Making profitable real estate investments requires information and careful analysis. Before making any investment decisions, there are many critical questions you must ask yourself and at least five key metrics you need to review.
1. Population Growth Rate
Of all the metrics that predict future market volatility, population growth is probably the most important. The housing requirement — single-family homes versus apartments versus something else — will vary based on the components of population growth, but ultimately, more residents equals more demand.
The trick is that you don’t necessarily want to invest in a top-10 location for population growth, as that may only be the case for the short-term. What we care most about is steady population growth over the long-term — it’s one of the core tenets of our investment criteria at our firm. Average to above-average population growth is fine as long as it follows a positive trajectory that is expected to continue for the foreseeable future.
You can see how this plays out in multifamily pricing, new construction, rental rates, etc., with every major market. Where there are either rapid or gradual declines in population, there is also stagnant to negative-performing multifamily assets.
2. Employment Growth Rate
The largest driver of rental demand is population growth and, in turn, one of the largest drivers of population growth is employment growth. When analyzing a market, you want to understand its job creation trends. Ask yourself:
• Is it a steady jobs market?
• Does it fluctuate at a greater rate than the overall economy?
• Over what period of time has it been stable?
• If the employment growth rate is more volatile than the overall economy, what forces are driving that?
In general, the larger the market, the more stable the employment growth because there are many job creators, i.e., existing and new businesses.
Three factors to keep in mind are:
1. Healthcare, government and higher education jobs rarely relocate and tend to grow over time.
2. Military jobs can fluctuate based on base realignments and deployments. Be cautious of markets where military is the bulk of employment growth.
3. Manufacturing and virtual service jobs can be volatile regardless of the economy.
3. Components Of Employment Growth
In addition to the overall employment growth numbers, you must also study where jobs are being created. For instance, how stable is the job source? Be cautious of service and retail jobs. What types of jobs are they: white-collar educated jobs, blue-collar trades or minimum wage? What age group is the dominant employment growth attracting? For instance, the 18-34-year-old demographic is the largest group that rents.
4. Unemployment Rate
Looking at unemployment and components of unemployment is different than employment growth. While not typical, you could have a market with rising employment growth with no corresponding impact on unemployment. This occurs when job creation demographics are different than the current unemployed base.
In general, you should look for a market where unemployment is less than the overall U.S. market. If there is a steady trend there, then most likely this specific market will be comparatively better than those with unemployment rates greater than the U.S. average or volatile.
5. Landlord/Tenant Laws
Multifamily investments sit in the middle of several different local and federal policy influences:
• Federal equal housing laws.
• Federal, state and local business practices.
• State and local landlord/tenant laws.
Since shelter is a basic human need, there are several voices impacting how and in what way a multifamily property is operated. This can impact your tax bill, your allowable marketing practices, required property living standards and the landlord’s and tenants’ rights.
Evictions can and will happen, even in new A-grade complexes. The percentage of evictions and bad debt activity increases as you move down from Class A properties to Class D. You want to be in a state that provides favorable or, at the very least, neutral treatment for the landlord in eviction and bad debt scenarios.
In relatively neutral landlord/tenant states, evictions usually take 30 to 45 days, and if a tenant breaks a lease, they are responsible for the economic harm caused to the landlord. However, in some states, it can take up to six months for evictions, and during that time there is no rental income or no recourse to the lost rental income.
Analyzing a multifamily investment market can be complex. Reviewing key metrics can help you evaluate the potential profitability and risks. Long-term, steady population growth and stable employment growth are indicators of a promising investment market. Moreover, a market where unemployment is lower than the overall U.S. market is more favorable. Neutral landlord/tenant states may reduce the loss incurred from evictions or unforeseen circumstances. A thorough analysis of all of these factors can help you make informed decisions.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
