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60 companies, whereas many areas of Texas do. In addition to considering tax rates, Logan Mohtashami, Senior Loan Manager at AMC Lending Group, says to look for investments in areas with strong schools. "Look to local areas, and see how educated and skilled the local people are by checking out city statistics," Mohtashami said. "e better educated the city, the higher the wage and lower unemployment." To separate the areas with good schools from those with faltering schools, investors should look at publicly available data and performance metrics, including standardized test scores, graduation rates, attendance rates, and suspension rates, Mohtashami says. "A distressed property in those areas is a good value," he said. Mohtashami recommends that investors consider distressed properties in areas with rebounding economics, too, such as Detroit or Baltimore, because they offer better value appreciation than other properties—especially if they're in good school districts. "ere's always value in any area," Mohtashami said. Lykken says that urban properties and those closer to suburban areas tend to provide good values as well because, as a country, there's been some movement away from full-on telecommuting toward a combination of telecommuting and in-office work. So investments in single-family homes beyond urban areas and close-in collar communities will tend to lag. However, on the West Coast, prices are so high that people are willing to live further out and drive in, according to Mohtashami. Investors buying properties with the intention of re-selling need to factor in a growing affordability gap that means the number of potential buyers for a property, particularly on the high end, is continuing to dwindle. Single-family homes continue to appreciate in value at 7 to 9 percent per year—faster than wages do, so the affordability gap for potential new homeowners continues to increase, Lykken and Mohtashami both say. According to Trulia, some of the best single- family investment markets are Jacksonville, Cape Coral-Fort Myers, Deltona-Daytona Beach-Ormond Beach, Tampa-St. Petersburg, and North Port-Sarasota-Bradenton, Florida; Grand Rapids, Michigan; Colorado Springs, Colorado; Charleston, South Carolina; San Antonio; and Phoenix. All benefit from growing or stable economies, and all but Grand Rapids and Colorado Springs offer warm weather throughout the year. MORTGAGE-BACKED SECURITIES "Mortgage notes are continuing to hold their value," Lykken said. ough they're interest-rate sensitive, mortgage notes shouldn't be placed in the same investment bucket as interest-rate sensitive investments like utilities and bonds, because mortgage notes are backed by solid assets. Other interest-rate sensitive investments tend to be more affected by regulations, corporate earnings, and other corporate factors that don't affect real estate. As interest rates go up, there's a smaller supply of notes with lower interest rates, according to David Holding, VP of Production and Capital Markets at Mortgage Equity Partners. In July, new Fannie Mae coupons for 30-year mortgages were at just over 3.5 percent, with some older coupons ranging a little more than 4 percent. While the higher-rate ones have attractive yields, they are also at risk for early payoff if rates drop, Holding said. According to Holden, the notes paying lower interest rates have some advantages over the higher-yielding notes—particularly for investors seeking a steady income stream. e best bet, Holding said, is usually to purchase mortgage notes in the middle of the yield range, which protects the investor against early payoff, as well as the possibility of interest rates rising too far ahead of the rates of the notes. Some subscription services like ompson Reuters can provide investors with good insight on current note rates, historical performance, interest rate forecasts, and other factors that could affect note performance, Holding said. However, not all mortgage notes paying the same rates are the same, Lykken and several other experts noted. ey recommended taking the time to carefully review the properties underwritten by the notes, which means conducting inspections and appraisals, looking at payment histories, and more. If such research is beyond the investor's capacity or expertise, there are several third-party firms that offer such services. "ere's a lot of science behind investing in performing and nonperforming notes," said Rick Sharga, EVP of Ten-X, a real estate platform that allows buyers, sellers, and real estate professionals to search, list, and transact properties completely online. ere's no one- size-fits-all approach. People have different strategies. Nonperforming are the easiest pools to work with, because you may be able to get $200k 1800k 1600k $140k $120k $100k $80k $60k $40k $20k $0k All 25+ < 9TH GRADE 9TH-12TH HS GRAD SOME COLLEGE ASSOCIATE BACHELOR'S MASTER'S PROFESSIONAL DOCTORATE MEDIAN AND MEAN HOUSEHOLD INCOME IN 2015 BY EDUCATION ATTAINMENT Source: Census Bureau MEAN MEDIAN 80.8K 39.9K 26.4K 42.0K 51.9K 62.5K 88.0K 101.3K 136.6K 121.2K 38.7K 57.5K 67.8K 77.1K 108.9K 125.1K 188.2K 152.5K 26.3K 58.0K

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