So how do you choose a city for investment? A neighborhood? A street?  

First, it bears mentioning that the criteria for what makes a good market for rental investing are different from the criteria for what makes for a good flipping market. To close this particular chapter, we're going to focus on what makes for a good region for real estate investing generally, and we'll later devote an entire chapter apiece to how to choose strong investment properties for both rental and flip real estate investing.  

All markets (not just real estate) thrive or die based on the fundamental principles of supply and demand. There are many, many factors influencing each, so we'll talk about them separately, and discuss briefly a few of the most important factors.  


Predictors for Demand  

1. Population
The most important predictor for real estate demand is population; after all, more people need more housing. If you take nothing else away from this section, take this: regions and cities with growing populations will have appreciating real estate, and the faster the increase in population, the faster the appreciation for real estate values and rents. Research population trends VERY carefully, and particularly look for areas that attract a lot of immigration, as it's the fastest vector for population growth.  

2. Job Availability
People go where the jobs are, so if there's a place where jobs are plentiful, you can be sure that people will want to live nearby. There are two ways to predict job availability: by looking at specific employers, and by looking at the regulatory environment. Some employers are so large and institutional, they will always have massive human resources needs (colleges, hospitals, biomedical research centers, governments, etc), and can generally be counted on to provide stable, middle class housing. Also, some areas are friendlier than others to businesses and research institutions, offering lower taxes or other tax incentives, lighter regulation, etc. These areas will always attract more businesses and investment than areas that are unfriendly to businesses and employers, and remember: people go where the jobs are.  

3. Cultural & Geographic Incentives  
People like to live near cultural institutions, and near geographically "attractive" areas. Cultural institutions range from art galleries to museums to theatres to universities to sports stadiums to hospitality/entertainment hotspots, and are always indicators of desirable areas. Geographic magnets include beaches, bays, lakes, rivers, and areas with commanding views, which naturally draw people. In my home town of Baltimore, for example, most of the expensive and desirable neighborhoods are on the harbor, overlooking the Chesapeake Bay.  


Predictors for Supply

1. Permit & Licensing Availability  
Some cities or counties are highly restrictive with the number of building and development permits it approves each year, which helps boost real estate values by restricting supply. 

2. Limited Boundaries  
Many desirable areas have specific boundaries in place, leaving a fixed supply of housing in that area. An example is the French Quarter in New Orleans: it's not getting any bigger, but more and more people are interested in living there. Note that boundaries can be geographic as well as artificial: Boulder, CO is largely surrounded by the steep slopes of mountains, which prove expensive and difficult to develop.  

This list is by no means exclusive, but these are some of the most accurate predictors for supply and demand. There is one other factor you should consider: political friendliness towards landlords and real estate investors. Some states, cities, and counties are extremely tenant-friendly, and make it extremely difficult for landlords to evict even if the tenants aren't paying rent or are engaging in criminal activity in your rental property. Some governing bodies also inhibit investment through high real estate taxes, use of penalties and fees, and convoluted laws restricting real estate investment practices and profits. Political climates must be investigated, before losing thousands of dollars unnecessarily due to unfriendly policies.

Resources:
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