Transcript
Welcome everyone to this very popular webinar course on how to find the hottest real estate markets using data science. This webinar course is nothing short of magic. It's going to allow you to independently find the best cities in the US for real estate investing. So, by the time you finish this webinar, you'll be able to randomly pick up cities anywhere in the US, compare them, and have complete knowledge of the diamonds and the clunkers. And you'll be able to do this without ever paying anyone, including us, for a course or for a subscription.
And just because this course is truly free doesn't mean that it's not worth millions. Over 25,000 investors have taken this course over the last decade in some form or the other. I get dozens of fan mails about the course from all across the country. Several billion in real estate have been purchased using the techniques shown in this course. And I'm I'm hopeful that tens of millions of profit have also been made.
All using the straightforward and free techniques that you're going to learn today. For those of you who don't know me, um we at Grocapitus are quirky and opinionated amateur data scientists and technologists. We buy and build large multif family projects. Our portfolio of 21 properties is worth uh $430 million and over 1,200 datadriven and slightly nerdy investors have trusted us with their money. Here's roughly half of our portfolio.
We use data science to invest in eight different asset classes. So multif family value ad, then apartment new construction, single family built to rent, forplex built to rent, student housing, built to sell town homes, self storage, and also flex industrial. So each of these asset classes taught us something different and hopefully made us better at our job, which is to protect our investors investment. And we've gone full cycle nine times on these projects. 10 times coming up.
We have a 10th sale coming up. Uh we have an overall irr if you know that what that means of 33% and average annualized returns of 40% across those nine exits. Uh great numbers but I have to be honest this track record was artificially boosted by extraordinary market conditions until 2022. So we do think that future performance will moderate to a more reasonable level. Uh here are two of the projects that we exhibited during that crazy time in 2021 and 2022 when things were very hot.
So just gives you a sense of what's possible when the real estate market is at its peak. Uh real estate has a lot of potential and this sort of demonstrates that max potential. Our investors like what we're doing here is Chong Z. She is a super experienced investor. She compares us to much larger companies with more projects and she thinks that we come out ahead.
Here's Brian who invested in one of our projects where we had to navigate through the COVID pandemic and we still doubled his investment in four years and also offered him a 1031 exchange option at the end. All right, time to get started with Location Magic. Uh let's get the boring legal stuff out of the way before we dive into the good stuff. This is just a friendly reminder. This webinar is for educational purposes only.
Just because we're sharing our personal opinions, it doesn't mean you're guaranteed to make a fortune in real estate. Do your own research. Consult professionals. And remember that investing in real estate and stocks is risky stuff. And don't be shy to type in your questions.
We do our best to answer them at the end. Uh and if there's any particular city you'd like to ask us about, we'll answer the questions about those. And if you miss anything, we will send out a recording of this whole shindig. Probably not tomorrow, but day after tomorrow. Every year before we start Location Magic, we share two slides.
This is one of my two favorite slides of all time. So notice that on this slide until about 2021 right here, the actual median income and the qualified income to buy a typical home in America were sort of in sync, right? But starting from here, we sort of broke things in America. Things broke. No one noticed, right?
That's really terrible because today the qualified income needed to afford the typical home in America is about 121 grand. But the median household income in America is 84,000. Right? So there's this ridiculous $37,000 shortfall, this gap that's opened up just in the last 5 years, and it's not getting any better. And this slide is not the sexiest, but it sort of is another way of discussing the previous slide.
So this gray line here is the median monthly mortgage payment in the United States, right? The blue line is the median multif family rent. And take a look from all the way from the left here, 2005. You'll notice that until 2021, these lines were pretty much tracking each other. And then what the f happens after co right here at this point, the gap between mortgage payments here and rents, it just goes crazy.
It's incredibly large. If anyone tells me that after looking at this graph they can't figure out why they should be a landlord, then I'm going to send you a free pack of Riddling because you need it. This affordability gap is astonishing. We've never seen anything like it. All right.
What is Location Magic? It is a datadriven set of instructions. It's not meant to be something where you come and get knowledge from us. It's meant to be something that you can do yourself. So when you know I'm I'm a computer science graduate.
