Travis Cadman’s Take on Build-to-Rent
Market identification is a crucial part of a successful real estate investment approach. Here, real estate investment strategist Travis Cadman offers sub-market identification strategies for new multifamily property investors.
What is a sub-market?
In real estate investment, a sub-market is considered a region or district that is a specifically – though not officially – defined area within a broader location. For example, a sub-market may be a suburban region within a metropolitan area. Any metropolis will have multiple sub-markets – or neighborhoods – that have a distinct identity and population.
While there may be official city designations within a county, a sub-market is an informal classification that is generated over time, and may evolve depending upon multiple factors. The identity of a sub-market is determined by numerous dynamics: The income of the population, whether it is adjacent to valuable public resources like transportation hubs, and the existence of a particular industry that employs a large segment of the population are all issues that contribute to the formation of a sub-market.
Because sub-markets are informal, they may be defined differently depending upon the source.
If you’ve chosen the city for your multifamily property investment, you’ll need to identify the appropriate sub-market for your targets in order to assure the greatest return. Here are a few factors to consider:
Regentrification opportunities. Regentrification is generally defined as the revitalization of a previously gentrified community. Communities with existing properties that are more than 30 years old may be prime for regentrification.
Crime data. The safety of the prospective investment location is paramount to its attractiveness to qualified renters. Carefully consider crime statistics before locking in your investment.
Job growth. A diverse and thriving job market brings and maintains a bustling economy to the sub-market.
Proximity to transportation networks. The ease with which residents and commuters can access the region will add significant value to the market. Learn if there are any plans for highway construction or additional public transit resources.
While these are some of the most important factors, they are by no means the only considerations you should make when determining the best sub-market for your multifamily property reposition. Consult with an experienced real estate investment professional before you commit to any market.
Travis Cadman is co-founder and CEO of Investar USA.