Quote from @Joshua Janus:
@Robin Morales When researching a market, it is important to pay attention to the factors you highlighted above as well as what brings people to the city and what will continue to do so. If the price is relatively low/sqft and the city has a growing population and job market, the demand for homes will increase which leads to home appreciation. Also see how the specific market handles STR as that brings in a large section of rei investors and can drive prices up. Here is a quick analysis of my market. Paying attention to recent and upcoming capital investments by the city can also give you a good idea of where the money is flowing in the city and you can see if it is recovering or growing. Columbus, Ohio is a great market to invest in. The population has been growing here year over year over the last decade, it is home to The Ohio State University which has over 50,000 students that live here along with those that visit, and it also holds a diverse range of young professionals and traveling nurses to fill the demand of the multiple business corporations and hospitals stationed here. Tech companies are continuously moving here and establishing a footprint in Columbus as well. Intel is a great example, who is building the largest chip manufacturing plant in the US right here, and it will be a $20 billion dollar investment that brings a few new thousand jobs. https://www.dispatch.com/story... are a few more recent investments https://www.10tv.com/article/money/business/hydrogen-power-company-hyperion-bringing-700-jobs-to-columbus/530-25907aab-5517-4661-a9f3-d2ed2d5be6b0
The problem with all these "metrics" doing Market Analysis from the REI point of view, is they don't tell you whether or not that market is worth investing in. Just because the market has a new factory bringing 20k new jobs, doesn't automatically make it a good place to invest in. All it tells anyone is if they are looking for a new/different job, that might be the place to move to. Having 20k new residents in a market means they are looking for a place to live, which is the logic behind this factory making this market an opportunity for REI. Unfortunately, the REI isn't the one looking for a job...they are looking to make money, and REI's make money on the spreads between purchase and flip (if flipping), or rent and expenses (if holding).
What if these new jobs make the PV's go up dramatically? That's great for the REI's that are already established, but not so good for those looking at this market as a new place to invest because the spread won't exist. What if the rents go up due to demand, but the expenses do too, such as taxes. The rent has a ceiling, the taxes don't have to increase at the same rate...and there goes that spread. What if the rents are already at their limits for the area?
Same thing with schools. Good schools districts many times also carry higher rents, but also higher taxes. As property values increase, so will the insurance on that property. What if the area is loaded with many 1 or 2 bedroom homes? How many of those homes involve kids going to these schools? How many involve seniors or starter homes (no kids), or singles? How many of these renters/buyers are willing to pay higher prices for homes or higher rents based on the better school systems...that they won't be using?
The truth is, using the vast majority of these metrics to analyze a market for a REI is pointless. Do these things matter to the tenants/owners? Yes. That doesn't mean it tells the REI anything of value...on the surface. How do we know if these metrics matter to these tenants/buyers? By what they are willing to pay in rent and purchase price. How do we as REI's know if that higher rent/price is a good are to invest? If the cash flow (rental spread) and/or the profit (flipping spread) show these higher rents/PV generate higher spreads, that's a good REI market. If all they do is break even, or worse, lose money, then all these great "metrics" tell the tenants and homeowners it's a great place to live, but it will cost them to live there. It's the cash flow and profits that tell the REI's if these "metric" matter enough to these tenants/owners to pay enough to generate those spreads.
See, they don't care about the spreads...just the metrics. We care about the spreads.
