How do you evaluate markets?

[Scott Sutton]

Hi everyone,

I'm in the early stages of deciding where I want to focus my initial efforts in REI. Specifically, I want to evaluate a few markets for the purpose of buy-and-hold, cash-flow investment in residential properties (single-family houses or 2- to 4-unit multi-family properties), so I'm curious about the process employed by other investors to assess and contrast a handful of markets when determining where to invest. In particular:

1. Exactly which factors/data did you consider?


2. How did you prioritize this information?


3. Why did you adopt this particular approach?


4. Would you do things differently today?

Please note, I understand that ...

1. There is no 'one-size-fits-all' methodology.


2. Opinions will differ widely with respect to which factors one should consider, and the relative importance of each.


3. Circumstances and objectives will vary from investor-to-investor, and from market-to-market.


4. A high-level analysis of a city's real-estate market has limited utility since 'all real estate is local' and opportunity exists in most every city.

That said, I still think it would be instructive to learn about the thought process and methodology employed by others when analyzing the potential of various real-estate markets. From what I've read thus far, REI authors touch on this subject in only the most general terms -- i.e. to evaluate a market, one should consider population growth, economic conditions, infrastructure, average cap rates, housing supply and demand, the legal environment, etc. While such guidelines are a good starting point, hearing a few examples would be helpful.

Thanks,

Scott...

Note: I don't think it's relevant to the question, but if you're curious, the markets I'm interested in contrasting are as follows:
Phoenix AZ
Tucson AZ
Charlotte NC
Charleston SC
Portland OR
Vancouver WA
Dallas TX

[Donna Blanchette]

When I evaluate a market, I look at it's economic base for future growth (i.e. industries, military, tourism) - obviously, the potential for strong future growth will usually translate into stronger demand for real estate...

I also look RE growth potential contrasted to what has inhibited past growth - for example, it the community land locked, controlled by environmental regs, lack of water, etc...