MY TAKE: DIG DEEP WITH DATA TO FIND YOUR NEXT INVESTMENT MARKET
ings, and even SAT scores help me paint a picture of a market’s future. Population and job growth drive demand, which drives up pricing. Low unemployment, low crime, and good schools often drive up home values. Markets scoring poorly in these areas may have homes that cash flow well, but they typically won’t experience the same appreciation. DATA SOURCES We’ve established that you need more data than a top 10 article in your dentist’s reading bin will provide. But where does the average inves- tor find this type of information? My primary sources are the U.S. Census, the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency (FHFA), The National Association of Realtors (NAR), HUDuser.gov, Echodevdirecto- ry.com, and ATTOM Data Solutions . If you’d like more information about using data-driven analysis for your market selection, please reach out to me at firstname.lastname@example.org.
These datasets will tell you areas to avoid in a market and even mar- kets to avoid. Rentals vs properties with owner occupants will indicate the viability of the rental market. Population numbers help you avoid markets too small to provide rental resilience and good exit strategies. because in certain markets investors can make more money from appreci- ation than cash flow. For many inves- tors this is where a blended strategy helps grow returns or where buying B to A- assets really pays off. Data- sets focused on population growth, job growth, future job growth, unem- ployment, safety scores, school rank- MARKET FORECASTING Market Forecasting is important
median rent, mortgage payments, property taxes, insurance, vacancy, maintenance, and property manage- ment costs allow me to calculate an estimated cash flow, total return on investment, cash-on-cash returns and cap rates. These averages allow me to easily compare markets. investment property looks on paper if you struggle to keep it leased. There are four datasets that help us deter- mine whether there is sufficient rental demand in a market. The first is the market vacancy rate, followed by the market’s percentage of rentals as well as the percentage of owner occu- pants, and finally total population. RENTAL DEMAND It doesn’t matter how good an
best ways to tell when you are mov- ing between market cycle stages, thus allowing you to maximize returns. PROFITABILITY I use more than 15 datasets to determine potential for profitability. First is the investment success ratio, which is arrived at by dividing the median foreclosure price by medi- an income. The lower the ratio, the better chance an investor has of servicing the debt and making a high cash flow and return on investment. The higher the number, the more the market will trend toward lower or even negative cash flow if it is a true appreciation or flip market. Next, I plug in numbers based upon the median foreclosure price. The
50 properties. Profitability would be tough to find. I also use data to tell me the stage of the market cycle a city is in. Here are the datasets I use: • Supply increase year-over-year (are there more properties on the market or less?)
get out while my profits are still intact.
SUPPLY AND DEMAND If you plan to buy multiple prop- erties on an ongoing basis in a given market, supply and demand is critical. The data that will support your decisions are the number of homes in the process of foreclosure, the number actually foreclosed, the number of three-bedroom homes for sale below $60,000, and the total number of homes on the market. If there are not 150 to 200 homes in foreclosure and at a price well below the median home price, I feel the opportunity for that market has passed. Therefore, I would also pass on that market. Think of hundreds of investors all competing for the same
Jared Garfield is a private hedge fund manager, real estate investment trainer, and
turnkey property provider. With more than 20 years experience, Jared is a sought after speaker and real estate advisor. He has conducted bus tours for “Flip This House” and “Flipping Vegas” and is a former Rich-Dad, Poor-Dad trainer. He currently hosts the ROI Wealth Watch Podcast.
• Sales activity year-over-year (more selling or less?)
• Percentage of asking price re- ceived (how much of a discount is the seller taking to move the unit?)
• Average days on market
Watching this data is one of the
26 think realty housing news report
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