Market Stats You Can’t Ignore

What’s the first thing you look at when investigating a new potential market? Is it local population trends? Vacancy rate? New construction? There’s no wrong answer here. All of these, and more, are important statistics that must be considered before you put a stake in a new market.

Before you invest, be sure to look carefully at each of the factors below. Each contains clues that will paint a picture about the market you’re considering and, ultimately, whether or not it will be wise to invest there.

Population

The first piece of information I look at is the local population. The U.S. Census Bureau has all this information readily available online, and I usually look over the last 5 to 10 years worth of data. If the population is trending up, this is a great sign, because it means the area is growing. Historical data isn’t the only consideration, though. You also need to investigate the population forecasts, which can give you an idea of how the population will trend over the coming years. Finally, consider what is driving population growth (or decline). Are there new industries in the area? Is the cost of living more affordable than neighboring cities? All of this information is helpful in giving you a broader picture of the area.

Demographics

The demographics of the market, as well as the specific area or neighborhood you’re targeting, are also important determining factors. This includes information about the median age and income of local residents, as well as crime stats and employment opportunities. All of these fall under the umbrella of ‘demographics,’ and each represents vital information about the area and the people who live there. Higher earners with more education and more job opportunities will drive up the cost of housing (both to purchase and to rent), while low skill jobs, high crime rates, and low-performing schools will have the opposite effect. Your investment strategy and goals need to align with the demographics of the area, so be sure to learn as much as you can.

Rental/Vacancy Rates

Lastly, the local rental and vacancy rates provide even more crucial information. Obviously, you need to know what units are renting for in the area to help determine if it’s even profitable to invest there. Compare the different rates with different types of units so you know what a 3-bedroom house, versus a 1-bedroom apartment, is going for. You’ll also need to check out vacancy rates. Vacancies can kill profits faster than you can say, “I have an open unit,” and a high vacancy rate in a select market is a big red flag. If units aren’t being rented, property owners aren’t making money.

These are just a few of the important statistics you can’t afford to ignore when thinking about breaking into a new market. Each offers vital information about that market’s performance and, more importantly, your potential for success if you choose to invest there.