Is It Better to Buy Real Estate in Big Cities?

Is It Better to Buy Real Estate in Big Cities?

Ladies and gents, SEO is not all that important to me. I am out of that game. But, having said that, I do want Google to pick some of these articles up. Forgive the title – it’s beneath me, but it’s just right for Google bots 🙂

Is It Better to Buy Real Estate in Big Cities?

This is actually a more complicated question than you’d think. However, the boiled down version of the answer is – yes. The presumption is that there is more growth in larger markets, and when buying into any commodity, of which real estate is one, growth rocks.

To give you an example:

Growth Means Competition

The Silver Tree project that we just closed on requires a $1.4M re-positioning. In simple English, we are going to spend $1.4M on this community in the next 18 – 24 months. That’s a lot of materials and labor.

When we underwrote this deal, we priced our CapEx to the averages, which is something I teach my students to do. However, now that our PM, Shelton-Cook, is nearing the completion of the bidding process it’s clear that we are going to over-perform on price for practically every line item.

We’ve collected 3 to 4 bids for everything, and we are seeing pricing for roofing work, painting, landscaping, mechanicals that is in the 10% – 30% range less than our estimates.


You have to know that I’ve had the opportunity to price out similar work in more remote, tertiary markets, and the bids were about 40% higher. We are not talking the fringe here. This is huge!

I’ve made a decision to completely ignore tertiary markets. Sure, it doesn’t have to be Phoenix. But, I’m not going into 50,000 population markets.

People don’t want to live there for a reason. And I guess – people don’t want to work there either…

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