Hi. This is Devin Elder and in this video I want to talk about multifamily market selection and I have defined three criteria here. Now, nothing is a hard and fast rule. This is more of a guideline and really in anything related to multifamily, you’re trying to triangulate data. You’re not trying to have a precise set of data for everything, but you’re trying to triangulate data and get your data from multiple sources. So, this is a high level overview. This is not the gospel, but it’s three things to look for in selecting a market to invest in multifamily property.
The first one I have here is growth, so you want to see an area that’s got positive net migration. Meaning that people are moving to that city and more people are moving to that city than are leaving. There’s different statistics for this. The census bureau obviously is one. U-Haul is another. U-Haul has data on one way bookings. Meaning that if somebody’s going from Los Angeles to San Antonio, Texas and they’re booking a one way trip, U-Haul’s going to assume that that is a move. That they’re moving from Los Angeles to San Antonio, Texas, so there’s a variety of data sources, but you want to look for a market that is growing because obviously you need tenants and residents if you’re going to have a sound investment multifamily.
The second is job diversity, so you want to select a market where the economy is not wholly dependent on a single industry or single large employer. An example that comes to mind for me is the price of oil. In Texas we’ve seen certain markets really have some incredible boom and bust and boom cycles based on the price of oil. When the price of oil reaches a certain threshold, it makes some of these fracking and other operations extremely lucrative and it creates really some overnight population explosion in certain areas and that can be great if you’re riding that on the way up and then it can be just as bad riding it on the way down when the price of oil, due to factors that are out of our control in this local economy. The price of oil can tank and take your multifamily occupancy along with it, so you want to look for a variety of employers. Whether it’s a tech sector, medical, you know you name it, but you want a couple of legs on that table so that if one leg is taken away the table can still stand.
The third I have here is landlord friendly and I’m in Texas. This is a very landlord friendly state, but some states like Oregon or New York are a few that come to mind, may have very onerous landlord laws where it takes a tremendous amount of time and even money to evict somebody that’s not paying their bills. In Texas it’s very straightforward. If somebody doesn’t pay their bills, you can file and put up an eviction notice, three day notice to vacate and then go to court shortly thereafter. I mean you can have someone out of an apartment for a couple of hundred dollars in three weeks in a lot of cases. Sometimes even less. Now some states are much more difficult than that and what it does is create a lot more expense and risk as an owner in those non-landlord friendly states.
So, you’re going to want to look for growth of a market. You’re going to want to look for job diversity and you’re going to want to look for a landlord friendly environment and if it has those three things, you may be well on your way to selecting a good market to invest in multifamily.
Hopes that helps. Thanks.