How do real estate investors analyze markets?

Question

What kind of metrics do investors look at in a city before deciding which property to buy? I know some common metrics include employment data, population, avg income, breakdown of neighborhoods etc but I was wondering to get a slightly more comprehensive list.

Thanks so much guys!

Louis Leone · Answer

There are actually a lot of variables to look at (especially at the local level).  What type of property are you focusing on.

For example, if you're looking at rentals, you want to be sure (besides population and employment that you mentioned) that the demographics (think millennials), supply (and pipeline), affordability, industry diversity, path of progress and access to lifestyle are clearly present.  For sales, demographics that include Gen X and/or Boomers are more important (among other indicators).

Joe Villeneuve · Answer

Rule #1:  Cash in = cash out within first year...CoCR => 100%.

Rule #2:  Minimum $300/month NCF

Rule #3:  Cash in = Cash Out within...oh, I said that already.  It's well worth repeating.**************************************************************************************************************Guideline #1:  New cars in driveways in neighborhood

Guideline #2:  Well maintained Lawn/landscape in neighborhood

Guideline #3:  New roofs in neighborhood

Joseph Chen · Answer

In a  quantitative perspective, investing in real estate is somewhat like investing in stocks. And in order to profit in real estate investments, they must determine the value of the properties they buy and make educated guesses about how much profit these investments will generate.  Most investors use the Comparable Equity Valuations to determine the present value of future incoming cash flows. Calculating a Real Estate Property's Net Operating Income, finding a property's income-Generating capacity and roadblocks to real estate valuation.

Eric Fernwood · Answer

Hello @Raghav Haran ,

I recently posted a detailed response to a question very similar to yours. Hopefully you will find it helpful.

http://www.biggerpockets.com/forums/12/topics/159951-advise-for-starting-an-out-of-state-buy-and-hold-investing-portfolio?page=1#p1074148