5 Key Components to Selecting a Target Market

As the saying goes, “Location, location, location”.  One of the Key components every Investor should review is the demand drivers of the market.  Investing in a market that is growing and can add value to the property is important.  We review all markets on a regular basis to ensure we continue to understand the strength of each area.  The exact same property in two different cities can have drastically different results.

Here are the 5 Key Components we identified when selecting our Target Markets:

Population Growth

Calculate the population growth for both the city and the metropolitan statistical area (MSA) over the past 5-10 years.  An increasing population is recommended.  A decreasing trend is less desirable.  Especially if supply and vacancy are rising.  Both the city and MSA data can be found at Census.gov.

Unemployment

A decreased unemployment rate leads to favorable results.  High rates can translate to increased concessions on rent rates.  This data can be found at Deptofnumbers.com.

Job Growth

Not only job growth over the past 5 years, but also diversification.  A market with strong diversity will have no one industry employing more than 25% of the employment-population.  If a certain industry is to dominate, the market may struggle if that industry had a negative effect.  This data can be found at Deptofnumbers.com.

Value Rent to Home

Understand the strength of the rental market vs. homeowners.  It is more cost-effective to own a home, occupancy might struggle.  To calculate, take the average rent value divided by the median home price to determine the ratio.  The lower the ratio the better the results.  This information can be found at Bestplaces.com.

Crime Rate

Although this is not a make-or-break factor, it is good to understand if this will be a nice place to build a community.  This factor can be used to determine what the market can bear when determining upgrades and renovations.  It can also have an impact on insurance and loan quotes.

Recapped below are the Top 2 factors we review monthly; job growth and unemployment rate.  Listed are the top 10 markets for February 2021.