Market Analysis for a Real Estate Multifamily Investment

2 Replies

Before getting into the details of a property, the first step is to analyze the market demographics and economy to ensure that it supports healthy rental growth and demonstrates demand with a growing population.

Below is an overview of the more critical factors that we analyze as they will directly impact housing demand and the performance of an investment property:

  • Poverty Rate – The poverty rate in the asset’s local area must be at or below the MSA where you’re investing.
  • Median Household Income – We like to see the household income at $35K or higher depending on the asset class and new resident qualification standards.
  • Unemployment Rate: The Unemployment rate in the asset’s local area must at a similar level or better than the MSA where we’re investing.
  • Population growth and jobs: Where there are jobs, there’s population growth. We look for deals in MSAs with an existing trend in population growth and economic developments that will fuel continued expansion, such as corporations moving into the city, developing transport and communication, etc.
  • Schools – Depending on the asset class, we like to see the assigned school’s rating at an above-average level.

Investing in a sound submarket with a growing population is the basis of any real estate investment. It’ll provide the tailwinds necessary to propel the performance of the investment.

Helpful Resources:

  • United States Census Bureau – QuickFacts – The most up-to-date and accurate data directly from the source.
  • City-Data.com – You can search by city and zoom in to the local area level to see Median household income, unemployment, residents below the poverty level, and more.
  • TownCharts.com – Powerfully illustrated and interactive data on Demographics, Housing, Economy, Education, Healthcare
  • GreatSchools.org – Check the assigned schools and the rating based on an address.

What factors do you evaluate?
What tools do you use?

@Davide Formica

This is a great topic Davide. I also look for markets with growing population in B class areas. I use VestMap.com to vet exact property locations once I identify the markets I want to invest in. 

VestMap has access to the maps above for the entire country. The indicated zip codes: 

  • Have median home values of 100-250k
  • Over 30k median household income 
  • Are major MSAs within 50 miles of a major airport 
  • Have a least 3k housing units 
  • Have a population growth rate of less than zero per year since 2010 

It is all about affordable growing B class areas!