How to research real estate markets, where does one even begin? That’s a very valid question. But first, let’s answer this:
Why Is Conducting Research in Real Estate Important?
Whether you’re new to real estate or whether you’re experienced, learning how to research real estate markets is a crucial skill. Read any of our blogs, and you’ll notice that “research the market” is among our most common tips for real estate investors. I tried avoiding the following, but I can’t: Location, location, location! The reason we always focus on location is that it can be a determinant of important real estate market indicators. Location can also often be an indication of the potential of your investment property’s success. The best places to invest in real estate are typically growing cities with profitable neighborhoods where your investment property will prosper. While the location is key, it’s not always everything. More and more real estate investors are looking into areas that have the potential for improvement, and/or are up and coming, but not necessarily thriving at the moment. It’s good to learn to identify those markets, especially with many neighborhoods being gentrified across the nation’s markets, creating investment opportunities. Learning how to research real estate markets can make the next stages of real estate investing much easier. The bulk of the work lies in research and planning for your investment. That is not to say that the execution phase is a walk in the park, but being well researched definitely makes for an “easier walk.” So what information should you be looking for when researching the market? And what resources are available out there to help you with your research? Stick around to find out!
How to Research Real Estate Markets – The Basics
When learning how to research real estate markets, you’ve got to look at both the macro and the micro levels – the macro being the general market and micro being specific neighborhoods with investment properties for sale. Usually, we advise real estate investors to begin with the macro (real estate market analysis) and then move to the micro level (neighborhood analysis).
ONE: Real Estate Market Analysis
The first step then of how to research real estate markets is to investigate the city where you wish to buy an investment property to rent out.
Buyer’s Market or Seller’s Market?
One basic, yet crucial, question when researching real estate markets is “Is it a buyer’s market or a seller’s market?” You can identify the state of a real estate market by looking at the housing inventory, days on market, and comparing average listing prices to sale prices. Now, generally speaking, most real estate markets in the US are seller’s markets due to the rising demand and the rather limited supply of properties for sale. This means that conditions are more favorable for sellers. As a real estate investor, you want to be looking into markets that have favorable buying conditions, also known as buyer’s markets. It’s also not impossible to invest in a seller’s market, but you do have to plan a little harder and be timely with your decisions.
Study the Demographics, the Economy, and the Job Market
To identify a profitable real estate market, you will also have to study the demographics, the overall economy, and the job market of the city. Knowing these facts will help you figure out whether or not a specific city is a sound investment location. Looking into economic elements is important because it can aid an investor in analyzing the rental market. A city with a strong economy and a high-demand job market draws in young people and millennials alike. This can increase the demand for rental property. Let’s take Boston as an example – a city thriving by all means. The job market is large, the overall economy exhibits good indicators, and the population of the city has a median age of 31. It’s no wonder that the Boston real estate market is a good choice for buying investment property in 2019.
The ROI Metrics of the City
Choosing a city to invest in depends on several aspects, the most notable is – numbers. When analyzing a city’s real estate market, you should be looking into indicators like average rental income, average CoC return, and average median home price. General city data is very important in the first stages of figuring out how to research real estate markets. Mashvisor is one real estate resource that can help you in your research for city data. Our blogs on real estate markets offer a comprehensive breakdown of general city data provided by our investment property calculator as well as top neighborhoods to invest in. In addition to this, you’ll get key info on whether or not the city is a seller’s or buyer’s market as well as economic, job, and population trends.
TWO: Neighborhood Analysis
After you’ve conducted real estate market analysis, it’s time to move on to neighborhood analysis.
Check Out the Neighborhood Amenities
A good neighborhood for buying investment property is one with available amenities such as access to good roads, access to transportation, and proximity to good schools. You can learn more about this part of how to research real estate markets by reading: What Kind of Neighborhood Has the Best Investment Properties?
Again, Run the Numbers
A neighborhood analysis isn’t complete until you run the numbers. You’ll want to find real estate data on:
- Median Listing Price
- Rental Income
- Cash on Cash Return
- Occupancy Rate
The above information will help you decide how profitable a neighborhood can be for either rental strategy- Airbnb or Traditional. Again, Mashvisor is your ultimate real estate tool for finding such data. Using our heatmap analysis tool, you can quickly perform neighborhood analysis using a color-coded map. Check it out:
Mashvisor’s Heatmap Analysis Tool
To learn more about how Mashvisor can help you research real estate markets to find profitable investment properties, schedule a demo.
The Takeaway?
Learning how to research real estate markets is the first step to finding the best investment property. Having access to information is very important in today’s day and age. And while conducting real estate market research can be challenging, and time-consuming, there are tools and resources out there to make it easier.