Last time I wrote about the importance of knowing your market. You never want to go out and just buy an investment property for the sake of buying a property. Rather, you want to make a calculated investment decision. And in order to do that, you need to know your market. 
But what exactly does that mean “know your market?” What should you be watching?
Here are four items that I watch almost every day.
- What is the Rent? – What are properties in your market renting for? You simply have to know what type of income you can expect before you can make any purchase decision. How do you watch them? You scan Craig’s List, read the classified ads, call for rent signs pretending to be a potential tenant and talk to other landlords at your local REIA club.
- Where is the Rent Going? – Are rents in your market steady, going up or going down? This factor obviously can drive many an investment decision. If you see rents going up, perhaps it is time to ratchet up your buying, if they are going down, perhaps you should consider another market.
- What are Properties Selling For? – As buy and hold investors, we are generally concerned with one thing, positive cash flow, hence our focus on numbers one and two above. Price is also a very important factor in that cash flow calculation. You need to be keenly aware of property values and prices in your market, because when a deal comes on the market you have to spot it and act quickly sometimes to beat others to it. You can’t do that unless you know your market. My Sunday paper prints listings of sales every week. Working with a realtor from your local REIA group can also be very handy here.
- Know Who is Buying In Your Market – No I do not mean by name, but what the buyers’ goals are. Are they owner occupants or are they investors or both. Knowing this information may help you determine your next move. If there are many owner occupants they may be driving prices too high for a reasonable cash flow return and it may be time to find a new market. If there are a lot of investor types, you may have found a good rental market, but the competition may be stiff to get properties. I like to watch the daily property transfers here. Your location may have a similar publication or website.
If you watch this information continuously, you will soon develop a very good feel for your market. You will become a much smarter real estate investor.
