How to best analyze a market

9 Replies

I am curious how everyone here analyzes a market when deciding where to purchase? Do you first look at the state as a whole and look at population, job growth, median or average income, % renters, property taxes ext. Or do you look directly as the micro climate that is the city or county area you would be investing in first. Also what resources are there out there to help with this, I have been just pouring over US Census Bureau Data and Googling and would love to hear how others here on BP are getting their information.

@Nick Fitzpatrick In my opinion, the state level is too broad to look at. However, you do want a business friendly state and one that does not have onerous government regulations. But in general, you will find good markets and bad markets in nearly every state. I start at a Metropolitan Statistical Area level (MSA) and drill down from there. The top 3 things I look for in the MSA are 1. Population trends and net migration. 2. Employment trends. Not just unemployment rates but more importantly number of jobs and job growth. 3. Income trends. Are incomes increasing. The next layer I look at is price to rent ratios, property taxes and insurance, landlord/tenant laws. There's a lot more factors to consider, but these are the major ones to start narrowing market choices down. I have a report on how to evaluate and choose a market that I'll be happy to send you.

Mike

@Nick Fitzpatrick

Stream line your approach by leveraging local experts. Have a general idea of the market you would like to invest in, then call up the top commercial brokerage firms and set appointments; at least 3 of them. Pick their brains on the best and worst places within your market, ask for any market reports that they create as a firm, then leverage the data across all 3 sources.

Finish it up with some due diligence on the exact areas you are narrowed down too, and make sure all their facts line up.

First quarter 2014 market reports should be available now.

Personally, I think it depends on the purpose of your purchase i.e. will it be a flip or a buy and hold. If it is a buy hold it ought to be something close enough for you to keep your eye on now or in the future.

If it is a flip it really doesn't matter where the location is, a good deal is a good deal regardless of the location.

@Annunciata R. I have to disagree. I think it's just the opposite. Fix and flips are far more labor and time intensive. It's very difficult to flip remotely. On the other hand, with a good property manager, you can successful own buy and holds anywhere. Not everyone lives in a good bu and hold market where the can "keep their eye on things". High cost markets like CA don't cash flow but could be good flip markets.

Thanks for the great feedback, where do you typically look to view quarterly reports?

@Nick Fitzpatrick the reports from the major CRE brokerages that @Michael Moikeha mentioned are available online at their websites. Marcus & Millichap, ARA, Hendricks Berkadia are a few. Also check the reports from the major multifamily research providers MPF Research, Axiometrics, CoStar are a few. There are also regional and local researchers and real estate economists which I posted about recently and I'm sure a search will turn them up.

The national orgs have research as well: NMHC and NAHB are two.

Good Hunting-

@Mike D'Arrigo that report sounds exactly what I am looking for. Thanks for being willing to help us new guys. Would you mind sending it my way?

Giovanni,

Thanks for the point in the right direction this information is great!

Thanks,

Nick

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