What is the CAFR and Why You Should Care

Long distance investing is nothing new, but it is something that has grown in popularity exponentially over the last 10 years or so. Thanks to the advent of the internet and the wealth of information it provides, it’s much easier for investors to buy in markets other than their own. You can compare markets, hunt for property, analyze local rental rates and more without ever leaving your own house!

One of the biggest tools that remote investors have at their disposal is the CAFR, or Comprehensive Annual Financial Report. If you’ve never heard of this before and are interested in investing in another market, prepare to be enlightened. You can thank me later for sharing this incredible resource with you. ;)

The CAFR is like an encyclopedia-almanac hybrid. It has all of a particular city’s most important details (important in terms of investment, anyway) - including past and present info, as well as projections for the future. Population and employment stats, financial records, tax information, and tons more can be found within the pages of the CAFR.

The report is divided into 3 sections: introductory, financial, and statistical. Each contains vital information about a city that you can use to determine if it’s worth investing in. Let’s look at the 3 sections.

Introductory

The beginning of the CAFR provides an overview of a city’s local economy, government, industries, and major initiatives. Basically, this part of the report gives you a quick-and-dirty look at a city and where it’s headed, shedding light on whether the market is growing or declining.

Financial

This section goes into greater detail regarding - no surprise - the financials of a city. Within the financial portion is a piece called Management Discussion & Analysis. This is an area you want to look at, as it discusses the financial highlights, how much capital a city has, and it’s ‘net position.’ You’ll also be able to see where the city’s biggest revenue streams are and where funds are being spent. While this section may read like a bunch of accounting mumbo-jumbo, it’s worth taking a look at. You don’t want to invest in a market that is in poor financial standing, nor do you want to start paying taxes in a city that doesn’t know how to manage its money.

Statistical

The statistical section analyzes all the facts, identifying trends and displaying them in handy graphs and charts. You can look at population stats, employment data, and the demographic profile of a city. This section fills in the remaining pieces, completing the picture of a given market and allowing you to make a more informed decision.

While the CAFR shouldn’t be the ‘be-all, end-all’ in your decision to invest in a particular city or not, it is a useful tool in helping you make that choice. It provides excellent foundational knowledge about a market, which, if it looks promising, you can use as a launching off point for further investigation.

The resource is free and easily available online; just google the name of the city you’re interested in followed by CAFR. It’s not just for remote investors, either. The CAFR is worth looking at for all investors, even those planning to buy in their own backyards. Before you purchase property, be sure to take advantage of this amazing tool!