Investor’s Guide to Real Estate Market Research

A successful real estate investment begins with thorough real estate market research. The information gathered during your real estate market research helps identify opportunities and risks in the market and guide your investment decisions. If you are new to market research, follow this guide on how to conduct real estate market research as a real estate investor.

Start big before you get small

It is a good idea to get an overview of the overall market before starting any real estate investments. Taking a macro look at the real estate industry as a whole can provide insights into market trends such as: B. a buyer’s market versus a seller’s market when people are moving in or out of town or which industries are underserved or underserved based on current and underserved industries based on future demand. You can use this data to determine which investment strategy you want to target.

While the tools and websites that you use to gather information will differ depending on the type of investment you are looking for, market research is generally done in pretty similar ways whether you are investing in commercial real estate or residential real estate.

Investors interested in commercial real estate can contact the CBRE Group (NYSE: CBRE), CoStar (NYSE: CSGP), and CoreLogic (NYSE: CLGX) for helpful data on subsectors of the CRE industry. Retail investors can search for real estate market data on sites like Attom Data, CoreLogic, Realtor.com, and other trusted real estate websites like Millionacres.

Dive deeper

Once you’ve identified the industries with the greatest potential, you’ll want to choose a market area to invest in. Many of the websites listed above provide data on the performance of the top markets for this industry, along with information on supply and demand, net absorption, rental rates, occupancy, cap rates, and more. With this data, you can narrow down a general investment strategy to a target market.

If you don’t see this data immediately available, contact a local real estate agent. Many real estate agents offer a monthly report for the subway area. This data, in addition to your personal experience and knowledge, can help you better understand the local market and tell you which zip code, neighborhood or property features are working well or poorly, and give you a better understanding of pricing in that market.

Supply and demand are critical to determining the long-term value, return potential and profitability of an investment. Sub-markets, that is, the local real estate market you are targeting, may have very different supply and demand than the general macro market. Make sure you understand the specifics of your region, including vacancy rates, average market days, demographic trends, current properties under development or planned development that may affect supply and demand.

Determine the property’s value, performance and potential

After you have established a target market and investment strategy, you can begin analyzing each of the investment properties. The property value is set differently depending on the property type. For example, commercial properties are valued using cap rates, which consider the income that the property in question generates or can generate in the respective market.

Residential real estate, especially single-family houses, is valued using the real estate prices of comparable houses. A comparative market analysis or real estate market analysis can be used to determine the actual market value or the post-repair value of a property. For investors targeting a residential property, it is important to consider the property’s rental potential in addition to the market analysis.

Rental rates can be found using industry websites to determine current rental rates. CREXi is the largest online platform for leasing or selling commercial property and is a great place to compare rental rates per square foot. Investors targeting apartment rentals can view current rental listings on industry websites or historical rental data on Rentometer.com to determine market rent.

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The data collected during your property market analysis is then used to conduct an investment analysis to determine the potential return on each investment based on price, current performance, or potential performance in the particular property market. The more you do real estate market research, the easier the market analysis becomes. Staying up to date on trends and news will make it easier for you to adapt your portfolio or investment strategy to changes in the market.