Lessons for Picking the Best Real Estate Investing Market

What is the best market for real estate investing? I get asked the question and see the question asked a lot. And it’s one that Selenid and I asked initially all the time when we got started.

And it makes sense.

Because the cliche mantra in real estate investing is: location, location, location. So it becomes natural to focus on where you will invest in real estate i.e. the location of the real estate.

However, that’s a tricky misrepresentation or misunderstanding. Because it’s less so about picking the right real estate investing market and more about picking the right properties to invest in within any real estate market.

Yes, any. Now, some places may have more or less opportunities for good deals. But there really are good deals in all markets. And even more than that, markets change. And your likelihood of picking the right market is near impossible.

Except for me and Selenid. Because we did just that. But rather than disprove everything I just said, I think it actually provides an important lesson and proves it correct.

Enough of this, let’s get into it…

How we picked the best real estate investing market

Selenid and I began our real estate investing journey in 2020. You can read all about the entire journey here.

To educate ourselves, we read 3 books – The Millionaire Real Estate Investor, Rich Dad, Poor, Dad, and The Doctor’s Guide to Real Estate Investing. Plus we took one course, Zero to Freedom.

After that, we were nervous but we had enough information that we just needed to dive in and learn on the job. We didn’t want to get bogged down in analysis paralysis.

However, to that end, we had to pick a real estate market. We lived in Buffalo, NY, my hometown. And our desire was to invest locally for a few reasons. We wanted to get our hands dirty and gain “on-the-job” experience. Plus we also wanted to invest and build up our city.

The problem was that Buffalo, NY was listed on multiple lists as being one of (or often times) the worst markets for real estate investing!

The other option would be to invest in another city.

As newbies, this obviously made us nervous.

We had a decision to make

Again, we didn’t want to fall victim to analysis paralysis. Of course, this didn’t mean jumping into a decision prematurely. So we again educated ourselves as best we could and then just had to make the call.

Ultimately we decided to invest locally in Buffalo, NY. Why? Well, for all of the reasons we stated above. It gave us the opportunity to get the best hands-on experience and we got to invest in and build up our city.

But we also spoke with a bunch of local real estate agents including the investor agents we ended up working with (and still do). We started analyzing potential properties and found enough that either worked or came close to it. The concept that even in a “bad” market we could find deals that cash flowed well began to set in.

And so, in October 2020, about 3 months after we started our education, we bought our first duplex (full analysis of that deal here)!

And we kept investing…

Fast forward to 2024

And…Buffalo was named the hottest real estate market in the U.S. by Zillow!

What?!

Where did that come from? Well, it seems like the analysis was based on rising jobs, speed of home selling, and expected market appreciation among other factors.

So we did it! We picked the best market for real estate investing in the whole country! But how did we do this? Was it careful analysis? Some insider information?

No! Of course not! It was pure luck. We could not have guessed this. Nor would we ever try. That’s speculation. And our investing strategy for real estate – same as for stock investing – does not base itself on speculation, it’s based on cash flow.

Market appreciation is great. But we don’t depend on it. Because you can’t. This time we got lucky. But we are just as likely to be unlucky next time.

How does this affect our real estate investing plan?

Well, it really doesn’t.

Our investing plan calls for investing for the long term. We have no plans to sell our investment properties anytime soon for various reasons.

We use the same criteria to identify, analyze, and buy good investment properties.

In the end, we will keep buying and investing in properties in Buffalo. We will also use the same principles within our newly formed real estate company with Daniel Shin, Cereus Real Estate, which was created to offer these opportunities to other doctors interesting in growing wealth via real estate.

But this still has to be really good news for us right?!

Yes. But also no.

It’s great for the properties that we already own. Their market value will rise and thus so will our net worth. But that won’t result in more cash flow for us. So in practical terms, again not much will change. Unless rents rise commensurately.

But as my properties rise in value, so will others. That makes it harder to find good properties. Ask anyone in California. Higher home values decrease cash flow. There are still good deals available. But they become a bit more scarce.

But if/when that happens, we will keep just looking for and investing in only the good deals.

So what does this story really illustrate?

Here are the main points for breakdown as I see them:

There is no perfect market for real estate investing
Even if there was, there is no way to predict it ahead of time. Trust me, no one was guessing Buffalo as the hottest market a few years ago…
Even if you could predict it ahead of time, it wouldn’t really matter. You don’t need to invest in the best market to be successful. You can be successful in any market by analyzing deals carefully, investing according to your criteria, and managing them effectively – either with help or by yourself
And lastly, even if you are successful predicting the best market ahead of time, the benefits are more theoretical than practical…your cash flow will usually stay the same and finding good deals may become more challenging
Your property’s value will rise. But that can only be harnessed via selling your property for a higher value (which will result in a big tax hit unless you use a 1031 exchange) or tapping the value via a cash out refinance (assuming interest rates are low enough so your cash flow doesn’t decrease so much that the deal stops making financial sense)

And if you would like to learn more about starting or optimizing your journey in real estate investing, these 3 posts are required reading!

You can also join our investor group with Cereus Real Estate here!

What do you think? Can you pick the best real estate investing market? What do you think it is? How should we invest in real estate? Let me know in the comments below!