Are you currently searching for apartment buildings to invest in as a means of expanding your real estate portfolio? Investing in apartment buildings is the only way to achieve financial freedom through real estate.
But before you put a deal under contract or start putting a lot of time and energy into a specific market, you need to know if that area is worth your effort.
In this article, I will help you conduct a thorough market analysis. This way, you can gain a better understanding of where you should be investing and make informed investment decisions.
You don't have to be a longtime investor to do this.
Don’t Fight the Direction of the Market
I want to give you some tools and best practices so you can figure out which markets are worth it and which are money traps.
This is important because you need to know which way your target market is headed.
When investing in a market, it's important to have confidence that rents will increase. It's tiring to have to renovate a property and add value while also navigating market challenges.
You want to find a market where the tide lifts all boats and you can be in it for the long term.
How to Pick the Best Markets
Look for a market where the population is growing, income is growing, jobs are increasing, home values are increasing, and rents are increasing because a rising tide lifts all boats.
It's much easier to operate in a market like that. Huntsville is a great example. The market started growing significantly about five years ago, and we noticed the impact on our properties—we saw the rents going up.
Everybody was moving to the southeast. Huntsville was a popular destination due to its low cost of living, high quality of life, and increasing population. This led to the ability to charge higher rents, making everything easier.
You also want to find a market with a high yield. This is an area where properties are valued less relative to their income than in other areas.
Cities like Phoenix used to be great for property investment, but now the prices have increased so much that the returns are no longer as attractive. This trend has also been seen in Nashville and now in Huntsville, where property prices are rising and yields are decreasing.
What we want is an intersection between the two: we still want a market that's growing, but we also want some kind of yield.
Here are some things to consider when evaluating a market:
Cap rates give you an indication of price and yield, and you should get both of those from your broker in the area.
The higher the cap rate, the lower the price and the higher the yield.
Other Considerations When Evaluating a Market
You want to find a market that's big enough to sustain your deal flow.
Huntsville is a strong market, but it does not provide enough deals for me to analyze four deals a week. I’d have to look at other markets in addition to Huntsville to get the deal flow I need. Atlanta or Dallas are much larger markets where I can find all the deals I want.
Let’s say you’ve identified 20 markets that are above average in national median growth rates in each of the above categories. How do you make up your mind? At that point, it really all comes down to personal preference.
So that's how you analyze markets.
✅ You want to be in markets you like…
✅ Find high-growth markets with high yield.
✅ And find a market that's big enough to sustain the flow.
I understand that going through all this information can be overwhelming. I'm here to help you narrow down your options and find the best markets for your needs.
The best way to ensure success is to work with a full-time syndicator who specializes in this field. If you're having trouble finding the right market or closing deals, consider partnering with us.
Our goal is to help you do your first deal, become financially free, and then scale your portfolio to 1000 units.
That’s all I have for you today.
Catch you next time.
