Property Types And Markets

There’s a principle when it comes to real estate investing as it relates to what to buy, and in what market to buy it. Property types and markets are a huge part of the real estate investing equation.

 

One of the things I’m asked is “Are you going to sell us duplexes? Why not fourplexes? Why not 10 unit properties? Why not just a bunch of houses?” This is not arbitrary from my side. There’s a principal that says: In whatever market you’ve decided to invest, you can only invest in what that market gives you freely. We have to stop trying to force square pegs in to round holes. It just doesn’t work. Let me give you a perfect example of that. Now I converted from being a house guy to being an investment specialist, in the 1970’s, here in San Diego County. I left this market, in 2003, because the rent/price ratios started getting too crazy. But here’s the point, never in the years from 1976 to 2003 did I ever find a house that I thought was a worthwhile investment as a rental for any of my investor clients. It just didn’t make any sense. What made sense was 2-4 units. Now there are other markets I’ve been in, where you could buy 1-4 units at will, whatever was available at the time you were looking. Boise Idaho is a perfect example of that. You could throw a dart at a zip code, in Ada County where Boise lies, and you could just arbitrarily say “I want to buy three units” and if you found three units, it would be a good investment. If you wanted to do a single family residence, it would be a good investment. You go to Phoenix, it’s like there’s an unwritten rule; 2-4 units shall not be built unless you need armed guards to go in and collect rent. I’ve never understood it, but that’s the way it is in Arizona. In Texas, I’ve not sold a single family residence yet in almost 8 years. Not because we can’t find them that are good rentals and the rent/price ratios aren’t good, it’s that I can’t find them to have all the factors I like in the areas in which I would put my 84 year old mom to live alone. So I just take what every market gives me. In Texas, it’s 2-4 units because the builder I use can go to areas I would put mom to live and he can build excellent 5-Star duplexes in those areas that have rent/price ratios that absolutely work, that give the cash on cash we want. And so, that’s what I do. Don’t try to force what’s not there. The principal is this: Take what the local market gives you; Smile.

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