Discovering And Assessing Your Ideal Real Estate Markets

by | Jul 14, 2022 | Investing Advice

The opportunity to invest passively in multifamily syndications is so vast because you can utilize specialized teams who already have knowledge within specific commercial real estate markets across the country. As you start looking at the potential markets, asset types, and locations, this opportunity can feel both exciting and daunting. 

It would be so easy to spend days or weeks investigating “the best areas for investing” or weeding through countless population trend reports, trying to locate the perfect investment properties… but STOP.

Realistically, all those hours of research will not give you the clarity you’re searching for.

Instead, turn back to your investment goals. For example, do you want an investment opportunity in a growing market that will yield ample cash flow? Or are you less concerned with cash flow and more focused on long-term appreciation?

Use your answers to questions like those to frame your wishlist for the “best” real estate market. Then, use this investigative checklist to help you pinpoint what you’re looking for:

  1. Job Growth
  2. Population Growth
  3. Job Diversity
  4. Landlord/Tenant Laws
  5. Taxes
  6. Geographical Features
  7. Cost of Living
  8. Local News
  9. Local Government
  10. Whether You Have a Competitive Advantage

 

Job Growth

 

Since steady job growth is indicative of a healthy local economy that’s likely attractive to new businesses, developers, and residents of the area, this is the most important metric to evaluate in each market. 

Job growth is a leading indicator of population growth. The more jobs, the more residents, and the more likely the area will maintain a solid tenant base. When more people are attracted to an area, the demand for housing increases, which drives up rent and real estate prices. 

 

Population Growth

 

Since the population in a particular area could be affected by natural disasters, migration patterns, and more, you always want to research it after job growth. 

Finding an area with long-term upward population growth trends (not a temporary bump) is critical, and a significant factor supporting that trend is job growth in the area. 

These two metrics provide a complete picture of the health and future of a given market. 

 

Job Diversity

 

You want to find an area with various industries supporting the local economy. Strong job growth is much less enticing if you discover that most of the jobs in the area are, say, in the tourism industry. 

A recession or a negative news story could broadly impact the number of tourists and, therefore, job growth and population trend. On the other hand, a diversified job market is much more attractive since a hiccup in any single industry likely wouldn’t affect the area as a whole.

 

Landlord/Tenant Laws

 

Beyond the top 3 factors – Job Growth, Population Growth, and Job Diversity, the next best factor to learn about has to do with the laws governing rental properties. 

Rent control, for example, is great for tenants but makes it incredibly challenging for landlords to make a return on an investment in an area where costs for contractors, pest control, and property management are skyrocketing. 

As an investor, you want some insight from local property managers who are intimately familiar with these laws so that you can find landlord-friendly areas.

 

Taxes

 

While usually the last thing on investors’ minds, taxes can make a massive difference to the bottom line. 

State income taxes and property taxes will both impact your operating budget, thus, your overall return. Each state has a different tax structure, and it’s good to understand what you’d potentially be getting into so you won’t be surprised later. 

 

Geographic Features

 

Use Google Maps to check out the actual physical landscape of the area. Look for physical barriers like a body of water, a mountain range, or any other geographical features that could inhibit the physical development of the area. 

As an example, coastal cities are limited by the ocean. Development can only get so close to the water, which forces them to build upward or expand into the suburbs. This drives up the value of centralized real estate, especially in a time of job and population growth. 

 

Cost of Living

 

By seeking out an area where the cost of living is low, especially in comparison to the median income in the area, you’re more likely to experience growth. If people can afford to live in the area easily, there is room for the cost of living (i.e., rent) to rise as more jobs and people move into the area. 

 

Local News

 

While the other previously listed factors are much more critical, you may want to track a few local news stories once you’re pretty “sold” on a specific area. 

It would be great to have some heads-up about new companies moving to (or away from) the area, local announcements, community developments, and anything else that would allow a sense of understanding of the local economy and the potential future of that market. 

 

Local Government

 

Just as with the local news, the local government is indicative of the area’s future standings. Therefore, it’s a good idea to invest in areas with strong local leaders who support new initiatives, an expanding local economy, and whose vision includes making the market vibrant and welcoming. 

Strong leadership from the local government is attractive to corporations, which means that job growth will continue.

 

Whether You Have A Competitive Advantage

 

There’s always the chance that you have greater insight into a specific area, more so than other investors. So, for example, maybe you have a close cousin or best friend who lives there, perhaps you went to college there or grew up there. 

Any time you possess a competitive advantage, more weight should be given to that market. Local connections or a little history with a particular area can put you leaps and bounds ahead of other investors. 

 

Have Some Markets In Mind?

 

Do you have an area in mind after going through the checklist? Start exploring the area and get a feel for the community. Look into the events and opportunities that are creating momentum there.

We have had great success in the Rural Detroit areas, and our primary focus remains in that market. We’re both from Michigan and have innate knowledge about the people, the trends, and a great pulse on what’s happening throughout the area, which gives us an edge. 

The other areas we are focused on are where the growth in Multifamily continues to grow; Texas, Florida, Georgia, and Alabama. You’re leveraging our combined 30 years and over $1B in real estate experience when you invest with us!

If you haven’t decided yet, don’t worry. Remember, as a passive investor, you probably won’t be the one selecting the specific properties. However, you still need to ensure that you are investing in sound markets and with a reliable team. These two factors will establish a solid foundation for your real estate success.

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