I've had a successful computer science career and I'm an amateur data scientist and I was always interested in basically figuring out what city in America should I invest in. Most people say invest locally. That's a nonsense um concept by the way. It it just simply means that people are telling you to be lazy, right? There are 116 116 cities in America.
There are 323 metros on the Bureau of Labor Statistics list. Which one is the best for real estate investment? How do you know? Just because somebody at the water cooler said, you know, Fresno is best for investing or, you know, or it's Tampa, Florida, do you really believe them? Shouldn't you verify?
This course lets you verify. You can pick any city in America and it lets you verify how that city matches up for real estate investment visav any other city in America. There are five real focuses that you're going to learn about today. Real focuses, right? That's what we call them.
The first one, as you can imagine, is population growth. Population growth. And you can see in the green bar, it says if the city that you're looking at, some random city that your cousin told you about, it's awesome. It's great for real estate investment. Some random place.
If that city is between 250,000 and a million people in population, most cities in the US are sort of in the sweet spot. You want that much population growth. See this number here? This is computed through our data science. So this is the one thing that we don't tell you in this course.
How do you compute this? Because it's too much work. There's a lot of code needed uh in a software called R which you probably don't have a subscription to. So this is the one thing. Believe us.
Believe us. What we compute this every year. It changes once a year. And for this year 2026, you want 10.1% population growth. When?
Well, between this year 2015 and that year 2024. 2015 2024. Between those two years, we want 10% population growth or 10.1% population growth. Now, the city is larger than a million people. Let's say Phoenix or Los Angeles, then it doesn't need to have 10% growth.
It can have 6%. Right? So these are some of the cities that you'd look at this kind of growth. Why? Cuz bigger cities, they are lower risk for real estate, but they're also lower growth, right?
And so people that are looking to invest in large cities must accept a lower level of growth and also they get a lower level of risk because these are big cities. If it's a micro city, right, less than 250,000 in population like some of my favorite St. George, Durham, Fort Wayne Bane, Indiana, or Idaho Falls, then in that case, you should look for higher growth. Why? Because you're taking a bigger risk.
These are smaller cities. Bad things can happen in smaller cities easily. Like one employer with 5,000 people closes down. Well, that can affect you greatly. So, you're looking for higher growth because you're looking for higher risk.
So, 10% if the city is 250,000 to a million people, 6% if it's bigger, 13% if it's smaller. Now, one big question is we're in 2026, Neal. Why are you saying 2015 to 2024? Very simple. This course is designed to give you public data that is free.
Now, when you come back one year from today, this course would have been fully automated using a AI tool called Claude. So, I'll I'll be giving you a beautiful interactive dashboard that you can plug your city into and it'll give you an answer. We're still working on that. We're 80% of the way through, but for the moment, right, you still have to go to certain websites. Those websites are public.
You know, this year we intend to mine them and stick them on a dashboard on our website, so you can just go in there and be lazier. But this is still only 10 minutes of work. There's a URL on this page. Do you see the word Fred? Big bold Fred.
Below that, there's a URL. Now, I'll be giving all of this stuff to you in an Excel spreadsheet that will come to you with the replay. So, you don't need to write anything down. Just listen. This link will be in that Excel spreadsheet.
So, anyone that goes to this website, this is the uh the Federal Reserve website for the St. Louis Federal Reserve, right? The it's called Fred. So very powerful website. You go in there, you'll see a list of metros.
Pretty much all of the metros in the US will be in there. Now what you're going to do is you're going to use the mouse. You're going to compare the 2024 numbers and the 2015 numbers and you're going to plug them into the spreadsheet. What spreadsheet? Well, the one that I'm going to give you.
So let's do it now so that you know exactly what I'm talking about. [snorts] Drag this over so you can still see this. And I'm going to drag over a spreadsheet. And the spreadsheet uh whoops that spreadsheet here is one that you will be getting. So you'll when you when you get the replay, you'll you'll see the spreadsheet, right?
So right here on this spreadsheet that you get, you'll be plugging in two numbers. I'm going to scroll up here and I'm assuming that this city that I'm going to be talking about is Columbus. Okay, so I go to the Fred website and I'm going to copy this link. Actually, I already have this link open open here. So, this happens to be DAC.
This happens to be the site that I was sending you to. And as you can see, lots of metros here. I'm not going to go through the whole list, but this is pretty much all of the MSAs or metropolitan statistical areas in the US. I'm going to use, you know, Phoenix for my example. Where's Phoenix?
Well, let's just search for Phoenix. Easier. There we go. Phoenix. I click on it and it gives me this chart.
This chart as you can see has data all the way to 2025. I'm using 2024 because at some point in uh earlier in the year that this data was not populated for 2025 and we only update this course once in a year. We're giving it to you for free. Right? So 2024 you see this number 5169873.
Right? We can take that number and you can plug it into the spreadsheet that I'm giving you right here. 2020 well actually 2024. So you plug that number right here. Okay?
And then you go mouse over backwards back back until you get to 2015. Right here, do you see 458345? 4.5 million. So Phoenix's population was about 4.5 million in 2015. In 2024, it was 5.1 million.
Just so you know, because I'm a math major, this is 11%. There's a 11% jump in Phoenix's population, right? From 2015 to 2024. Now, in the document I gave you, I said 10%. But this is a large city.
So, it would have been okay if Phoenix's population had grown by 6%. That would still get a thumbs up from us, right? This first real focus would be good. We'd be saying thumbs up. But Phoenix is actually growing at almost double that number.
It's growing at about 11%. So, not only does it work for large metros, it also works for small metros. So Phoenix from a population perspective is doing really really well, right? So so so that works for Phoenix and obviously whatever city you're interested in is is in this list somewhere. You can, you know, click on states if you want to, but there are 396 metropolitan areas.
Interestingly enough, there's two ways of measuring them. We measure 323 metropolitan areas, but the Fred the uh of St. Louis, the Federal Reserve measures them as 396. Doesn't matter. Doesn't really matter.
you'll see all of the cities that you're interested in in this list. All right, does this make sense? Right? What we're doing is we're we're basically saying, hey, if I want to invest in real estate, I want to go to a place that has lots of population growth, right? And you don't know exactly what the appropriate population growth should be.
Should be be 1% a year, half a percent a year, right? So, we provide that number once in a year. Now, you can come back here next year and get the number. It varies a little bit. Next year, it might be 9.6% 6% or something like that because the US's population growth is slowing, right?
So once in a year we give you this number. Do we charge you for it? No. Is there a subscription? No.
Is there a higher tier? No, we don't. This is free. It's always meant to be free and you can come here next year and grab the number. You don't even have to attend the webinar.
You just register for it next year and at the end of the webinar, you'll get that replay with the new Excel spreadsheet for next year. Easy. Good. All right. Let's move on from the first one.
So we now you know where the spreadsheet is. Now you know where the stuff goes in. Population 2024 goes in here. 2015 goes in here. And the spreadsheet will automatically calculate the population growth percentage.
And it'll give you, you know, a thumbs up or a thumbs down. Okay. All right. Let's move on to number two. And median household income.
You want to be looking for a certain amount of median household income growth between this year and this year 2000 and 2023 using a website. And that website is called citydata.com. City-data. Everyone forgets the dash. City-data.com.
And this, by the way, applies to cities of all sizes. Could be a big city, a small city. It really doesn't matter. You're looking for a certain amount of income growth. For 2026, you're looking at 52.7% income growth, right?
Between the year 2000 and the year 2023. Once again, why is it not recent? Well, I don't have access to recent data and I wanted to give you free data. By next year, we'll be using, you know, more more um um sort of more recent stuff because we are now beginning to use AI to gather this this information. But for now, 2000 to 2023, all I can tell you is that the income growth really doesn't change that much over a few years.
So even though I'm giving you slightly older data, it's extremely likely that you'll end up with the same list of cities even if you had 2025 data. Okay, now let's take a look at where do we go and how do we do this. So, I'm going to exit out and I'm going to go to city-data.com. And this is their homepage. Remember the dash.
