In this blog, we will provide you with valuable information and actionable steps to help you effectively and efficiently find great deals in any market. Whether you are a house flipper, wholesaler, or real estate agent, this blog is for you.
Phase 1: High-Level Market Analysis
Before diving into marketing or sending out mailers, it is crucial to understand the market you are targeting. Market analysis is the first step in finding great deals. Here are some key factors to consider:
Knowing the population of the market you are interested in is essential. You need to determine if the market is big enough to support your investment strategy. For example, if you want to flip 100 houses, a small college town with a population of 20,000 may not be the best fit. Cities with populations of around 100,000 to 250,000 are often ideal as they offer sufficient inventory without excessive competition.
2. Crime Rate
Understanding the crime rate of a market is crucial for both your personal safety and attracting the right tenants or buyers. Even the nicest cities have some level of crime, so it’s essential to research property and bodily crime statistics for the areas you are considering. Websites like CityData.com and local police websites provide valuable crime data.
Evaluating the growth of a market is vital. Is the market attracting new people? Are there new construction projects, housing developments, or other forms of investment in the area? Growing markets indicate increased demand, which can benefit both rental and sale properties. Google searches and local news sources can provide information on population growth and new developments.
Consider the types of jobs available in the market and the overall job growth. A diverse job market is preferable to relying on one dominant employer. If the main employer in a town leaves, it can have a significant impact on the local economy and potentially affect your investment properties. Websites like CityData and local business journals can provide job growth information.
Good schools are important for many tenants and buyers, especially those with children. Investing in areas with reputable schools can increase your chances of finding tenants quickly or selling properties easily. Websites like SchoolDigger.com and GreatSchools.org offer ratings and information on schools in specific areas.
6. Median Home and Rent Prices
Understanding the median home and rent prices in a market is crucial for determining if the numbers align with your investment goals. This information helps you evaluate potential margins and cash flow. Google searches and real estate websites like Rentometer can provide median home and rent prices based on location, bedrooms, and bathrooms.
Assessing the appreciation rate of homes in a market can give you insights into the long-term value of your investment. Are homes consistently gaining value? Websites like the National Association of Realtors (NAR) or local real estate agents can provide data on appreciation rates.
8. General Internet Research
Utilize online forums, like BiggerPockets, and general internet searches to gather boots-on-the-ground knowledge about specific markets. These platforms often provide valuable insights from investors who have experience in the area you are researching.
Phase 2: Analyzing Demand and Supply
Once you have completed your initial market analysis, it’s time to dive deeper into demand and supply factors. Here are the steps to follow:
1. Analyze Demand
Using resources like ListSource, identify the number of cash buyers or investor buyers in your chosen market. Look for hot zip codes where investors are actively buying properties. This information helps you gauge the level of demand for investment properties in the area. ListSource allows you to filter results based on property type, ownership, and sale date.
2. Identify Hot Zip Codes
While purchasing a list from ListSource is an option, you can also identify the hottest zip codes for free. By sorting the list by zip codes and exporting the data, you can determine the top zip codes where investors are buying properties. This information is valuable for both wholesaling and building a buyer list.
3. Assess Supply
Use ListSource or similar tools to analyze the supply side of the market. Consider factors like equity percentage, length of ownership, and property type. By filtering the data, you can identify potential properties that match your investment criteria.
Phase 3: Baselining Neighborhoods
Baselining involves analyzing specific neighborhoods within your target market to determine property values, rental prices, and potential margins. Follow these steps:
1. Use Online Real Estate Platforms
Websites like Redfin and MLS provide valuable information on property values, recent sales, and rental prices. Browse through listings and analyze property photos to identify potential flipped or fixed-up properties.
2. Determine Sold Prices
Look for sold properties in your target neighborhoods to determine the price range for fully renovated properties. Analyze the difference between the purchase price and the current listing price to estimate the cost of renovations and potential margins.
3. Rental Price Analysis
Examine rental listings to determine the market rent for different property types in your target neighborhoods. Ensure that the rental numbers align with your investment goals and strategy.
4. Repeat the Process
Repeat the market analysis process in multiple markets to gain a comprehensive understanding of different areas. This will help you identify the market that best suits your investment goals and strategy.
Now that you have learned how to analyze any market, it’s time to take action. Follow these steps:
1. Get Started
Begin by researching online tools and selecting a market to analyze. Start with Phase 1 and Phase 2 to gather high-level information and identify hot zip codes.
Choose two or three neighborhoods within the hot zip codes and conduct in-depth baselining. Analyze property values, recent sales, and rental prices to gauge potential profit margins.
3. Repeat and Compare
Repeat the market analysis process in different markets to compare the data and identify the best opportunities for your investment strategy. Expand your research by exploring new areas and gaining a broad perspective.
Market analysis is a crucial step in finding great real estate deals. By following the steps outlined in this blog, you can effectively analyze any market and make informed investment decisions. Remember to repeat the process and compare different markets to find the best opportunities. Happy investing!