Important demographic to know for buying commercial real estate?

[Raman Singh]

I want to know that what are the demographics investors need to know about the area to purchase commercial or multifamily property?

[Joel Owens]

Demographics are just a baseline.

You can buy in an amazing area but have a crappy property location or a lease for the income stream.

The badly placed property in the great area or a weak tenant or unfavorable lease can be just us bad or worse than purchasing in a bad area.

National median income average is about 54,000 nationally. I generally like higher income areas of 80,000 and preferably above 100,000. These people tend to have more discretionary income and assets saved up in an economic downturn. The lower income areas when times are good will have maybe 3k to 5k a year to spend going out. When the economy gets bad most are hand to mouth so the local businesses tend to suffer more.

Sometimes you can have a great area at 52,000 median income. It can be a tourist destination where most of the money is high income that spends there but the workers to serve the tourists make lower income averages. Also if a town has a large college that can artificially skew the median income numbers down. The kids going to school tend to have very little money and work menial jobs so you see very high incomes for an area and then very low which it pulls it down more than it should.

Each area has to be evaluated on it's own.