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SHOW NOTES FOR EPISODE 404: VIRUS UPDATE – MULTIFAMILY MARKET RESEARCH FOR BEGINNERS
Virus update! Old Dawg Podcast Guest tests positive, Bill’s house under quarantine and stimulus checks spur Rental Mania! In today’s podcast episode, Bill covers a host of informational tidbits, including a Virus Update and a beginner’s guide to multifamily market research to prepare investors for the buying spree ahead.
Virus Update
- Perfect scripture for media fear mongering
- 2 Timothy 1:7 – “for God gave us a spirit not of fear but of power and love and self-control.”
- In the Manassero Household
- I’m 65 (next month)
- No respiratory, asthma, or lung issues
- But I have known what it’s like to be very ill
- In Haiti, my wife and I both had Malaria and Dengue Fever at the same time
- My wife is currently under quarantine because a client tested positive
- So Mr. Bill is cooking for the kids!!! Yikes!!!
- Pizza
- Chili dogs & Mac ‘n Cheese
- Lots of Haitian Spaghetti
- Old Dawg Podcast Guest Tests Positive!
- Read a great description of what it’s like to contract the coronavirus from previous Old Dawg Podcast guest Paula Pant
- Here’s the Link: https://affordanything.com/i-tested-positive-for-coronavirus/
- Rental Mania
- Great time to market rentals
- People are waiting for stimulus checks – anxious to move
- I had 100 FB marketplace inquiries in 2 days for one rental that has difficulty getting 10 per week- Could be a regional thing
- People are indoors
- Hanging out on FB
- Lots of reasons why
- Surviving AirBNB Bust!
- AirBNB – low-balling to keep income coming in
- Filling up calendar but not making a lot of profit
- Better to break-even than lose at this point
Multifamily Market Research for Beginners
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 podcast will provide you with in-depth answers to all these questions.
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. 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.
Census.gov can give you data of the fastest growing cities in the U.S.
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 cities where there is a wide range of successful employment sectors and industries.
To track job numbers, go bls.gov
3. Price-to-Rent Ratio
The price to rent ratio is a real estate term which is useful for both real estate investors (landlords) and renters (tenants). In simple words, this metric calculates the ratio between the average property price in a given housing market and the average annual rental rate there. From a common person’s point of view, this measure compares whether renting a property or buying a home costs more, relatively speaking. Thus, the ratio helps individuals make an informed decision on the old dilemma of “rent vs. buy”.
Check out Mashvisor.com
Many people don’t realize that Zillow makes its data publicly available for download as spreadsheets. The main data download page includes links for both residential sales, residential rentals, and some miscellaneous datasets.
4. Median Household 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.
Again, Census.gov can give you this data
5. 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.
6. 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 multifamily 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.
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.
In Conclusion
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.
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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