095: How to Find Hot Emerging Markets for the Best Deals

SHOW NOTES FOR EPISODE 095  –  HOW TO FIND HOT EMERGING MARKETS FOR THE BEST DEALS

Vinney Chopra, who controls over $156  million in multifamily properties , has, over the last 10 years, found amazing deals in new hot markets where properties significantly increase in value in just a few short years.  In this episode, Vinney will share his “insider” secrets on how he finds these hot markets where he consistently generates phenomenal returns.

What You Will Learn

• The definition of “emerging markets” and how to locate one
• Why to never hold on to a property for more than 7 years
• Nine key steps to researching emerging markets
• Who is your very best resource for emerging market information
• Vinney’s secret trick to uncover “insider information” on emerging markets
• Where he sees the next key emerging markets

About Our Guest

Vinney Chopra

Vinney Chopra is president of The Ideal Investment Group and Moneil Investments Group, multifamily investment companies with assets over $130 million.  A Mechanical Engineer, with an MBA in marketing, Vinney and his wife started real estate investing in 1983.  He became a broker in California and started buying single family homes and multifamily assets in Texas, California, Arizona and India.  Over the last seven years, Vinney has purchased a number of large apartment communities in key emerging markets throughout the US.  In addition to real estate investing, Vinney has been a professional fundraising consultant, business coach and motivational speaker.  Vinney is married to Kanchan, has 2 children, Neil & Monica, and lives in Danville, California.

About Emerging Markets

Definition of Emerging Markets

Emerging markets are metro population centers in the USA (MSAs) and around the world where  where there is a strong demand for housing and properties are significantly increasing in value.  In these areas, more jobs are being created and where you have more jobs, you have more people. This creates a pent up demand for housing (apartments, single family homes, etc.) and other support services and businesses.  In areas where larger businesses are relocating or expanding, new jobs are being created, appealing lifestyles are emerging, rental potential increases, and retail shopping centers and services are needed to meet the needs of the growing population.  This phenomenon also creates various paths of progress .

Emerging Markets He has Invested In

In 2006-2007, Vinney started researching various population centers around the US where unemployment numbers were some of the lowest.  He identified areas such as Odessa and Midland, Texas.  He bought 7 multifamily properties in those areas.  Then he found similar employment numbers in Round Rock , Austin and San Antonio and bought 7 or 8 more properties.  3 years back he also bought in an area south of Houston, a tertiary market where $110 billion was going to be spent on in the next 15 years and he ended up buying 10 more properties.

He found a town 30-40 miles south of Houston (Angelton, TX) that was not as dependent as Houston on the oil industry.  After he bought a property there, his property manager informed him that his property had 100% occupancy and that they had 25 families on a waiting list.  He bought the property for $8.7 million and 2 years later it was worth $11.7 million.  He bought another near there for $5,225,000 and recently got an offer for $7,225,000 (he’s waiting for $7,650,000).  He ended up buying 10 more properties in that market.

All of his deals have been “pocket listings” (unlisted offerings that brokers make available exclusively) from brokers with major commercial firms (ARA, Marcus Millichap, TransUnion, Cushman Wakefield, etc.).

He said there may be 20-30 emerging markets across the US at any given time.

Why He Plans to Sell His Properties in 3 to 7 years

The primary reason he only holds on to properties no longer than 3-7 years is that investors generally do not want to invest for longer periods of time on any one property.  In his Private Placement Memorandum (PPM) for each property, he usually says that they will sell anywhere from 5-7 years but if they can sell sooner, say 3-5 years, they often will and still often double their investors’ money, which is usually just rolled into another deal.  In those cases, each market hasn’t technically peaked, which is good because it’s much easier to sell.  Other buyers still see the area as a “hot” market and he is able to get top dollar for the properties.  When it reaches the top of the growth cycle bubble, prices will start declining and it is harder to sell.

