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Despite what you may hear, there is no perfect market for investment. Each market offers different advantages each appealing to different investors. We have a list of factors we use to measure a market’s potential. These factors are applied to markets and submarkets alike.
Population Growth
Probably the most important metric is population growth. It would take an exceptional deal for us to settle on a property in one of these markets. We usually look for more than 25% population growth over the past 20 years.
Poverty Rate
This is submarket-specific, but ideally should be less than 20%.
Crime Index
Again very submarket specific, but generally like to see less than the national average for a similar sized MSA, or if higher, prefer for crime to be trending down.
Median Household Income
Greater than $50,000 or slightly above the national average for similar MSAs. Shooting for 45% increase since the year 2000.
Landlord Friendly
Landlord/tenant laws are regulated by the states. Getting out old tenants can prove extremely challenging under certain state laws.
Median Gross Rent vs Median Household Income
Annual Household Income should be 3x the annual rent. To determine the monthly rent a market can support we can divide the annual Household Income by 36. This is the maximum rent rate a market can reasonably support.
Vacancy Rate
less than 10%
Job Growth
2% year over year. Also, look for job diversity as mentioned in a previous article.
Unemployment
Less than 8%
