Properly Analyzing a Market

[Chris Mackey]

What demographics and statistics do you look at before investing in a market? Ie. population growth rate, income to rent ratio, vacancy rates, etc.

What ratios and percentages do you require in the above or any other demographics before concluding the market has potential?

[Theo Hicks]

1. Unemployment: ideally, % is decreasing over last 5 years
2. Population: 5-year population growth is increasing
3. Population age: 5-year population age range of your target demographic is increasing 
4. Industry: ideally, no one industry is employing more than 25% to 30% of the employed population
5. Top employers: look up the top companies, determine what industry they are in, and calculate if that is a growing or declining industry
6. Supply and Demand
   • Is the supply of your product (SFRs or multifamily) increasing?
   • Occupancy/vacancy: are the occupancy rates increasing, vacancy rates decreasing?
   • Median rents (if buy-and-hold): are they increasing? 
   • Median income: What % of median income is the annual median rent, ideally less than 30% to 35%