Crystal Beach, Texas. So it’s really interesting because you don’t think of Pittsburgh as a sexy destination, but it’s working really well based on the data you just shared as a long-term rental. And I personally know people who are launching short-term rentals in that market as well, that are doing incredibly well. So there’s some good things happening in Pittsburgh.

Dave :
It is often, I mean, we talk about this a lot, but it’s often the not sexy cities that do really well, particularly because to your earlier point about your personal criteria, it’s just less competition.

Ashley:
And think about those two states too, as far as the insurance probably cuts into his cashflow too, having properties in Texas too, especially on the beach. Okay, well, we would love to hear what you guys thought of the markets that we have selected. Maybe you invest there, maybe you invested there and pulled out of that market. But if you’re watching on YouTube, leave a comment below letting us know if you have any experience in these markets or if you’re going to look even more into these markets. Don’t forget to go to biggerpockets.com/where to start to download this data. Even if you are already investing in a city or know where you want to invest, first of all, go and look at all the data about the city you’re going to invest in that Dave has been able to pull for you. But also, if you ever do consider going and looking at another market, look at the information you should be considering based off of the tabs that are on there that you’re able to see what we thought was important as an investor to study a market. And then just kind of browse through and practice, practice, practice analyzing a market, pull different markets, use chat g, PT, or other resources. There’s bright investor.com, there’s neighborhood scout.com. Go into the BiggerPockets forums and search the market. I have for my market, Buffalo, New York. I have a keyword alert set up. So I think you have to be a BiggerPockets Pro member and you can set keywords up.

Dave :
Keyword alerts are for everyone.

Ashley:
Oh, awesome. Even better. So you can go ahead and set up a keyword for whatever market you’re looking to invest in. So anytime somebody posts about that market, you’ll get an alert and you can check out the post to kind of learn more. Don’t be afraid to actually create your own posts too, asking if anyone’s investing in that market and what they know about it, because having people who are in the market is going to be a great resource for you too. Okay, well, Dave, thank you so much for joining us today and for sharing Pittsburgh, Pennsylvania with us. We always appreciate your knowledge and your expertise coming onto the Rookie

Dave :
Show. Thanks so much for having me. It was a lot of fun.

Ashley:
Okay, so don’t forget to go to biggerpockets.com/where to start to download this data. I’m Ashley. And he’s Tony. And we’ll see you guys next time on the Real Estate Rookie podcast.

Tony :
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony :
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.