By Gregg Cohen
Ever seen the Nightmare on Elm Street horror movies? Remember the feeling you felt as you were watching the young blonde girl (it's always a blonde girl) go into the forest (or you can insert any dimly light area here) where Freddy Krueger is hiding, ready to attack? You were probably saying "No no, don't go there, don't do that, you're going to regret that!" Well that's what I feel like when I see investors buying long-term investment properties in real estate markets that little chance of helping them reach their cash-flow goals. The real estate market they are investing in is like Freddy Krueger to their cash-flow goals, ready to dig his sharp nails into their bank accounts and kill their ROI's. Obviously, this is not a good thing.
As investors, we want our real estate market to be more like Ben Stein. Remember the TV show on Comedy Central called Win Ben Stein's Money? In the show, the contestants had a shot at winning Ben's money if they were informed and could take action quickly by answering the questions. And there was lots of money to be won by the savvy contestant. That's the type of long-term, cash-flowing real estate market we want.
The simple fact is that the vast majority (I'm guessing like 90% plus) of real estate investors that I work with have absolutely no idea how to accurately determine if the real estate market they are investing in is actually good for building long-term real estate wealth. Heck, I'll be honest…I didn't know what to look for when I was first starting either. As investors, we just get so excited to slap some money down on the table so we can finally say we own some property that we never stop to think if that real estate market is in line with our goals. (And just because it's where you live, doesn't mean it's the right place to be investing in long-term, cash-flowing real estate.)
So here's what to look for when determining whether or not your real estate market is more like Freddy Krueger or Ben Stein when it comes to cash flow:
1. Relatively low prices
2. Relatively high rental rates
3. Strong economic indicators
Our business, JWB Real Estate Capital, has found Jacksonville, FL to be one of only a handful of these "Ben Stein" real estate markets for holding on the cash-flowing rental properties. Jacksonville has relatively low prices and relatively high rental rates. Check this out:
These are amazing statistics. Basically, Jacksonville's median home price is 79% of the national average, yet its median gross rent is 107%. So, what does it mean when you see low prices and high rental rates? CASH FLOW opportunities! You've found a "Ben Stein" real estate market! Now, dig a little deeper into the economic indicators of Jacksonville (or whatever real estate market you are analyzing) and verify the "Ben Stein-ness" (definitely not a word, haha) of your market. Here are some very strong indicators for Jacksonville, FL:
1. Jacksonville's population continues to increase and ranks 40th in terms of US Cities
2. Home to 8 Fortune 1,000 Companies including Modis, CSX, Fidelity, Landstar, Winn-Dixie, and more
3. Strong Navy & shipping industries
4. No state income tax for residents
5. Home to the St. John's River & Atlantic Ocean Beaches
Now, can you see why we feel like we are sitting on a real estate investing goldmine here in Jacksonville, FL? That's why our program, JWB Real Estate Capital, has investors from all over the country licking their chops just to get their hands on some of these cash-flowing properties. Just click here to check out some of the cash flow deals that our members are enjoying! To find out more about how you can become a member of the JWB Real Estate Capital program and start taking advantage of the Jacksonville real estate market, click here or call our office at 904.677.6777.
But before you buy any rental properties, do me a favor and take a deep breath. Look objectively at your real estate market to see if it is a good place to be investing your money. Are you real estate investments going to turn out more like a Nightmare on Elm Street or like you were a contestant on Win Ben Stein's Money?