Market Analysis for RE Investments

[Brandon Phillips]

Do you have any advice for someone who is trying to understand "the market" of a geographic location? I look at both properties sold and bought in an area, years built, purchase/sell price, sq.feet. To me, who is starting out, just looks like a bunch of numbers. What kinds of trends do you look for in the numbers that makes you confident to invest in certain areas?

[Joe Villeneuve]

What you are attempting to do is one of the most important things a REI can do...should do. Market analysis is everything. It trumps property analysis because it is based on the cumulative results of common properties.

It's in the numbers with $$$ in front...period.  The rest is decoration, and rationalization because the end results from all those "decoration" numbers end up forming the numbers with $$$ in front.

The idea is to find micro-markets.  These are markets that are formed by common properties (all the same size...meaning within around 10% of eachother), in three different categories...4Sale, Sold and Rentals.

The 4Sale properties dictate the cost to "enter" the market.

The Sold Comps dictate the Value of these properties, the "exit", which when combined with the Entry numbers, tells us what the potential profit in this area (micro-market) is.

The Rental Comps dictate the "exit" in the form of income, when combined with the monthly costs (including the mortgage pmts...dictated from the 4Sale comps), you get the potential Cash Flow of this Micro-Market.

...and the rest, is...