And I'm going to type in Columbus. I don't particularly like Columbus for investment, but that's what I use for examples. Columbus, Ohio. Going to hit enter. And it finds the city of Columbus.
Now I'm going to scroll down just a little bit and I'm looking for median household income. Right? So right here with a little bit of scrolling we found median household income in 2024. Ah this number has changed for um so you we're copying the 2024 information now 67,084. Going to go into our spreadsheet.
We're going to plug that number in here. And then we're going to come back. Oops. And we're going to take the number for 2000. This one here.
We're going to go back into the spreadsheet. We're going to plug it in here. And it will calculate the difference between the two numbers right here. And if that number is higher than 52.7% then this city is producing enough income growth for you as a landlord to continue growing your rents and growing your rents fairly quickly. Let's call it 3 4% a year.
Why? Because if there's not enough income growth in this in this city or this metro, then that metro will basically have slow rent growth. Not just for you, but for every landlord in that city. And you don't want to be in that scenario. You want to be where the ceiling is high for rent growth.
And that's what this median household income number is giving you. Does it make sense? Right. And [snorts] again, this number applies for 2026. In 2027, you'll get a new number from us cuz these this number does tend to go up and down quite a bit.
All right, moving on to real focus 3. So, what you just learned median household income, that was real focus two, right? So, in the spreadsheet, you've got one, two, and now we're going to go to number three. And that is house value growth, right? Median house or condo value.
So let's drag this over. [snorts] We want 92% growth in median house or condo value between 2000 and 2023. Once again, using city data. Uh and this data has looks like it's changed in the last couple of weeks cuz I taught this in April for a group and it was still 2023. So unfortunately city data being a nonprofit website we don't know when exactly it changes it sometimes the numbers are off just a tiny little bit right 2000 2023 we want 92% growth in the median house condo value right where's that data well let's go back to my example remember Columbus Ohio we were here right we were here estimated median income we took this number we took that number well if you go look right below it median house or condo value in this case 2024.
You can use that number 279900. Take that number, plug it into the spreadsheet right there. Then go back, take the number from 2000, this number here, plug that number in here, uh, in here, and it'll give you a number. And that number in this case for Columbus is actually almost double of what you need which is the 92% growth. Columbus homes have almost tripled over that time.
So Columbus obviously qualifies. A lot of cities will qualify. Median house and condo value is actually easier than some of the other um other real focuses to hit. So next year we'll be raising this number well over 100. It's going to go up to like 103 or 104 next year.
All right, let's move on from real focus number three to real focus number four. And real focus number four is not crime. A lot of people are like, Neal, you you're tracking crime. No, I'm not. I'm tracking change in crime.
So, it's not about whether the city that you're investing in is high crime or low crime. It's about whether it's getting better, right? So what you want is you want to look for crime to go down and you want the most recent crime number below 7450 in a crime table at the same website city-data.com. And this applies to cities of all sizes and actually applies for all years. So this one doesn't change from year to year.
Next year I'll still be looking for 450. Now how do we do this? Remember the city data website? We plugged Columbus into it as an example. And we were right here.
We looked at the median household income. We looked at the median house or condo value. Let's just scroll down a little bit. Scroll, scroll, scroll, scroll further down, down. Right here, we come to this blue table.
Crime rates in Columbus in our example, city by year. Right? And on the left side, you can see the breakdown, murders and rapes and robberies and assaults and burglaries and thefts. Right? All of them are here.
We're going to skip all of these. We're just going to look at this blue line. See this line at the bottom? We're going to look at this line. What we care about is both this number, we actually care about all of the numbers here.
What we want to see is a fairly smooth, not super bumpy reduction in crime over time. Right now, you'll find that for most cities in the US, these numbers are going to fall even for like high crime cities like Memphis, right? You you're going to see these numbers fall. Why? because the way that we are measuring crime in the United States is is changing.
So it's not because these cities are, you know, have less crime. It's because the the the measurement methodologies are changing and that's making pretty much every city, even cities like Memphis, look really good, right? But what you want to see is a declining trend here, a declining trend. And then you want to see this number, the one at the far right, be lower than 450. See this?