How to Know When a Market Has Peaked and Not to Buy There

He is constantly doing research.  He has been looking at the Atlanta area for more than 7 months (does much reading).  In North Atlanta (Murrieta, Smyrna. for example) the properties are peaking and going for $100-125,000 a door.  If he would have bought 3-5 years ago in those areas, he would have done well today.  However, in other “sub-markets” such as Union City, Austell, and Riverside (on the outskirts of Atlanta), that are lagging behind and are on their way to becoming like the North Atlanta markets .

How to Analyze a Market

First, find the people who know the markets best.  Commercial Brokers.  Property Managers.  He starts building relationships with these people early on.  He may study a market for a year or more before he even approaches a broker.  For example, when he finally knew he wanted to invest in the Atlanta area, he scheduled a 4-day trip 6 months ago.  On the trip, he talked to the top people at major commercial brokerage firms (presidents, executive VPs, etc.).  When he returned home, he started texting and mailing his contacts every 10 days.  He would sent articles on Atlanta that he found and would ask them to send him articles about Atlanta. He also sent gifts (chocolates, gift cards, etc.) to stand out and win favor.  In the beginning, the properties brokers would send him were overpriced and he wasn’t interested.  As the brokers started to see his property criteria and that he was a serious buyer, they started offering him “pocket listings” that better met Vinney’s criteria.

Vinney’s Secret Research Trick!

He has signed up to receive Offering Memorandums (OMs) from multiple brokers in his target areas.  The great thing about OMs is that because the big brokerage firms have extensive research budgets and resources, they do excellent market research.  The OMs always have,  in the last pages of the OM, a wealth of market information with extensive exclusive data.  He would use this data for his own research and share it with his investors.

Vinney will occasionally bid on OMs he receives via email (if the numbers make sense) but does not often win the bid.

Big Wins in Atlanta

Over the last year, he has directed his research to Atlanta and, in the last 5 months, has found 90 potential properties, of which he made offers on 45 of those properties and was in “best and final on 4.  Unfortunately, but didn’t get any of them.  However, he recently was presented with 2 great deals at $37,000 per door and, where the property across the street, which was just sold into syndication for $66,000 per door.

He is currently buying two different properties in the Atlanta area comprised of 458 units cumulatively that he believes will double in value in the next few years.

His local Atlanta broker referred him to a great contact (Sid) to put together his due diligence inspection team in Atlanta and they started the next week.  The team consists of 5 people who have been doing inspections for 42 years.  They will inspect every single unit (367 units) for $10,000.  He found local Georgia attorney and he is using his Texas-based lender.  They will do lease audit, background checks – 75 page report.

First Steps in Researching New Markets

#1 – Talk with local brokers

#2 – Do online research (IRR.com, data.gov, globest.com).  In Google: type city name and write “economic growth” or “potential new business.”  Put city’s name and Forbes, Wall Street Journal or WSJ, Fortune, US News & World Report.

#3 – Research jobs numbers

#4 – Look at occupancy numbers and trends up or down – Is it 90% and above?

#5 – Look at multifamily building permits being issued in the city

#6 – Migration info (who and how many are moving there)

# 7 – Contact local Chamber of Commerce (they have great info on local business growth)

#8 – Visit the city – meet with chamber, brokers, others

#9 – Look for new employers in the area, new hotels, restaurants, WalMarts

His Assessment of Current and Future Emerging Markets

• Currently researching North Carolina
• Texas is still hot (Dallas, Houston, Austin, San Antonio), especially with proposed bullet train connecting Houston and Dallas
• Atlanta is about 2 years behind Dallas
• Look for pockets of growth in areas like Texas, Portland, etc. – Talk with people that live there

Spinning Lots of Plates

• Real estate investors who syndicate much juggle a lot of activities at the same time
• Multiple Plates Spinning at the same time (Because you only have 60-75 days once under contract)
  • Investor Communication
  • Acquisition Activities
  • Broker Contact
  • Syndication Processes
  • Team
  • Underwriting
  • Lending

How to Reach Vinney

• Phone: 925-766-3518
• Email: vinney@moneilig.com
• Websites: multifamilysyndicationacademy.com or multifamilysyndicationacademy.info

Episode Sponsors

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