I hear it all the time…

“How do I know where to invest? How do I choose the locations?”

The short answer is research, research, research.

The first 3 things you need to research are found in this video:

Whom do you want to serve?

I’ve written about this before, but understanding whom you serve is critical to your decision-making process when investing in real estate.

If you are going to actively invest and want to know where you will have the highest rate of success and the biggest returns, you need to figure out who your ideal tenant is and learn where they like to live. As you know by now I am hyper-focused on investing in multifamily properties that I rent out to solid B-Class families. That is the tenant I seek to serve.

What can I say? I love to serve working class families, pink and blue collar workers who work hard to put a roof over their loved ones’ heads and food on the table. They drive a decent vehicle and they don’t live a high-class luxury lifestyle. That said, they aren’t just getting by either. Quite the contrary. They are doing just fine, but they don’t have millions in the bank.

I’ve done some deep research into various states in the U.S. to see which areas match the people I want to serve. At the top of the list, I’ve identified Charlotte, North Carolina, as the place for me to invest. For you it may be somewhere else.

When choosing properties based on the “whom do you serve” rule, you need to dig into the following 3 criteria:

Demographics

For the sake of argument, let’s say you also like  Charlotte. Okay. Great. It’s a perfect place to buy rental properties  – Tweet   if you like the idea of serving families in the middle-income bracket who are stable and will pay rent on time and in full. But Charlotte isn’t the only place where this holds true.

I know people who love to invest in properties in the Houston and Dallas areas, Tulsa, different parts of Ohio and several areas in Florida. All for similar reasons. These fellow real estate entrepreneurs like serving the working-class demographic who pay a fair rent on time most of the time. These tenants don’t cause big issues and they just want good places to live, grow and thrive.

Individuals in this demographic tend to keep their jobs over the long haul and pride themselves on putting family first. If you can give them clean places to live with 2 and even better 3 bedrooms, plus a few amenities like a playground for their kids and laundry facilities in their unit or in the complex, you can do really well as their landlord.

Economy

Is the economy in the areas in which you are considering investing strong and stable?  – Tweet   Are there a lot of job opportunities that would appeal to the demographic you want to serve? What type of growth is happening in those areas that may dictate a better economy in the near future?

Once you’ve chosen maybe five states in which you may want to invest, drill down to the counties and the cities. Research the economy in each of these areas. What’s the job market like? The unemployment statistics? The rules around multifamily dwellings?

How many of these multifamily properties exist and are more complexes being built? If not, could you possibly build a great apartment building or complex? Hey, if more are needed based on your research, why not consider it? You can raise the private capital if your plan is solid. Just know that is the tougher path. Buying an existing building or complex is way less problematic!

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Political Climate

When it comes to investing in rental properties, this may be something you never thought you’d have to consider, but guess what? The political climate in the areas in which you are thinking of investing in will dictate the stability of the area… and how successful you can be at renting your properties to stable tenants.

Seriously, look at what’s happening where I live! There is no way I’d invest in this area right now or maybe ever. The rules around landlording are more challenging. Let’s just say that tenants can go without paying for a long time without being forced to leave for a variety of reasons supported by governing rules. Of course, it’s more complicated than that, and that’s just one reason I won’t invest in properties in Spain. Right now, it’s the political climate. I wouldn’t ever invest in an area with such unstable politics.

It’s not just where I live that the political climate is a bit off.  The U.S. as a whole faces interesting challenges, too; people are divided like never before and each state has its own political challenges.  – Tweet   It’s up to you to do your homework regarding the politics of an area before buying properties there. That way you can avoid possibly costly surprises.

I talk about it my book, Grow Your Money the SMART Way, which you can grab for free by clicking into the link below:

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