Below 450, right? So what that means is the city has reasonably low levels of crime. You know, below 450 is not some super safe city like, you know, Idaho Falls is probably going to be 250, right? So, uh, but it's it's reasonably safe. It's not a city that were that's considered a high crime city.
It's considered medium crime or medium low crime, right? And then on this side, if the gap between this number 567 and this one is at least a couple hundred, then the crime in the city is actually declining. If it's like a 100, maybe if this was like 567 and this was like 454, then that's just a way that that's a measurement, you know, the way we measure crime changing. But since the gap is about 200 between these two, there's a measurable change in crime in Columbus. As you know, Columbus, lots of universities and that's basically pulled in more educated folks from Ohio.
So, Columbus has the highest level of educations of any major city in Ohio. Ohio has four major cities. So, there's Columbus, Cincinnati, uh um Columbus, Cincinnati, Cleveland, and Dayton. These are the four big cities. And of those cities, Columbus has the the highest education levels, which is why it has the lowest crime levels right amongst them.
And crime is declining faster in Columbus than it's declining in any of those other three cities. Does this make sense? We're still on city data. We're just looking for this table, blue column, uh, you know, trying to make sure that crime is going down and trying to make sure this number is below 450. Simple, straightforward, right?
Now, you've got four different metrics. And of course, each of those metrics you can plug in. Here's crime. I could have plugged in the crime here, and then it would calculate the crime reduction over those those years. All right.
Now, I'm going to give you the most important one. Some people ask me, well, you've given us these four real focuses. I'm about to give you the last one, the fifth one. Which of these is more important? Should we give a higher weightage to uh you know, any one of these real focuses, right?
Which one matters the most? My answer is the fifth one. And the fifth one is jobs. And we don't look at jobs data over an extended period of time in the US. We only look at job data from the last 12 months.
We used to look at five years. At one point, we used to look at 10 years, but then we we couldn't it it wasn't really pointing us to fast rent growth or fast home price growth. When we started looking at the last 12 months, there was a very strong connection, a correlation between real estate prices, rents going up, and jobs. Why? Because when people get jobs, they immediately start spending money on rents and on buying homes, right?
And they when they lose their jobs, they immediately stop spending money, right? It's it's very stark, right? People are very like no one that just lost their job is thinking I'm going to go out and buy a home or I'm going to get an expensive rental. No one thinks that. So the job data really has to be what's happening in this city in the last 12 months.
And we're going to give you that job data in just a second. But we do want to tell you a little bit about one of our projects. So, as you can see now, we're data scientists. We're using technology to rank all 323 metros in the US. And we found that of those metros, the one that we consider to be the best is called Idaho Falls.
And yes, you've never heard of Idaho Falls or you don't care. It's a beautiful metro, 150,000 people where we built this property. the the property that you're seeing is already built, right? So, uh and you can actually see it's not finished because some of these fence posts were still going in when we took this picture um about five or six months ago. Um so, we built this property and this property has town homes.
There are four different kinds of town homes. And when we built it, we realized that one kind of town home was flying off the shelves. Like, it was incredibly insanely hot. And it's called the Fiona. It's this one here.
And you can see there are seven doors, seven yellow doors here. So, seven town home units in one building. And so when we built this, we were like, "Wow, this is insane. Let's go back to the seller who sold us this land." And next to it, he owns more land. And so we bought that land from him and we're building the second phase of this town home community.
And the reason we love, love, love Idaho Falls is because it's winning. its insurance costs and property taxes are amongst the lowest in the entire United States. And I care so much about that because insurance and property property tax, the non- sexy stuff matters the most when you're come when you're looking at making profits. There's a great group called the Milkin Institute. They rank over 300 cities in the US.
I highly recommend you look up the Milkin report. It comes out in January. And you'll notice Idaho Falls is at number two best per best small small best performing city in 2026. And if you go back and ask Chat GPT, how many times has Idol Falls been at the top of this list? Chat GPT will tell you it's there practically every single year, right?
