what should I be looking at when I analyze a market?

Question

This is one area I seem to be getting held up on. I have found many things on how to analyze properties but almost nothing on markets. Obviously bigger markers would be better for the amount of possible deals. On the other hand though, smaller markets will be cheaper. For example, I have noticed the Plexes in Portland seem to be roughly $100k per unit while in more rural areas of Oregon you can find plexes for around $70k per unit. Analyst of this sort is fairly easy but what I need help on is the analyst of markets that are fairly similar. For instance, Seattle and Detroit are close to the same size. But I am guessing that Seattle would be the better market. As far as I know Seattle is not having the same economic difficulties as Detroit.

So what bits of information should I be looking for when analyzing a market?

Thus far this is what I am assuming I need:
Crime rate
Major industries/companies
Demographics
Proximity to other cities
Quality of the schools
Taxes
Predominate real estate type like ownership/SFH or APT rentals/mobile home parks

What else should I be concerned with?

So what bits of information should I be looking for when analyzing a market?

Thus far this is what I am assuming I need:
Crime rate
Major industries/companies
Demographics
Proximity to other cities
Quality of the schools
Taxes
Predominate real estate type like ownership/SFH or APT rentals/mobile home parks

What else should I be concerned with?

Ali Boone · Answer

Hi Mason, I agree that it depends on what kind of investing you are wanting to do, but the biggest factor I consider is population. If the population of a market has steadily been increasing over the last 10-20 years and continuing to increase, that's a great sign. Somewhere like Detroit where it's decreasing, bad sign. Industry is a big thing too. How many industries are in the market? If it's only one, how likely could that industry tank, meaning leaving the market/state for bare? ie the auto industry in Michigan.

My best advice is to network and find out where everyone else is investing, then use those markets as a starting point to look at. While not everyone will be right in the markets they choose, if all the big boy investors are in one market, there is probably a reason and you may want to consider looking at that one. There are professionals whose jobs are to analyze markets, so don't hesitate to piggyback off their research.

Ziv Magen · Answer

What Ali Boone said - look at the population (average salaries should also confirm the same trends, if you have access to this data), and read/hear/ask active local investors' opinions.

Chris Clothier · Answer

What about getting caught up on market size? I am sort of hesitant of looking into smaller markets since I may not be able to find any buyers or renters.

Mason -

That is a fallacy and can cause hesitation that you are experiencing.  There will be demand and opportunity for both sales and renting in every market around the country regardless of size (to an extent).  If you are thinking of investing in a market with 500,000 plus residents which would qualify as a medium to small market (outside the top 20 markets list), then you will have no problem.  I would only be concerned if you were thinking about buying in a market where the population is very small and even then there will be some demand.

What you need to be more concerned with, and this goes for ANY market regardless of size, is the actual part of town you are investing and the demand for selling or renting in that particular zip code, neighborhood or street.  So don't let market size scare you.  Instead focus on the area of the market you want to invest.  That is way more important.

Chris

Chris Clothier · Answer

Hey Scott -

You can start here:

http://www.fedstats.gov/cgi-bin/A2Z.cgi

You can also do a Google search where you search labor statistics, industry stats or housing statistics or census data and then enter the city name you are looking for.  It will return results and in there will be the data you are looking for.  Basically you are looking for trends and not necessarily wanting to get bogged down too much.

I would also enter the name of the city in a google search followed by Business Journal and see if there is a local Business Journal or other business publication.  You will be able to get a good sense of the on-the-ground situation from such a publication and get some data.

Hope that helps.

Chris

Chris Clothier · Answer

Hey Mason Valenzuela -

There is not a lot more I can add here that Ali Boone and J  Scott have not already said, but the market you choose is really going to be dependent on what your ultimate goal is for investing.  They both gave really good advice.  If you are looking for a long-term buy & hold, then you are going about it the right way by considering the market first.  Do not fall in love with a market.  You need to know why it is a good investment market and the economic metrics that have been listed on here are a great place to start.

If it is out of your area, then the next step is to research who can help you invest in that market - your team per se.  If you feel you have found the right market for you as an investor and a quality team, then Jeff  S. nailed it on the head with your next step.  How is that property going to be managed?  That is extremely important and I would caution you that no matter how good a market looks or how good a property looks or how much you may like the people who are going to help you on the ground.  If the management is not right, you should absolutely pause before buying.  Great management can help a bad property - not always, but it can.  However, bad management can and often will kill a great property.

Good luck to you -

Chris

Jeff S. · Answer

Hi Mason Valenzuela I am in Portland. I am thinking you are talking about something larger than sfh and duplexes as 100k per unit is cheap.

I would say property management should be your biggest concern. You might be able to get a rental in Atlanta for 40k but that is a big plane ride and since the income is low and the potential for problem renters is high, finding someone to do that kind of work for cheap is problematic to say the least. There are agents out there who will agree to manage your place just to make the sale but when things get tough they have other priorities.

J Scott · Answer

Depends on your strategy...will you be flipping, landlording, wholesaling, or something else?

Lynn McGeein · Answer

I start with city-data.com, although figures are a few years old, then google for other, newer stats, as news, magazine articles, etc., tend to show good info once you've narrowed down different places.

Scott Meredith · Answer

Thanks Chris

Scott Meredith · Answer

I would be interested in knowing where to look to find a lot of this information.  I see people talking about stats but can never seem to find them when I try to find them.

what should I be looking at when I analyze a market?

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