How To Target Real Estate Market Like A Professional Investor
Selecting a target real estate market is not only about shouting “location, location, location.”
Everything you’ve heard about starting a real estate investment as a newbie was to buy cheap in a good location and sell high.
In reality, a property in a suitable location is pricey, and the fair market value is stable on the high side. Frankly, it is nearly impossible to buy such properties – CHEAP.
So, what do you do when you want to select a target real estate market?
Real estate represents a significant portion of most people’s wealth and rings true for many professional investment property investors and owners.
The factors that affect a target real estate market and the variety of investments include
property types, prices, availability, and investment potential.
Location, Location, Location
When you look at single-family homes, even identical ones—3 beds, two baths; you may see something similar.
However, for a professional investor, the same property in two different cities can fetch drastically different profit and return on investment (ROI).
Each city, neighbourhood, and community has a unique quality of residents, values, and rental yields.
Take this a step further in your research; you find how a professional investor filters the data to get different results;
• the two submarkets in the same town,
• two neighbourhoods in the same submarket, or
• two streets in the same community.
If this is a case of A/B comparison, how do you determine which city, submarket, neighbourhood, or street to target?
How to Select a Target Real Estate Market?
As of 2020, there are currently 3,243 counties and county-equivalents in the 50 states in the United States.
A market evaluation is performed to select a target market for real estate deals.
The target market is the primary geographic location where you search for potential investment properties to buy.
So, before you think you want properties in Hawaii, Alaska, Las Vegas, or near all the Disneyland Park – you need to know what the biggest bang for your buck is.
• How much money do you have for your investment property?
• Do you want to live there?
• Are you looking into being a landlord to earn monthly rentals?
• Do you want to buy, rehab, and resell – FAST?
Specifying a target market is essential for more reasons than just its location.
If your target market is a specific state, or the entire United States or worst still undefined –
the number of opportunities is so large that your investment properties are too complicated and unmanageable.
If it is too small or chose the wrong city or the wrong target real estate market, you may not find enough deals to meet your investment criteria.
In some neighbourhoods, the primary occupants are homeowners and not tenants.
You will not look to buying in these neighbourhoods when you want to purchase investment properties to earn rental income.
While it’s smart to diversify your investments among different investment classes, real estate help families continue growing wealth while helping young families reach their financial goals.
We can look at a three-step process we advocate when selecting a target market for real estate for our investors.
1. Identify seven potential target markets.
2. Evaluate those markets using seven variables.
3. Analyze the results and narrow them down to 1 or 2 target markets.
Step #1—Identify Potential Target Real Estate Market
There are several strategies for selecting the initial markets if you live in the US.
Our investors in Asia continue to live at home and conduct their real estate investing business online.
The US is so data-driven that selecting and comparing one city’s data to other cities is not a problem.
You can do this all online from the county’s website.
You only need to ensure that city you selected has a robust real estate market.
You can easily use the second strategy to Google for the results for whichever investment niche you’re pursuing – Single Family Home (SFH), Apartments, or even Multi-Units.
- “top real estate markets in the US”
- “hottest real estate markets in the US”
- “best cities to buy a home in the US.”
Another option is to read detailed real estate reports and surveys to understand the overall real estate economy.
The information is on a subscription basis and created by different companies.
Step #2—Evaluate Target Real Estate Market
Once you’ve selected your target real estate market, start analyzing the data by evaluating each detailed demographic and economic data.
Real estate prices generally follow the cycles of the economy.
Government policies and legislation, including tax incentives, deductions, and subsidies, can boost or hinder real estate demand.
Check the unemployment percentage for the city for the last five years.
Look for a decreased unemployment rate—this is a signal that the real estate’s target market is ideal.
Unfavourable data—a high and increasing quality, a low, stagnant rate mean that while there is no employment increase, the residents still keep their jobs.
A specific sector may not see a jump in unemployment data.
An increasing population is ideal—this means there is population growth for both the target market city.
A stagnant or decreasing trend is unfavourable, especially if supply and vacancy are on the rise.
The best places to target real estate market to invest in are in an area where there are good schools for a young growing family.
Similarly, the age group of an increasing population, say 25-to-34-year-olds, will prioritize luxury apartments with more superior amenities.
When you target the real estate market to expand the retirement-age population – look for assisted living facilities in the community.
Employment data for the different industries will give you an idea of how diversified the job market is in a particular city.
If a singular industry dominates and employs over 25% of the city’s population – the market may collapse if there is a fall in industrial production coupled with the shutdown of factories.
Find out the top 10 employers in the target market for real estate.
A new factory or facility opening in the city will create jobs.
You can find this out by Googling “(city name) + top employers.”
Keep abreast of the latest business news and headlines on the world’s most influential companies and their industries to stay aware of the opportunities available.
Where there are new jobs, people will move to the cities and need homes.
6 Supply and Demand
A high or increasing vacancy rate is a huge red flag not to invest in the target real estate market.
In tandem, you will probably see an increase in new building permits and vice versa.
Check the building permits data to know if developers are building more houses soon.
If there is no population growth or migration, there will be a glut of properties on the market.
Noble Sky International analyzes the data and creates “market insights” of the target real estate market.
Besides online data, we have a US team on the ground with a network of realtors and wholesalers who know the market.
Using both technology and “boots on the ground,” we can consistently find out actual neighbourhood environments, conditions of houses and get an accurate estimate of repairs BEFORE we buy the property.
Step #3—Narrow Down to 1 or 2 Target Real Estate Market
It is always better to narrow your search and investment to 1 or 2 target real estate markets even if you can.
After analyzing and comparing the results for potential target markets for real estate, remember that what you select depends on your investment criteria.
Demographics information on the age, income, and regional preferences of potential buyers, includes a percentage of buyers starting a family or retirees.
You may want to find out the percentage of those who might buy a vacation or second home.
For instance, every year, thousands of retirees move to Florida, looking to live out their golden years, an abundance of activities.
The sunshine state’s affordable neighbourhoods, a big city feel, plenty of beautiful beaches, a sound health care system and activities boost the residents’ overall quality of life.
You can examine each city’s cost of living, health care facilities per capita, attractions, and other critical indicators of retiree-friendliness if you want to invest in Florida.
Are you a newbie with a modest capital or a seasoned investor who wants to grow multiple income streams like a farmer growing various crops?
Starting an investment journey take takes excellent business acumen and focus.
The real estate market’s size and scale make it an attractive and lucrative sector for many investors.
While it takes money to invest in making more money, you will need a real team to start a real estate business.
As you learn in the upcoming emails, we will break down how you can achieve this even with a modest capital.
If you are keen, you can book a free 40min consult to speak to any of our Consultants.
Click here to learn how to get started today!
This blog post’s views and opinions are provided for informational purposes only and should not be construed as an offer to buy or sell properties.
You are free to make or consider any investment or your next course of action with no influence or references to the content above.