How do you learn your market?

[KBecks]

I think my biggest challenge is -- learning the market, and also, choosing a neighborhood to really learn.

If I were to choose a neighborhood based on desirability, I would choose a few neighborhoods that are popular and vibrant and pretty, but where there are no homes available under $100k. 

If I were to choose a neighborhood based on getting a $50k or less deal, I would be looking at neighborhoods that I don't know, that I might not feel comfortable in.  Not unsafe, but just not anywhere I am familiar with.

College rentals might be interesting, but they are a different type of business.

I don't know how to research rents, or to figure what price / neighborhood is the right one for us.  I almost need to pick a neighborhood to commit to learning, and I'm not sure if I should choose the more grand neighborhood(s) or the less expensive ones.

My max would be about $150k (maybe up to $200-300k for a duplex in a "good" neighborhood), but I'm still not taking very expensive, but I am talking suburban vs. city locations and better school ratings.

There are places within a 15 minute drive that probably fit the 2% rule, but I'm not sure that that's what we want to own.  Is that silly?   I drift between thinking -- let's get a cheap one to try it out -- vs.  let's get one that we want to hold forever and ever that is VERY solid for location.

Edited I am obviously not talking about $250k + homes, and I am also not taking about $900 - $15,000 homes.  I can find those too, but the question is which slice of the middle market do we look at?  Where should I get started with learning and where should I focus? 

[the fixer]

I'm curious what others have to say too, but here's what I know:

You need a good ground game. If the neighborhood is any good at all, the neighbors will be VERY talkative. Walk around the neighborhood you want to learn more about. Have your SO with you if possible, that way you're a happy couple and not just some random person on the street. Look for people outside in their yards, approach them, tell them you're thinking about buying a house in their neighborhood and ask them some basic questions. By telling them you want to buy here, you just complimented them on their choice of location, so from their perspective you're asking them to brag about how great it is. I've learned tons of stuff about various neighborhoods from talking to neighbors. The gold mine is a nearby friendly landlord; I just ran into one of those last week. If you're naturally shy, don't worry, you'll get over it after the first one.

While you're talking to people, ask them if they know of anyone in the neighborhood who might be interested in selling their house. This can be a way to get off-market deals.

Other resources for information are neighborhood based blogs, churches, and newspapers. To research rents you can start by checking Craigslist, but in my experience CL can mislead you into thinking rents are a lot higher than they are because many of the listings can be for big, expensive apartments with correspondingly high vacancy. The guys advertising market rents on CL will only have their ads online for a week or two at best, and if you don't know about the seasonal cycle in your neighborhood you may not even be checking at the right time. What works better is scouting the neighborhood to find tenants, and ask them how much they pay.

I've played with neighborhoodscout.com a bit too, but it doesn't give you that much actionable information IMO.

[arebelspy]

I wouldn't recommend sacrificing location quality for an initial investment, and maybe ever (and do it very cautiously if you do).

That doesn't mean it needs to be a top of the line super trendy neighborhood either.  But it shouldn't be a place where you say:

I would be looking at neighborhoods that I don't know, that I might not feel comfortable in.

To answer your overall question of "how to learn a market", it goes to one line you said:

I don't know how to research rents, or to figure what price / neighborhood is the right one for us.

You need to start looking at the listings in the areas you're interested in daily, both for sale listings and for rent listings.

Get rental comps from the MLS (not sales comps, rental comps), check sites like Zillow for their Rent Estimate and Rentometer.com and Craigslist.  Know what houses sell for and rent for, and why, and what amenities and neighborhoods change that, and by how much.

The way to learn a market is to dive in and look at what is available and what it goes for, over an extended period of time.

You can't just read about a place for 15 minutes and "learn" the market.  It takes time, work, and due diligence.  (Or glomming onto someone who you trust that already knows the market and being able to use their expertise and knowledge.)

(I'm skipping past the macro view to the micro, because presumably you're already familiar with the local economy, laws, courts, etc. etc. - but if you weren't, or if you were trying to identify a market long distance, you need to start with the macro before going micro.)

Hope that helps!  :)

[KBecks]

This has been the hardest part.  I just need to pick one neighborhood, and I am picky (and I also need to be cheap).  Hmm.   I have 6 potential suburbs that I think have solid long-term investment potential, good schools, should have good demand, etc.  Maybe I need to research them further, one at a time, because poking around with 6 is overwhelming.  Need to narrow these down?  I have my mental top 2 suburbs picked out, but do the numbers really work?  Can I find a property that works in those areas?   One suburb has very few rental homes.  The other has more rentals.  It would be interesting to study.

I think the baseline is a neighborhood that I would like to live in (as a mother of young kids).  Hmmm. 

[arebelspy]

This has been the hardest part.  I just need to pick one neighborhood, and I am picky (and I also need to be cheap).  Hmm.   I have 6 potential suburbs that I think have solid long-term investment potential, good schools, should have good demand, etc.  Maybe I need to research them further, one at a time, because poking around with 6 is overwhelming.  Need to narrow these down?  I have my mental top 2 suburbs picked out, but do the numbers really work?  Can I find a property that works in those areas?   One suburb has very few rental homes.  The other has more rentals.  It would be interesting to study.

I think the baseline is a neighborhood that I would like to live in (as a mother of young kids).  Hmmm.

If all six are roughly equal in terms of neighborhood quality, start looking with some simple rough numbers and see where the numbers look better and dive in there first