This week’s Cash Flow Friday tip is the top 3 critical market indicators to help you identify high demand or “soon to be high demand” areas to invest. The question is, how do you find out whether the property you’re considering is located in a high demand area and whether the area will continue to be in high demand in the future because the last thing you want to do is buy a property in a declining market where incomes are deteriorating, unemployment is rising, and people are moving out.
#1 – Demographics: Commercial property investing is really all about space investing. What that means is that you are buying, selling, or leasing space that you think the general population not only want, but need. Take a look at the number of households, people, and businesses residing within 3-5 miles of your property. The more the better. A simple free tool I use to do a quick and dirty analysis for this is www.BestPlaces.net and www.City-Data.com
#2 – Income: To market, sell, and lease your space, you need paying customers. That means the more paying customers you have within 3-5 miles of your property that earn enough money to pay for your property, the better. For example, when I’m evaluating a market for Mobile Home Parks, I will look for median household incomes of $28,000 or better. That’s because residential tenants will spend about 1/3 of their income on housing. I’m looking for tenants that can afford at least $7,000-9,000/year. (583-750 mo)
#3 – Infrastructure: Airports, highways, railways, ports, area amenities are all critical indicators for high demand areas. People want to live, work, and sleep where access is easy and amenities are available. If you’re looking at an apartment community 1 hour from any Walmart location, you might want to reconsider how “in demand” that are might really be. In fact, when I’m looking at a mobile home park within a new market I always look to see if there’s a walmart and how close by it is. If there is no walmart in town then I usually pass immediately.
- Yours Truly