Knowing how to conduct proper market research is a skill that every real estate investor needs to master. In fact, this is the only way to secure a profitable real estate investment. Market research is even more important when it comes to investing in multifamily real estate. After all, these income properties have several unique specificities that set them apart from other types of real estate investments. Moreover, finding the best multifamily markets is only possible if you know exactly what to look for. So what is the best way to conduct multifamily market research? How to find the best places for buying multifamily homes? And what are some of the investment property search tools that can facilitate the process? This blog will provide you with in-depth answers to all these questions.
Related: How to Conduct Real Estate Market Research the Proficient Way
Conducting Multifamily Market Research: What to Consider
The main goal of multifamily market research is to identify the ideal area to invest in. In fact, location is by far the most consequential factor when it comes to a property’s viability as an investment. Here is what you should focus on when you research real estate markets.
1- The population
The population of the city should be one of the first things that you look at. As a rule of thumb, you should look for a real estate market that has a population of at least 250,000. Additionally, the growth rate of the city’s population should be increasing on a yearly basis. The reasons why cities with high populations are usually the best places to invest in real estate are fairly obvious. Firstly, they have a decent pool of potential tenants that guarantees consistent rental income. And secondly, these cities are more likely to attract a diverse range of employers and businesses, which is highly beneficial for real estate investors.
2- The job market
The second thing you want to look at when you are doing your multifamily market research is the job market. In fact, you will have to take a number of variables into consideration when assessing a city’s employment. Not only should the unemployment rate be quite low, but the jobs should also be growing at a rate that is higher than the national average. These indicators bode well for the real estate market as they signify constant demand for rental properties.
Another variable that you should factor in when conducting multifamily market research is job diversity. It is highly advisable that you avoid cities that rely on one large employer or a single industry. As you would expect, investing in these markets is inherently risky since the job market could take a big hit if the large employer closes or if the single industry experiences a slowdown. Instead, the best locations you should opt for are home to a wide range of employment sectors.
3- The median income
The median household income in a given city is a good indicator of the strength of its rental market. Since rent is often the most significant expense for the majority of people, it is crucial that you invest in an area with a moderate to high-income demographic. Taking median income into consideration when you are carrying out your real estate market analysis will allow you to weed out the low-income areas that are not suited for multifamily investing for beginners.
4- Safety
Safety is often a neglected aspect of multifamily market research. This is a grave oversight since the level of safety in an area is directly correlated with its suitability for real estate investing. In fact, low crime rates in a city go hand in hand with positive experiences with tenants as well as reliable rental income. Areas that are riddled with crime tend to attract a disproportionate number of delinquent renters and investors who take the risk of investing in such housing markets are bound to deal with a myriad of property management issues. So whether you are doing a traditional or Airbnb market research, be sure to check out local crime rates.
5- Neighborhood analysis
After picking a city, the next step of your multifamily market research is to explore the different neighborhoods that you could potentially invest in. Naturally, you should narrow your target list down to parts of the city that boast all essential amenities. This includes but is not limited to; schools, hospitals, public transport systems, and proximity to major freeways.
You can also take your neighborhood analysis a step further by incorporating multifamily analytics into your multifamily market research. The best way to do this is to use Mashvisor’s real estate heatmap. This amazing tool employs multifamily real estate data and visual cues in a way that enables real estate investors to identify the top-performing areas with a click of a button. Moreover, with an Expert Plan, you can set a filter that reveals only multi-family homes for sale on the map. Needless to say, finding a high cap rate multifamily real estate investment can be done in a matter of minutes when you use this practical solution.
Sign up for Mashvisor now to use the Real Estate Heatmap Analysis Tool.
Related: How to Conduct Neighborhood Research Before Buying Rental Property
The Mistakes You Need to Avoid When Conducting Multifamily Market Research
There are many pitfalls that you should avoid when investing in the housing market. This is especially the case when dealing with some of the specific aspects of multifamily investing. Here is what you should avoid doing when you decide to tackle multifamily market research:
- Not taking the time to understand local rental laws and how they could affect your multifamily investment.
- Relying solely on multifamily property data and neglecting to take other macro trends into consideration.
- Not looking at similar rental properties in order to get an idea of how much you should charge for rent.
Related: 9 Common Real Estate Mistakes and How to Avoid Them
The Bottom Line
Market research can make or break your real estate investment. This is why you need to approach it with a clear set of parameters and objectives. In any event, applying the tips outlined here should help you conduct multifamily market research and get started in real estate investing.
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