Knowing your market ?

3 Replies

Can someone please give  me  a detail information on exactly what knowing Your market is?

I know the area I want to invest in, and I'm assuming that knowing your market is have the understanding on how much the property you interested in is going for ? The crime rate, school score, employment rate, and what the future holds for that area. Where can I get that information from? I apologize if I should know this already , 

There are many things that go into knowing your market. Here are just some questions that you should at least be able to start answering. Of course, there are some parts of knowing your market that depend on your overall strategy, property types, and the sub-market you are in. Knowing about Atlanta (for instance) can only get you so far.

  • What is the going cap rate for your area (esp if you are doing 5+ unit MFH)
  • Are there new jobs being created in the area? Or are jobs stagnant? Worse, are jobs leaving?
  • What are the market rents for units like the ones you are considering?
  • How many people are renting vs. owning in the target area?
  • What are average vacancy rates?
  • What should you expect to pay for utilities (water, garbage, sewer, etc.)?
  • What type of tenants are looking for a property like yours? Will they likely meet your screening criteria?
  • If doing "residential" properties (4 or fewer units), what type of appreciation are you expecting, if any? Would you do the deal if appreciation was 0%?
  • How are the schools in the area?
  • What is crime like?
  • What are average Cap Ex for properties of this type and age?

Some of these things you get from knowing the area, some of them you can research through local Chambers of Commerce or real estate reporting sites. Some of them you know by calling local utility companies or property management companies and asking. Network! Find a local REA and ask there. Talk to other investors. Ask appraisers. Meet neighbors. Talk to the mailman who walks down the street every day.

At the end of the day, there is no single source of information that will help you to "know your market."

Good luck!

This is such a deep topic. Lance, great job getting it going with some other thought processes. I like the "boots on the streets" approach to knowing your market. Take your smart phone, know your local online data source (portlandmaps.com for Portland) and go watch the activity. Go in side as many open houses as possible, look for dumpsters, research sales history, check out permit history for the renovations you find prior to them hitting the market, watch DOM, pay attention to the "players" in your market place, keep a very close eye on rents and retail prices, call all the FSBO signs you can, create your "drive for $" list, talk to locals, knock on some doors, drop off some door hangers.

When it comes to knowing your market you can get a lot online. All the stats and such, but when it comes to working the streets you can become intimate with your market and take those stats to a whole nother level. Of course this doesn't work well if you're investing out of area. The biggest reason I invest in my "back yard"

I also take "know your market" further to "know your buying pool". When you're looking at a specific opportunity...identify that retail "buying pool" and work backwards from there on your number crunching. 

Thank you guys, I really do appreciate the feedback. 

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