Why It's Important to Research the Market
Once you're ready to start searching for a turnkey property, it's tempting to look at available homes right away.
However, it's in your best interest to spend some time analyzing the various real estate markets across the country and narrow down to a few that you like. Why? There are are two main reasons for this:
1. The market will have a huge impact on your long-term success.
How your rental properties will perform as the years go by (ex. the cash flow they will generate) will depend on many different factors, but they always start at the large macro level and work their way down.
If unfavorable conditions exist at the top (market or neighborhood), it will not really matter how good your rental home is - you will feel the negative effects on your performance. This can manifest itself as higher tenant turnovers, shorter lease terms, increased late payments or evictions, and decreased price appreciation (or even depreciation).
Think about this. If you purchase a property in a city with poor economic conditions, rising unemployment and a declining population, do you really think that your rental will be a good long-term investment?
It likely won't be. As a landlord, you want a strong rental market so there will always be demand for your property and the rents will keep rising. People tend to move to areas that have good economic prospects and out of areas that are not doing so well.
Properties in a city with a solid economy and population growth will also likely appreciate in value as home buyers bid the prices up. And while you probably shouldn't focus on appreciation as a deciding factor, your overall return on investment will be much higher if the property value does increase.
The key takeaway here is that while things like the property's cash flow, return on investment, cap rate and other "numbers" are important, its location matters above all else. By picking a solid market and neighborhood, you're greatly increasing your chances for success. The opposite is true if you blindly invest without keeping the big picture in mind.
2. If you try to look at all available turnkeys, you'll quickly get overwhelmed.
This one is pretty simple - picking 1-2 markets will help you narrow down your search efforts.
Most large cities will have at least several turnkey companies selling properties. At any given time, there are thousands of turnkey homes for sale across the country.
Trying to look at all of them will be largely a waste of time and you will spread your attention span too thin. On the other hand, focusing on a specific area will greatly reduce the number of listings you have to go through and will also help you learn that area much better.
This is exactly why I highly encourage you to work through this module and pick a couple of markets to focus on, rather than looking at all available turnkeys, all at the same time.