Market analysis

[Jeff Johnson]

If you were to write a market analysis for a business plan in today's market how would you write it? I am having a little trouble with this as I try and get my plan totally on paper so if its needed for a financing I have it in place.

The issue I am having is that on one hand I can find properties that are very cheep as compared to 1 or 2 years ago. But its also harder to find buyers for homes. In my plan I am going to start out with a few smaller rehabs that will be aimed at first time home buyers. How do you write something that has such a big positive and also a big negative?

Thanks.

[Jeff Tumbarello]

Here is the issue I see.

http://en.wikipedia.org/wiki/Analysis

"Analysis is the process of breaking a complex topic or substance into smaller parts to gain a better understanding of it."

You are not trying to gain understanding, you are trying to write something that will enable someone to lend you some money. In a sense you are writing a brochure. If I am seeing that wrong please correct.

I would do an Empirical Study, start in the macro, then drill down to the micro. Then find out whether you should borrow any money to play in the market. Without proper DD, most take someone else's treasure, trade copper for brass, paying interest on the copper the whole time. Toast is served for all involved.......

To break down a market you need to track at least the following:

Money in Motion
Number of sales
Average Sale
Median Sale
Average Asset size in SQFT
Average price per SQFT

Rents. You study this to know whether you have positive leverage in this market or not. This will affect your ability to hold or fold.

Driving forces of local demographics. I would key in on the income stats for your rehab flipps. Do not release 300K product into a market where the average wage earner makes 40K a year.


Historical trends ( looking back thru the last cycle)

Monthly Sales trends on an annual basis.

Pricing trends for the above as well.

Thats the shortest version I could come up with.

The key find out whether you should before you decide to do it.