the-abcs-of-real-estate-investing-ken LifeFeeling

Level Two Research
In Portland, we were a couple of desert dwellers from Arizona who came armed with
information but hadn’t seen rain in months let alone trees that actually bear leaves. We were
as green as the Portland landscape. We plunked right into this market knowing no one. We
were prepared, however, to conduct Level Two Research once we got there to develop a
team that would help us understand the market and maybe even lead us to property.
Research plays an important role in establishing yourself within the market and finding the
people who will help you make things happen.
Level Two Research is about meeting face-to-face and we didn’t waste time. Even
before we arrived we had made phone calls to set up meetings with property managers,
commercial brokers, commercial lenders, city officials, and businesspeople like the
publisher of the local apartment guide. When we arrived we met with each of them. First of
all, they were amazed at how much we knew about the area and the depth of our
knowledge. They affirmed the things we presumed to be true and set us straight on the
assumptions that were off base. For instance, they confirmed our assumption that the
limited supply of housing in downtown Portland was greater than in any other area of the
city. They confirmed that there was a high demand to live and work in the city. They
confirmed that the downtown area was not only a vibrant, progressive community for those
who lived there, but that it was also a draw for people who lived elsewhere through its
Saturday markets, jazz festivals, holiday events, convention center, Rose Garden, parades,
and more. It was a true city center.
We didn’t get everything right during our Level One Research, though. The people we
met with surprised us by painting a gloomier picture of the outlying suburban areas than we
had painted ourselves. There was more overbuilding than we had assumed and there was
more available land than we had assumed. Nike and Intel had a very large presence there
without much other employment of any size. The overall picture was clearly a risky one.
It was during this time that we really started narrowing in on our submarket. In any
economic downturn, it’s always smart to be in the market that will turn positive first. That’s
true of anything in business whether it’s the stock market, a business sector, or real estate. So
we looked at several submarkets and determined that downtown Portland was strongest at
this point and would be the first to rebound based on the simple economics of supply and
demand, its diversified employment base, and lack of affordable housing. We learned that as
the economy rebounded, the downtown market would be the area that rebounded first.
While we were meeting with all our contacts, we clearly communicated our goal to buy a
200-plus-unit apartment community and asked them a variety of questions like: who their
favorite property management people were, what lawyer they recommended for legal work,
if they knew any good accountants. We asked for recommendations for every team member
we listed in the last chapter. By the time we left two days later, we had a vivid picture of the
market, and we had narrowed our search to a viable submarket. We had some good leads for
our team, and we were told of several properties that were possibilities. We also took in the
sights, ate wonderful dinners, and generally enjoyed our time in Portland.