With any type of investment or business, research is important. This will allow you to know what to expect and also have the ability to be able to distinguish a diamond in the rough by examining comparables.
Before you write an offer for any market, you're going to want to spend some time getting a feel for the market.
Doing this before you look at deals will allow you to move much more quickly when recognizing a potentially good deal as much of your due diligence has already been done. How can you know what a good deal is without research?
You will have little background on which to judge investment deals. Your market research can and should include most of the following information:
what rent is going for an area, who the large employers are, and what the smaller sub-markets are doing. What are home sales like in the area?
Where is job growth going to come from and what kind of jobs will these be? Where will new transportation be? What is the current rental market like? Asking all of these questions gives you an idea of the bigger picture and explains the economics of the area. Knowing the current situation along with where future trends lie will allow you to assess a deal for current viability along with future appreciation based upon the trends that you have researched.
Secondly, look at some comparables with in the area.
Taking time to study these will let you understand what the market is truly like. This will allow you to know prices within an area (as well as submarkets) and roughly what you can expect to pay if paying market price. This can help you quickly determine if a prospective deal is brought to you whether it is undervalued and whether you might be able to create forced appreciation very quickly.
Look at as many comparables as possible and most experts recommend around the last fifty.
This can allow you to see what has happened over a period of time and lessens the impact that outliers can have upon the data due to the larger data pool you are using.
Remember that you do not have to find all this information yourself. Use the services of an experienced broker. They are paid very well to help you succeed. You must make the broker feel comfortable knowing that you will work for him as much as he will work for you. The importance of using a broker is that here she is in this particular market every day. He or she should know what the hot areas are and should be able to bring you some potentially good deals. You are paying for the brokers’ expertise to do not be afraid to ask questions as you do your market research.
Hopefully this article on the importance of doing a research is giving an indication of what you have to look for in the reasons to do it. Completing the due diligence can make you a great deal more money as you're able to jump on an opportunity that much quicker and put your bid in with the confidence that you have done the market research to make this potential deal work out for you.