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How to Pick the Right Investment Market

A Lesson from JSJ Sustainable Investments

Why Pittsburgh?

It is no secret that Real Estate Investing is one of the best, if not the best, ways to create generational wealth. Getting started in Real Estate Investing is a challenge for most, especially if you have little to no experience outside of your personal home purchase.

To start, you cannot make emotional decisions when selecting your investment strategy and market to implement that strategy in. If you do, it will be a lengthy, less than profitable, avenue. You must laser focus on one aspect, like flipping houses, before jumping to the "greener pastures." You do not have to live where you invest, you just need to have the right system and team in place. Real Estate Investing is a numbers game, not an emotional one!

My family and I got started investing in Real Estate over 12 years ago with our tax lien business. At the time, we lived in Cincinnati, OH, but made the choice to invest in Florida, as it has very lucrative returns on tax lien certificates. After several years of investing in Florida, we decided to start another Real Estate Company to invest in Fix & Flip properties in our new home state of California. As you may know, competition in this market is fierce. There are usually inexperienced investors willing to pay top dollar just for the opportunity to flip a house like they saw on HGTV. This leads to higher barriers of entry into the already extremely competitive Real Estate Market in Southern California.

We overcame this challenge by making the decision to invest out of state. We picked the midwest because of the low barriers to entry and high returns available within the house flipping industry. In order to identify the right city to invest in, we came up with several key market factors:

  • Price Growth

  • Job Growth / Industry Growth

  • Education Growth

  • Price Point

  • Livability

We also used a software called Propstream to identify areas of the country that had massive price growth over time periods of 6 months to 5 years. Once we identified the region with the most consistent growth, we narrowed down our search to specific cities, and then specific neighborhoods.

Pittsburgh, PA, was one of several markets that matched our first qualifier, Price Growth. Once we identified the city, it was time to do a little more digging. That led us to the driving factors behind the price growth, which are Job/Industry Growth and Higher Education. Pittsburgh specifically has a few main industries that we like, Technology, Energy, Financial & Business Services, and Healthcare. Over 87% of the workforce in Pittsburgh is white-collar, which is significantly higher than the national average.

The tech growth in the area is at an all time high and that is partially due to the Carnegie Mellon University, but the city also features world class Robotics and Artificial Intelligence development.

The energy industry in Pittsburgh is undergoing a transition and the future is looking bright for renewable energy. Pittsburgh is one of the largest US exporters of coal, but what people do not realize is that it also has become a new center of American industry, with significant investments in solar, wind, and intelligent buildings.

Finacial & Business services are a significant portion of the job market in Pittsburgh, employing over 230,000 individuals, at companies such as PNC Bank, which is based in Pittsburgh.

The Healthcare system in Pittsburgh really drew our attention and was one of the major factors in our decision. The UMPC hospital system has invested billions of dollars into specialty hospitals in and around Pittsburgh and was ranked #4 in the US for best primary care. The University of Pittsburgh's School of Medicine is ranked #5 in the US in medical research. By combining Pittsburgh's technology growth with top notch medical research, the healthcare and life sciences sector of the job market will continue to boom in this area.

As mentioned above, the higher education system in Pittsburgh is top notch. Carnegie Mellon University and the University of Pittsburgh systems continue to produce top candidates for industries nationwide. The number of residents in Pittsburgh with 4 year degrees is over 42% and that has lead to an increase in per-capita income of 24% over the past 20 years (inflation adjusted). Pittsburgh retains many of its college students who choose to work and live in and around the city.

Price Point is also a major factor when choosing a market. Access to capital, both personal and through your network, will help determine the city in which you invest. With our access to a network of Private Investors that we have worked with for years, we are able to fund most projects without the need for any financial institutions. With a lower barrier to entry, Pittsburgh was a perfect choice for our business to scale the Fix & Flip model. With price points from under $100,000 for homes in need of renovation, it was an easy choice to leave the overpriced California real estate market behind and go after a wider variety of projects in the low cost city.

Finally, Livability is a major factor as well. If you do not invest in an area in which people have a desire to live, you will have an extremely hard time selling your flip project and will have minimal appreciation if you are holding the property for cash-flow. There is no shortage of activities, attractions, sporting events, and nightlife in Pittsburgh. The city is full of bars, restaurants, coffee shops, and parks, which is why most young professionals prefer to stay in the city after graduation.

Picking a market to invest your money in can be a difficult decision. But with the right tools and team on your side, the burden of making that choice can be significantly reduced. Start with the simple things, like Price Growth, and then deep dive into the driving factors of Job Growth, Education Growth, Price Point, and Livability.

If you would like to learn more about Real Estate Investing with JSJ Sustainable Investments and our investment programs, click here.

Visit our website to learn more about us.

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