For many investors this will be the second leg of their property exchange, the first being relinquishing their initial property (if they are doing another type of exchange the order could be different).  But the success of the exchange, and the achievement of the exchange goals really lie in the replacement property.  We suggest that the exchange replacement property is scouted out well ahead of any exchange beginning in the first place.   Here are some considerations to think about.  

Location – The location of the property plays a vital role in determining the future of the investment. The property built or located in a prime or upcoming location or state is likely to produce more income.

Neighborhood – Another factor to be considered while choosing the property for the replacement is the neighborhood as a good neighborhood will impact in terms of tenants. While, in case of shops, offices or any other type of property, the neighborhood is important in terms of footfall. Consider checking with local law enforcement for crime statistics.  Also look to www.city-data.com for household income growth.  

Population Growth – When looking for replacement properties with strong cash flow, we must look for markets with high population growth. Because renters make up roughly 40% of a market’s population, population growth is a good indicator of potential cash flow. As the population grows, so does the demand for rental properties.  The bureau of the census has population growth statistics by geographic areas.  You can even use Google.  Type in “population of ….insert city you want” .  

Job opportunities – We also look for markets with strong job growth. This follows the same logic as above, because as more jobs are created, more people tend to relocate to an area. In other words, population growth is caused by job growth.  Look to the local chamber of commerce for the latest happenings.  You can also look at https://www.deptofnumbers.com/employment/metros/ for job growth numbers.  

Affordability – When looking to generate cash flow, you don’t want to overspend on your investment property.  Familiarize yourself with cap rates and understand how they can be a marker for what you should be paying in a certain area.   You can also look at  www.city-data.com for median property values.