Make no assumptions when it comes to where to invest. Sophisticated real estate investors conduct thorough market research before investing. They know that all real estate is local, and winning property investments are all about “location, location, location.” So what factors do savvy investors look at? What indicates a good market to invest?
DILIGENCE ON A
What should mobile home park investors be
looking at when evaluating markets to invest in?
invest. Sophisticated real estate investors
conduct thorough market research before
investing. They know that all real estate is local,
and winning property investments are all about
“location, location, location.” So what factors do
savvy investors look at? What indicates a good
market to invest?
#1. LANDLORD FRIENDLY STATES
Intelligent buy and hold real estate investors will
normally filter out and focus on states based on their bias
for ruling in favor of landlords versus tenants. Even if you
plan to resell your acquisitions relatively soon this will be
a factor for the next buyer too. Some states like Florida
are friendlier to landlords. Others such as Massachusetts
are decidedly in favor of tenants. If you don’t want tenant
issues, look for states with legal systems in your favor.
#2. TOP RANKING MSAS
Once states have been shortlisted investors often boil their
search parameters down further by MSAs. Larger
Metropolitan Statistical Areas are seen as being more
sustainable and profitable. Larger population concentrations
generally foster more transaction activity, and in turn price
appreciation. They may also be more stable over the long
run compared to a small rural town which could more easily
go bust and become a ghost town in a very short period of
time. More people also suggests more demand for rental
units, lower vacancy rates, and the potential for faster rental
#3. TREND SETTING STORES
Certain stores are known for leading growth in new areas.
It could be that their research enables them to move into
areas which are about to explode. Others argue that
certain brands drive real estate and population growth.
Both may be true. Some examples of this include
Walmart, Home Depot, and McDonalds. Recent data even
shows that real estate located nearer a Starbucks is
worth more than other properties.
#4. INCREASING POPULATION
Population growth is incredibly important to real estate
investors. There may be some well-established
communities in the US which are actually beginning to
age and die off. Others have proven growth decade after
decade. Population growth is directly linked to demand
for rentals, and rental rates. Wikipedia offers a quick
resource for tracking the population of a given city.
#5. INCREASING EMPLOYMENT
Strong employment not only dictates the ability to rent
and for how much, but also how tenants will perform.
Clearly mobile home parks are unique in that they can
benefit and thrive in tough times, but if people don’t have
money to pay, or end up leaving town for jobs that can be
a challenge. Remember that “a rising tide lifts all boats.”
The United States Department of Labor, Bureau of Labor
of Labor Statistics reports on local unemployment rates
#6. DIVERSITY OF EMPLOYMENT
Diversification and type of employment and industry is critical
to the sustainability, consistency, and growth of real estate
fundamentals too. Without a good balance of
industries, entire metro areas can go broke. Look at Detroit to
see how bad it can get. The end of the auto industry literally
bankrupted it, and has left much of the region as ruins and
urban war zones. Despite its prominence, Silicon Valley is
incredibly reliant on tech. A bursting of a tech bubble could
certainly have a significant toll. Again it is important not to
make assumptions here
#7. TYPE OF EMPLOYMENT
How about the balance of outsourced work versus work
that cannot be outsourced? Brick and mortar industries
which are hard to move may be a good sign. Is this
market supported by organizations that can’t afford to
move, or can’t do their work elsewhere? Is the talent pool
so strong that other businesses will come to feed on it?
#8. OCCUPANCY RATES
How strong are local occupancy rates?
Higher rental occupancy rates secure
consistency in income, increase property
values, and provide to rising rents and
better tenants and terms.
When surveyed analysts replied that they
believed the single most important factor for
real estate was affordability. How affordable are
properties? Are wages strong? Is the destination
affordable enough to keep attracting smart
money and serious employers?
What other trends are in play? What trends could affect a
potential acquisition during the time you plan to hold it?
Is the destination becoming more or less fashionable?
Who is buying and holding property here? How will that
matter if the economy goes south, a foreign economy
goes under, or currency exchange rates change? What
about property taxes? Are they headed up or down?
There are a number of fundamentals that savvy investors
look at when selecting a market to invest in. Never make
assumptions if you want reliable investment returns.
Fortunately the internet can make it incredibly fast and
easy to dig up the data.