Where do we buy apartments in? What makes a good or what makes for a bad market to buy in? – to
These are some common questions people ask when they start to get interested apartment building investing. You really want to stack the deck in your favor when buying an apartment building by purchasing in good areas that are growing and expanding. In a growing market rents that have the potential to go up in the future and an increase in value upon sale.
So what makes a good market good and what drives rent growth?
I am going to over simplify the answer a bit and say that three driving factors to consider when picking a market to invest in:
1.) Job Growth..You need people with jobs to fill your units. You want to invest in an area that had companies and businesses moving into an area…not leaving the area for greener pastures.
2.) Population growth…You want to see people moving into the area and not moving out. Usually this is spurred by an increased number of jobs in the area. When the population increases, this puts upward pressure on rents due to supply and demand.
3.) Market cycle.. You want to be in a market that in expanding and not in a period of retraction. You can use the IRR report to see where a particular area may fall within the market cycle.
So this begs to ask the next question….How does one know which cities are experiencing job and population growth? How do we know which part of the investment cycle a market may be in? There are many ways to get this information. You can Google these key words.
The Bureau of labor statistics is one recourse. They have allot of information there regarding job and population growth.
Aside from that, there are four reports I look at that give me information about the health of specific markets. The four I like to use are :
1.) Integra Realty Resources, Inc. (IRR) Viewpoint National Multifamily Report
2) Milliken best performing cities report
3.) Marcus and Millichap, US Multifamily investment report
4.) Colliers international Multifamily spotlight
These four are great recourses for determining where a particular is doing and where it falls within the investment cycle….
See the screen capture below taken from the IRR report that shows different markets and where they are at in the cycle…I find this graph very helpful.
This was a very quick overview about what makes a market one to consider or not…If you would like to discuss these topics at greater length or have questions about apartment investing,
Pease give us a call at 510-863-1447 to discuss.
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