Erion Shehaj

On one hand, you want to invest in real estate to build a solid portfolio and achieve financial independence. On the other, you are currently located in a market where real estate is too expensive to make the numbers work.

What do you do? The obvious and easy solution is to consider investing opportunities in out-of-state markets where prices and rents are much more balanced. But the ease quickly ends when you have to get tactical and select a good market to invest in.

This is the point where I see real estate investors make the BIG Mistake: They rely on “Best Real Estate Markets to invest in 2020” articles to select their target market. I can certainly understand the allure. The research criteria for selecting these markets seems rigorous. They are looking at population and job growth plus real estate price and rents growth. What’s more, they offer a “silver bullet” that reduces the overwhelming task of picking from a multitude of options into a few neat bullet points.

“Why is that the wrong methodology to select a real estate market”, you ask?

One major reason: All the data they’re using to select the target market is backward-facing which means that it only tells you what has already happened. It is telling you that it was great to invest in that market 5 years ago. Investing in a real estate market because of its performance in the past is like deciding to invest in Apple stock because it is up huge over the last 5 years. The blind spot investors are falling prey to is the untrue assumption that the upcoming future will be just like the recent past. And as they tell you in those stock market investment commercials: Past performance is not a guarantee of future results.

By the time a real estate market makes it on one of those lists, you are likely too late to the party. Best case scenario, you are catching the very end of the wave. Worst case scenario, you are buying at the top.

A Better Way to Select a Real Estate Market to Invest

It is always easier to point out the fault in something than to offer an alternative that actually works better. But that’s what I’d like to offer you now. Let’s dive in.

Instead of using those articles as the end of your search for a great market to invest in, use them as your starting point. If X metroplex has experienced population and job growth in the recent past, what are some of the towns in the edges, in the fringes that may have not experienced the same growth… yet.

To continue with the Apple stock analogy from before, you focus your search on the technology sector and try to figure out the next company that might grow in the future. In Wayne Gretzky’s famous words: You skate to where the puck is going, not where it is.

It’s important to understand that metroplexes are like magnets. As they grow, their “pull” on surrounding areas grows as well. So if you can figure out the path of growth, you can acquire properties ahead of it. Then, maybe 5 years later, you might see that area on the list of best markets to invest in 2025.

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What method have you used to determine the right market to invest in? Drop us a comment below – we’d love to hear from you.

I want to share with you a tale of two investors. Picture two childhood friends who went to and graduated from the same college with a degree in the same field. They possess the same natural talents and intelligence. Further still, they earn the same income and live the same lifestyle which results in the same savings rate and same amount of investment capital.

Fast forward a decade or two. One of these investors goes on to build an impressive real estate portfolio with multiple streams of income at different stages of her life. Meanwhile, the other does some sporadic investing and ends up with a couple rental properties that while they provide a good return on investment don’t change his life in a meaningful way.

Key Question: What made the difference?

If all the ingredients are the same, what was the cause of such vastly different results in the end? Why did one investor manage to succeed at a much higher level while the other fell short?

While the above is a hypothetical scenario meant to isolate the critical difference maker in success for long term real estate investors, I can tell you that in my experience I’ve seen similar scenarios often. Based on that experience, I can tell you that the critical factor that separates successful investors from those that fall short is the presence of a thoughtful strategy and the execution of a plan of action that flows from that strategy.

Why successful investors need a strategy to succeed?

You see, the process of building an impressive portfolio is too complex for it to just happen by accident. No one has ever woken up after a decade of dabbling in investing and said: “Look Honey, it turns out we built a word class portfolio and didn’t even realize it…”

It takes a certain amount of critical mass for your portfolio to generate the kind of income that change substantially change your life. It takes a lot of discipline to stay on track for 10, 15 or 20 years. It takes a lot of focus to zero in on your action plan and not get your head turned by the trendy investment strategy of the month. It takes clear milestones along the way to show you where you’re supposed to be on every stage of the journey.

Without a thoughtful strategy and an accompanying plan of action to execute, it’s impossible to reach that critical mass, acquire the discipline and the focus and establish those clear milestones that are critical to success. In the wise words of Warren Buffett: An idiot with a plan can beat a genius without one.

Bonus: The Blueprint Annual Review Process

As part of our Blueprint plan, we do an annual review with our client, I’m working on one such review for a client meeting so I thought I’d share that process with you in hopes that you find it helpful. During this annual review, we go over 3 key questions:

• How did last year go? Here we look at the targets we set last year. Did we accomplish all we set out to achieve. If yes, we celebrate the win. If no, we need to find our what happened and learn the lesson for the future.
• What do we know today that we didn’t know when we prepared the plan? In other words we look for new information that we can use to course correct, if necessary.
• What do we need to accomplish this coming year?