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.

Conclusion

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…

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.