The Power of Any Market: Location, Location, Location.

Choosing a market could easily be one of the biggest challenges people have when starting in real estate. Without a market, you can’t start anywhere. You can make money in any market but everyone has their own business plan that includes their priorities. Ultimately, your priorities dictate what market to invest in.

This interview is with Jen S. I met Jen at a United Kingdom Real Estate Investors meetup that Michael started earlier this summer. Jen is living in the UK and has invested in the US. Jen is always providing the group with great insights on the knowledge she has on the particular markets she is looking in.

Why did you start you real estate journey?

Even as a child, I have been fascinated by cityscapes, different types of homes and apartments, etc. I grew up in Boston but my dad was from NYC so we frequently would take the Amtrak there. To this day there is an excitement I get from when the train turns a certain corner and you start to the see the Manhattan skyline. I also enjoyed films showing other cities around the globe: how did people live in Paris? In Tokyo? In Sydney? Even though we didn’t have a ton of money growing up, I “travelled” this way through film and books.

I started thinking about prices of property probably in the 1990s—my uncle lived in a super cool loft in Soho when this was still semi-bohemian but changing fast. He moved to Paris because it was much cheaper rent at the time, something like 1/2 or 1/3 the price. This heightened my interest in real estate.

At my first real office job in NYC again I pored through data to figure out a location for an apartment that was inexpensive, relatively safe and decent-ish commute. I ended up in Greenpoint, Brooklyn which at the time was still pretty dirty. Rats outnumbered hipsters then but it was soon to change. 

Side bar to illustrate the power of improving areas:

Greenpoint has risen in price by 82% since 2012-the first data I could find—I imagine it had already risen before 2012 as well).

I moved to London to study but always stayed plugged into the real estate trends back home. After moving to Switzerland, and moving back to London, my husband and I got tired of renting and not having any real estate investments. We then decided something had to change.

Real Estate Portfolio: 

My husband is from Argentina and we visit every year. We frequently explore all the cool neighborhoods. It reminded me of Paris for 10% of the cost so we bought a 1 bedroom apartment in a 1920s style building within a few blocks of the river. We saw the changes coming to the area; pedestrianization and upcoming bars and restaurants. We were able to buy at a discount because the area was not seen as modernized.

In 2010 I bought a condo in an up and coming part of Boston, close to the subway and relatively close to the key hospitals/ medical schools. Purchase price was $270k and fair market rents were around $1300 then. When I sold in 2019, fair market rents had risen to $2200 - 2500 and sale price in the low 400s. While it wasn’t super cash flow heavy in the beginning, it quickly caught up. This is the kind of rent growth you can easily get in a booming city with tough zoning and building constraints.

My London home: I know this is our primary home but I disagree that the primary home should not be viewed as an investment. It is often people’s biggest single line item in their net worth, and it is often the asset that can secure the best financing terms and tax treatment. I don’t look at it like a piggy bank but neither do I take big risks on renovations that can’t be justified by the market.

I’m proud of our market selection because we could have been flat or down like some London areas since we bought but instead the neighborhood rose around 40%. We decided what our priorities were and chose the market that fit our criteria: Affordable areas with good transport and fairly low crime.

What difficulties are you having when choosing your markets? We would love to help you decide.

If you have any questions for Jen or about this article, please comment below or email us at exploremore@adventurousrei.com

Explore More. Adventure Awaits!

How am you deciding on new markets now?

• The standard stuff like population, crime rate, etc..

• What kind of job growth (the dream combination is rising number of high paid tech style jobs but with some relative affordability still).

• Is there natural beauty and activities that attracts people (e.g. skiing, hiking, boating).

• Weather, how many days of sunshine. Remember what it was that first attracted people to California: …weather! It is not immaterial. If Spain and Italy had better job markets they’d be more expensive than London given their awesome weather.

• Fiscal environment of the place: landlord friendliness, tax environment, underfunded pensions that could cause issues.

• Diversification of the economic base. If one sector got hit, what would remain? 

• Cultural / educational atmosphere: Are there interesting and fun things for people to do—this doesn’t have to be “elite” activities like NYC opera – it can be fun things like music in Nashville, TN or Austin, TX.

• Climate risk: pretty hard to model this beside the obviously risky South Florida but I try to avoid risks that I struggle to price. I think climate risk is generally quite underpriced right now and I would like to avoid big surprises (e.g. I know of a working class town in Southeastern Massachusetts where homeowners suddenly had to pay $1000 a month in flood insurance). In some cases people will be able to have the government “take care of it” but this is fragile in the medium term given all the other things people are asking the government to pay for.

• Walkability: if possible I prefer an area where you can at least walk to get milk, etc., when you run out. I know this is much more uncommon in the US. It’s more that if you have 2 equal places on all the other factors, I’d prefer the walkable one. Especially with people wanting to get more fit and spend less time in their cars.

What I’m struggling with now: I know that 1% is the dream target but this is super tough to achieve without going into some pretty distressed, low or no growth areas, or without getting some kind of amazing quirky off market deal. 

Greatest lesson learned thus far in real estate?

I have probably not taken ENOUGH risk in my investing life especially when I compare myself to the massive, rapid success stories on BiggerPockets, for example. I’m happy that my decisions to date have at least allowed me to take time off and be a stay at home mom, without huge financial pressure. 

Also, I have been somewhat surprised how rapidly prices can move in places like Idaho and Colorado. I was working on other personal projects and suddenly prices were up 30% over a couple of years! This is influencing how rapidly I will make decisions on such markets, once I have my financing locked down.

What are your long term investing goals?

I sort of don’t like to tie myself down…I have seen so many predictions over my years that I am wary of extrapolating out too far.

My only answer to all that is to try to diversity as best I can across currencies, asset classes, and geographies while also trying to keep things fairly simple.