Knowing Your Market

[Kurt Price]

I am a new investor and have been doing a lot of studying and reading about real estate investing. One common suggestion and crucial part of investing is knowing your local market if you are investing locally. I just wanted to ask for some of your more effective and time efficient ideas and methods that you would use in order to stay knowledgeable about your local market. 

[Joshua McGinnis]

@Kurt Price

Great question. Understanding your target market is vital to your success as a real estate entrepreneur. 

I'm currently working in several areas, but for all of them, I go deep into understanding how the market functions, what it looks like, feels like, what it needs and doesn't need.

Here's a rough list of what I think you should do get to know your market:

• Make a Map (see below). Determine an outer boundary to your target area and drive each and every street in order to make a map of the city. Do it by hand as the repetitive nature of the exercise is part of what will make the information become engrained in your mind.
• Demographics. You should study the following:
  • Population Trends over the last decade
  • Population Income over the last decade
  • Population Age over the last decade
  • Population Density
  • Ethnic and Cultural Breakdown of the Community
  • How many households exist?
  • What is the breakdown of SFR vs Multi vs Apartments vs Mobile Homes?
• Economy. Research and know the following:
  • Who are the largest employers in the area?
  • How many jobs do those employers employ?
  • Where are the jobs concentrated?
• Inventory.
  • Map every new development under construction.
  • Research the price / size / unit-mix / amenities to every development created in the last 2 years.
  • Do the above for developments in the pipeline.
  • Map Vacant Retail / Lots / Buildings

There's a lot more that you could research, but if you do the above, you'll be 99% more informed than the other tire-kickers in your area and you'll be better prepared to evaluate a potential investment.

Here's a map I recently made of the Koreatown area of Los Angeles: