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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 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. RENTAL DEMAND It doesn’t matter how good an 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 occupants, and finally total population. These datasets will tell you areas to avoid in a market and even markets to avoid. Rentals vs properties with owner occupants will indicate the via- bility of the rental market. Population numbers help you avoid markets too small to provide rental resilience and good exit strategies. MARKET FORECASTING Market forecasting is important 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. Datasets focused on population growth, job
growth, future job growth, unemploy- ment, safety scores, school rankings 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.
> Continued on :: PG 81
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.
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32 | think realty housing news report :: february / march 2019
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