I have written numerous posts about doing your due diligence and vetting the sponsor prior to making the passive investment in a syndication, but we have not discussed enough what you should do after you identified a sponsor you trust and with whom you believe you would like to invest.

Choose The Best Market

Just as important as it is to work with a great professional, and not your best friend, it is important to identify a great market, and not your back yard. Just as ”best friend” bias can cause one to miss out on the best use of investment capital, so can “backyard bias.”

Investing only in areas you know, live and love likely does not yield the absolute best investment results. This is why it is wise to learn new market and let the data help you decide where are the best places to invest.

Key Metrics

Look for the following key metrics:

Population Growth
Job Growth
Job Diversity

These metrics can serve as key indicators of growing and emerging markets, locations in which you can invest at pre-growth prices and be glad you did in the future. But the market has to have fundamentals. If a sponsor is telling you about the market, ask questions to understand what attracts him or her to that market and what makes it a great deal. Then, do your independent research.

Bonus Metric

Look for the above key indicators and other useful leading indicators, such as the UHaul one-way trip data, which can be a great resource and indicator of new hot locations where people are moving. You do not need to be a market genius, but should have total conviction that the location in which you select for your passive investment is sound and offers growth for the next ten years.

After the “who” is the ”where.” Invest with those you trust and in great locations!