Its population growth is remarkable, extraordinarily f much faster than the the the population growth required for um for uh Location Magic. So amazing city and it's sitting at the center of nuclear revival as you've heard recently because of AI. Meta and Nvidia and Amazon and Microsoft are buying nuclear data centers, sorry, nuclear plants and they're getting into the business of investing into nuclear uh startups, companies that are, you know, creating new kinds of nuclear plants. Well, did you know that there's only one place in the US that certifies nuclear plants and it's Idaho National Labs, which is growing at an insane rate. Absolutely insane rate.
And this the micro neighborhood that our property is in is also incredible, right? Just stunning numbers. Look at this wage growth. Seven 15% wage growth over just the last two years amongst the highest in the nation. I won't get into all the numbers, but amazing.
The population growth in this micro neighborhood is double of even Idaho Falls population growth, which was already kind of crazy. Here's a quick look at the property that we built. Not sexy, by the way. These are not meant to be extremely beautiful properties. They're for the common man.
You know, if there's two workers and they both work at Starbucks, they can afford this town home because it costs about $2,000 a month for a three-bedroom, 2 and 1 half bath, brand new granite countertops, two floors, beautiful with many amenities, and it's $2,000 a month. That's pretty insane. And you can't get that anywhere else in the US, but you can in in Idaho Falls because construction costs are incredibly low. So, right here is where that new uh community would be. Here's the inside of our property.
As you can see, gorgeous property. We built this last year, and we're going to build 75 new units that look just like this. We built four different kinds of town homes. The winner, Fiona, was the one with the most highest leasing velocity, and by the way, also highest rent. So all four of these, the Fiona had the highest rent and still has the highest leasing velocity.
So this piece of land that you see here next to our town homes is where we are building phase 2 and we are projecting a very high IRRa. Pete, what was the IRRa? I think it was 20% IRRa, 25% annualized. >> Absolutely. It's uh 21.1% and a 25% average annual return.
>> Yeah. So fantastic returns. We cannot get those returns anywhere else in any project. And we're building phase two ultra fast. Why?
Because the city's already approved everything because of the previous town homes. Same builder, same subs and uh same property manager and same construction manager. Everyone's the same. The team is the exact same. These are the exist this is the existing property.
This is the new property. It's a builder ready site because we work with the builder. So he kept sorry with the seller, the land seller. So he kept working on it and we actually as part of our first project built this road Princeton and put in all the the the pipes and all the uh electrical work under it as part of building this project. The city required us to do that.
So now this is absolutely ready to go. We've saved an entire year of construction on it. This is what our clubhouse and outdoor amenities will look like. Absolutely beautiful. Ultraast timeline.
We are going to be starting sh putting shovels in the ground next month. So around around June 30th uh end of the month and we'll be done basically by you know July August of next year. Again it's ultra fast compared to what you typically see. So we actually will be leasing up next year. We'll be getting depreciation next year.
So fantastic project. I'll skip past this slide, but if you're interested in it, um we'll be throwing up a poll or you can just scan this um this uh barcode and you can talk with Peter, our director of investor relations, who can tell you more about this. One other thing before I go back to the fifth um to to jobs. This is our investor club. We do eight webinars like this every year and they're all very information.
They're all very fun. If you're new to our community, please join multifamilyu.com/club and you'll get lots and lots of uh benefits. Again, there's no upsell. We don't have an educational product. We just want people to be informed with high quality content.
All right, let's move on. 12 month job growth percentage. Normally, in normal times, this number works. Anything above 1% annualized job growth at this website, right? So this is the BLS, Bureau of Labor Statistics website.
Anything above 1% is fine, but I can tell you that just for this year, you may want to pull back to 0.5%. In the last 12 months, the US economy has been produced a disastrously low number of jobs. So even my favorite metro in the US, um you know, um northwest Arkansas, even that is at 2%. Normally those kinds of metros are at 3% or 4%. Right?
So when my favorite metro is there, I'm thinking, okay, I'm just going to tell everyone, look, 1% is the number that seems to work every year and that's a pretty standard number. We haven't changed it much, but in the last 12 months, things were pretty awful. And let me show you an example. >> [music]