Where to call home (or: finding a market to support our ambitious plans)

So once you've decided to buy an investment property, the next question is where?

I strongly recommend buying somewhere easily accessible to you since I DON'T recommend using a property management company (that can be saved for another post). It's almost certainly best for you to manage your properties yourself.

But if you are in a central area (say Washington DC), or there is more than one person partaking in this venture (dealing with more than one person in a real estate venture is also going to consume an entire post at a later date), then you have options. Here's a short list of things to consider when looking for the first property:

- How expensive are the houses? Can you afford to buy in that area? Even more importantly, can you afford to pay the mortgage if your property is vacant?

- What is rent like? Study this for at least 2-3 months. Are rents rising or falling? Look at places comparable to what you want to buy, how close are the rents to what you'd estimate to be your mortgage payments? It unlikely that you'll be able to rent that place out for more than your mortgage payments (although Biff and I got lucky and did just that), unless you made a huge down payment. Can you cover the gap each month?

- What sort of people are living in the area? The type that are looking to settle down? Or is it a more transient population, people who are just here for a few years before moving on? Obviously both populations can co-exist in the same area, but many areas tend to lean heavily in one way or another.

- As an extension of the above question, what was the demographic you would be targeting? Families? Young singles? College students?

- How much money do you have? This is a crucial question. I don't believe for a second that you can buy houses for No Money Down and make a profit on them. I intend to write yet another post simply on saving up for a down payment, but in the mean time I simply believe that to be successful in real estate you need a decent amount of cash saved up. Remember that, even if you buy for No Money Down, you still need a cash reserve for any emergencies (like a leaky roof).

These were the questions that Biff and I asked ourselves when we were starting out. My initial bright idea was to buy in our college town. On the plus side the homes there were relatively cheap (especially compared to Washington DC), we understood the area (I spent 4 years there, Biff was there for over 8), and the constant flow of students in and out each year would always give us a huge pool of potential tenants.

The bad side of the equation was simple. Neither of us lived closer than 3 hours away from said town, and college students can range from simple and quiet to wild and destructive. Such a property would probably require more maintenance than your average place.

I still thinking that owning in a college town can be a great idea, and there's no shortage of non-urban campuses to consider (non-urban implies far more affordable properties). And someday we may further pursue that idea. But at the time Biff trumped my idea with a far greater one.

We decided to buy near Williamsburg, where he lived. Houses were just about as inexpensive as the college town. There were 3 major military bases within commuting distance and several more smaller ones. The military became our target demographic, they move every few years so they are less likely to be interested in buying, the ones who choose to live off-base tend to be very respectful and quiet, and they have salaries.

So before you buy a property, consider the above questions and try to come up with new ones. At this point we're just interested in finding a general location so don't bother asking questions like "Should I buy a townhouse, condo or single family?" unless it directly pertains to your market.