K is for Know Your Market

One of the biggest mistakes new investors make is overpricing their finished property on the MLS. Understanding the local market, researching comps, pricing accordingly, and knowing the buyer market are all keys to successfully flipping a property.

The more you know up front, the more leverage you have when completing a deal from start to finish. Whether you’re flipping or holding, there are various factors that you will want to take into consideration before purchasing your first real estate investment property.

You’ve likely heard the phrase, “know your market”. What does it mean to “know your market” though? What do you need to know before jumping into a real estate investment project?

Helpful information to know about the market that you intend to invest in include median prices, average days on the market, distressed sale prices, rehab sale prices, cost of repairs in your area, typical finishes and materials used in the area, whether residents in the area are buying or renting, and demographic of who you will be selling or renting to and so on.

Data sources such as the American Community Survey, also known as the Census, can help you to find information on topics such as the poverty rate in a given area, rent to income ratio, rental vacancies, property tax rate, unemployment rate and more. These indicators will help you to determine which areas you’d like to invest in.

It’s important to also note in which direction these market indicators are heading. You’ll want to have a good understanding of where the market is currently, where it will be a year from now, and beyond. Obviously, it is impossible to know the future with 100% certainty, however the information is available to make educated predictions that factor into real estate investment decisions.

Websites such as biggerpockets.com , local real estate investment association meetups, and localized Facebook groups are great resources for a new real estate investor to ask questions and gain insight on the pulse of the current real estate market. Information is abundant, it’s important that before diving into a real estate investment property that you understand all of the factors that could make or break your first project.

One incredibly valuable resource is a relationship with an investor friendly realtor who has access to the MLS, understands the real estate investment market, and can provide you not only with tips and advice, but also put potential deals in front of you that you may not otherwise come across.
Some additional ideas for research and understanding the market include browsing Craigs List for average rental prices, speaking with local residents to get a good pulse on the neighborhood, meeting with contractors who have recently done work in the area, attending open houses for recently renovated properties, and using available deal analyzers such as the one available on Bigger Pockets.

As always, if you want to discuss a potential deal with one of our team members at Alpha Funding Partners, we are always happy to chat with you. You can call us anytime at 732-657-2014 or email us at info@alphafunding.com . To get pre-approved or submit your next real estate visit www.alphafunding.com.