Without a doubt, the best source for targeting city-by-city and state-by-state advertising is BuilderMagazine. This source is the home building industry’s biblical resource for new home development. Annually, and now even monthly, BuilderMagazine publishes its forecast for the real estate market. This forecast, available online at builderonline.com, gives you a methodical breakdown of the top 75 markets nationwide. This research is broken down by city and state, the number of housing permits issued, and other economic and housing market indicators. Builder magazine even breaks down MSAs (Metropolitan Statistical Areas) from rising stars to slow-burning stars. The Green Triangle of real estate, which had been my path to glory, is comprised of Phoenix, Riverside, and Las Vegas, and all three ranked in the top ten markets nationally for permits issued in 2003-2006. What that translated into for me was a lot of moolah. However, don’t be fooled by the markets that are at the top. While Phoenix ranked number two in 2003 and 2004 and had an annual rate of appreciation of 33 percent; Market number three, Houston, appreciated just 7 percent annually. As a flipper, you will not make money in that type of market. What you will make are some major mistakes that will hurt your pocketbook and send you to the bank very quickly. Nobody likes to be on the bench.
In terms of deciding on an MSA, don’t reinvent the wheel and duplicate the research that already exists. If your interest is in Washington, DC or Atlanta, for example, subscribe online to the major newspapers in each city. In the last example, they would be the Washington Post and the Atlanta Constitution Journal. These two newspapers will give you a real idea in terms of where the market is for each respective city. Another invaluable resource is provided by the National Association of Realtors, also known as NAR. At Realtor.com, which is part of NAR, you will find that NAR provides a monthly tabulation of the top ten most appreciated markets in the nation. Therefore, there is no need to duplicate and reinvent the wheel. The investigation is now available to you. This information is free, so take advantage of it, but also have a good eye. Just because a market is in the top ten and on the leaderboard does not necessarily mean that it is a long-term winner. Learn more about the city and the region and see what their long-term prospects are. For example, is the market expected to have continued real estate growth over the next twelve to eighteen months? Remember, if things are slowing down a bit, it may be too late to go to market, but also keep in mind that you don’t need three years of growth, just nine to twelve months of growth, which is enough time to run two or three. cartwheels and “Dodge Salt”. Inside and outside, no one gets hurt, and you’re on your way to the bank with a couple of big, fat checks.
Other market criteria are pretty obvious. These attributes include a city or state with low tax assessments, high job growth, and a pro-housing sentiment in the region. However, let me warn you not to get too immersed in these little details. Remember, paralysis by analysis. Avoid this kind of slow mission. Let me give an example. In Riverside County, where I bought about thirty new homes between 2003 and 2005, the tax break is roughly 1.7% to 2.0%. Compared to the national tax assessment average of 75% to 1.0%, it is almost double. Given a Riverside County tax rate of about 1.85 percent on a $ 400,000 home, this equates to a monthly appraisal of about $ 500 in taxes. In many cities in the United States, that equates to the monthly rent for a nice one-bedroom apartment. But don’t worry, because Riverside County had some of the best appreciation rates in the country over a five-year period, ending in 2005 with an average annualized appreciation rate in the range of 27 to 32 percent.
What is the lesson here? Don’t get caught up in the little details. Keep in mind that the game here is a quick appraisal, not micromanaging of an asset that will be quickly and completely disposed of within two to three months. The fact that you can save $ 200 to $ 300 a month in taxes with a 75 percent tax rate over a two to three month period in a market that can give you only a 6 to 7 percent annual appreciation, such as Houston. market, versus a 1.85 percent tax rate, such as Riverside, California, which issued an annual appreciation rate of 27 to 32 percent, illustrates that the investor’s focus should be on appreciation, not extraneous details and irrelevant.