5 Steps to Better Property Research
Introduction
Acristo Engine's purpose is simple: to make real estate research easier and more effective. By leveraging technology, we create comprehensive property reports that are not only detailed but also fun and easy to read. Whether you're using our software or conducting research manually, this guide will equip you with actionable steps to confidently analyze properties and markets.
Step 1: Start with a Market Analysis
Every property exists within a specific market, and each market is unique in terms of demographics and economics. For example, buying a property in Los Angeles, CA, is different from purchasing one in Ocala, FL. Conducting a proper market analysis is critical during predevelopment, acquisition, marketing, and disposition stages.
The first key metric to understand is the demand-to-supply ratio:
How many properties are available?
How many buyers or renters are interested in those properties?
Example:
Suppose you’re considering an investment in downtown Austin, TX. You search Zillow and find 500 rental units available, but local news reports indicate 1,000 new tech workers in the area over the next six months. This high demand-to-supply ratio suggests a strong rental market, making it a great time to invest.
Quick Tip:
Head to Zillow and search for available listings in your target area. Compare this with population or housing demand data from sources like the U.S. Census or HUD.
Formula:
Demand-to-Supply Ratio
Ratio=Potential Buyers or Renters/Available Units
A ratio above 1 indicates high demand, while a ratio below 1 suggests oversupply.
Step 2: Define the Market Area
Real estate is local. Like very local. Even properties just a few blocks apart can have vastly different market dynamics. We've all heard of "the good part of town"—this applies when defining market areas.
Steps to Define Your Market Area:
Start with a 3-, 5-, or 10-mile radius from your property.
Consider natural and political boundaries (e.g., rivers, highways, or school zones).
Identify local amenities, crime rates, and community reputation.
Example:
You’re looking at a property in a suburban neighborhood outside Atlanta. While it seems promising, further research shows it's just outside the district for a highly rated school. Properties within the school district boundaries are selling for 15% more. This insight helps you refine your target market area.
Fun Tip:
Use free tools like Google Maps to draw boundaries and identify clusters of desirable amenities like parks, restaurants, and public transit.
Actionable Insight:
Once your market area is defined, revisit Step 1 to conduct a targeted supply/demand analysis for this specific area.
Step 3: Analyze Demand and Supply
Local factors like job growth and population demographics are primary drivers of real estate demand. For example, an area with increasing job opportunities is likely to attract new residents. Additionally, analyzing income distribution helps identify what types of properties the market can afford.
Where to Find Data:
U.S. Census Bureau (for population and income data).
Local MLS or Zillow (for comparable property supply).
Example:
Imagine you’re researching a potential investment in Las Vegas, NV. The Census shows significant job growth in the hospitality sector, but income distribution reveals many workers fall in the $40,000–$60,000 range. This indicates strong demand for affordable rental units rather than luxury apartments.
Formula:
Absorption Rate
Absorption Rate=Units Sold or Leased in a Month/Total Available Units*100%
A high absorption rate indicates a strong market, while a low rate signals potential oversupply.
Quick Tip:
Check local news or city websites for upcoming infrastructure projects or major employer announcements—these can significantly impact demand.
Step 4: Evaluate the Property
This step goes beyond the data to focus on the property itself.
Key Evaluation Points:
Age and condition: When was the property built? Is it well-maintained?
Lot characteristics: Assess size, shape, and zoning restrictions.
Proximity to amenities: Evaluate nearby shops, restaurants, and schools.
Example:
You’re evaluating a small apartment building in Orlando, FL. The property is older, but it’s within walking distance of a popular shopping plaza and a new Brightline train station. While it may require renovations, its proximity to amenities makes it a strong candidate for value-add investors.
Formula:
Walkability Score
Walkability Score=Number of Nearby Amenities/Walking Distance (in minutes)
A high score makes properties more appealing to urban buyers.
Fun Tip:
Visit the property in person (or use Google Street View) to assess intangible factors like noise levels, neighborhood vibe, or visual appeal.
Step 5: Study the Competition
Now, compare your property to similar ones on the market. This is crucial for understanding where your property stands and how to position it effectively.
Best Practices for Competition Analysis:
Focus on recently sold or leased properties, not just active listings, as they reflect actual market prices.
Compare objective features like size, amenities, and condition.
Identify what you can improve (e.g., better finishes or additional features) to make your property stand out.
Example:
You’re considering a rehab project in Denver, CO. Nearby properties of similar size and age have recently sold for $450,000–$500,000. If you invest in upgrades like modern appliances and open floor plans, you can potentially price yours at the top of the range, or even higher.
Quick Tip:
Remember, you're not trying to set the market price. The market establishes the price! Delivering a much superior property to the comparable properties may make it difficult to sell or lease it.
Conclusion
Market research doesn't have to be overwhelming or time-consuming. With these five steps, you can gather actionable insights and make smarter real estate decisions. For those looking to save even more time, Acristo Engine simplifies the process by synthesizing reliable data into easy-to-read reports—giving you the confidence to tackle any deal.