While the binary metric of population growth or decline provided a foundation for Keeton’s decision, there was also a qualitative element to the process that involved driving through neighborhoods to get a feel for them — something he recommends all investors do before buying. “See what you are going to buy, don’t just look at it on a spreadsheet,” he said, adding that driving around both Phoenix and Las Vegas, which had similar population trends, helped him eventually decide to go with Phoenix. “I just got a different feeling driving around. I can’t quantify it.” Winning in Blue Collar Neighborhoods The neighborhoods that worked best for Morningside were a specific niche

neighborhood that gave Keeton and his partner a competitive advantage over both the bigger institutional investors as well as local mom-and-pop investors. “We wanted the blue collar neighborhoods because we didn’t want to compete against the big guys,” he said. “In our neighborhoods we were competing against the local mom-and-pop investors who owned five to 10 houses. We thought we could compete against those guys operationally.” Keeton said the prototypical property that Morningside purchased in Phoenix was a 3-bedroom, 2-bathroom 1960s ranch home with 1,200 square feet, sitting on a 9,000-square-foot lot within four miles of

downtown and within the city’s highway 101 loop.

“A lot of the guys in the business felt more comfortable buying the A quality stuff,” he said, describing A quality as stucco homes with tile roofs built in the last 15 years. “When the market turned around those properties were going to turn around faster than the stuff I own.” But appreciation has been strong enough in those established neighborhoods that Morningside has decided to start selling off some of its homes — about five years after it began purchasing. The company stopped acquiring new properties about 18 months ago and has sold about 40 of its homes in the past year, according to Keeton, who noted that the majority of homes are being sold to owner-occupant buyers using conventional financing. That’s an indication those established neighborhoods closer to big city amenities are attractive to owner- occupant buyers, even if crime rates and school quality are not always the best. “Crime is honestly everywhere,” he said, adding that he did not look at crime rates or school scores when purchasing the homes. “We didn’t really look at that because we knew these were good neighborhoods.” Access to Jobs Trumps School Quality Bartlett, the Los Angeles-area flipper, observed a similar trend in some transitioning Los Angeles neighborhoods where the housing market is on the upswing despite lower-quality schools.


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