How to analyze markets

Question

Hey all,

New to REI here and still learning so much. I'm wondering what tools you guys use to analyze markets. Alot of investors talk about class A, B, and so on neighborhoods but I'm still not sure what makes a neighborhood fall into one of those categories. I don't want to be too much of an ask-hole so I'm just wondering what tools are commonly used to analyze various neighborhoods and markets that I can also use to help me figure where I should invest?

Thanks!

Caden Wakim · Answer

Hey Kyle!

This is key in determining markets you want to invest in, their are a few different strategies I would recommend to get the best info!

-Local real estate agents, finding a realtor you can trust in some markets you are interested in is key. They often provide great insight on what neighborhoods are desirable and where investors are buying. Just be sure you find an agent who isn't just trying to push you for the commission.

-Property management companies, you can contact property managers in the area and they can provide insight on where their clients are buying, rents, neighborhood details, crime, etc.

-Other investors, connecting with other investors in different areas is the best option, you get to meet like minded, successful individuals doing what you want to do. The best info will be from the people who are "doing" it actively. Active buyers, in specific markets etc.

These are my 3 top ways in which I break down new markets.

Hope this helps, best of luck

Jimmy Lieu · Answer

Hi Kyle, look into neighborhood statistics, crime maps, Google Street view, and ask your real estate agent to take a video walkthrough of the entire block of the neighborhood. As a local investor and agent here in Columbus Ohio, I work with a lot of out of state investors and I make sure to do all of this for them! If you have any questions or want to connect, feel free to reach out

Ned Carey · Answer

@Kyle Baer welcome to BP

I think your question may have confused some people - Maybe me. If you are asking how to pick a market to invest in, I recomend your own market. Investing out of your area increases both risk and cost.

I think what you are asking is how to evaluate the market you are in and how to diferentiate exactly what neghborhoods or sub arkets to invest in and how to evalualte them. The A B C thing is a crude generalization. My B may be different then your B, especially if we are talking different cities.

To learn the market you are investing in follow the 100 house rule.

"Until you have looked at 100 houses you really don't really konw your Market"

So how do you do that? Look at all kinds of deals; wholesalerdeals, open houses, listed properties, FSBO, onsite auctions,etc. It is especilly good if you can get another investor to let you see their properties. Ask them what they are going to do with the property and what the numbers are.

Bob Stevens · Answer

No tools, just network and see where the highest returns are coming from. No you do not need a realtor. I have done 100s and 100s and 100s and never use a realtor, they do not for the most part have the deals. If you are cash buyer all you need to do is connect with those doing deals. I have been seeing 10% +++ net caps being purchased weekly for many years. I just picked up yesterday a 7 unit, with about 20% net cap no realtor involved. BTW this ABC thing people use is useless. For the most part you are not going to make money in A areas, for rentals, sure maybe a flip. Just go to your local RE meeting, you will learn more in a day then you will in a month sitting on the internet.

Min Zhang · Answer

I would actually consider investing with a bare minimum of 1% rule. This is what I usually look for in grade properties.

This means that the security deposit cannot exceed 1% of the total rent for the rental period. For example, if the monthly rent is $1,000, the maximum security deposit that can be charged for a one-year lease is $1,500 (or 1.5 times the monthly rent).

If you have questions about this, please don't hesitate to reach out to me at anytime. best of luck! ;)

Aaron Francl · Answer

@Kyle Baer "ask-hole" is a new one, haha, but that's hilarious. Any reason why you're not buying your first deal in your own area?

I'd absolutely look in my own backyard first to buy as an owner-occupant bc you'll need less capital vs. buying investments at a distance, which is what I assume you're referencing here? Not only that, you'll likely know your area better and can learn easier with how to run your property than you can vs. long distance. If you can house hack a small multifamily with a residential loan, that would be my advice, and how I, and many other investors get their start.

If, let's say, your home market(s) are too costly then that's when you can take your focus into outside markets.

Here is a good article on neighborhood classifications:

https://realwealth.com/learn/c...

Kyle Baer · Answer

Yes, that is what I was trying to ask. Thank you. I agree; I definitely need to see more deals and get used to analyzing them.

Anthony L Amos Jr · Answer

Pick a strategy then speak to investors who are using that strategy and see where they are investing and why. You can back up the information you learn from them by checking out public statistical info such as development, population trends, area income vs rents, etc.

Ran Iarovich · Answer

Barbara Cocoran just came on a Bigger Pockets podcast. I don't want to ruin it but her strategy for analyzing locations is very unique - https://open.spotify.com/episo...

Bob Stevens · Answer

Its not rocket science, though many make it seem that way. Its just numbers,

How to analyze markets

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