Know the Trends in Your MarketOct 04, 2019
You need to gather all the data for your market and submarkets so that you can present this information to your investors. You’ve got to put together your offering memorandum and you need all the information in reports on trends in your marketplace.
As a multifamily investor in your marketplace you need to know all of the trends of your market - from vacancy, expenses and rent. Let me give you an example of what I'm talking about. Where is the best place to find average vacancy in your market and submarket along with absorption rate? Okay listen, there are many different places in different markets who'll have different sources. If you are among those who have not looked at this yet, or if you're looking in to some particular markets and you haven't even gone to this most basic site, then shame on you. I'm going to show you what you need to be doing for this type of data and start keeping track of trends on an Excel spreadsheet.
Build out the most beautiful model so that you know exactly what it takes to own and operate property in your area. So let's take a look at this right now. I got this from City Data. City Data's great and if you go back to the Multifamily Business Building Program, we have a whole bunch of different sites that'll help you identify what's going on in your market.
All right so, this is directly from Marcus and Millichap. Go to the Marcus and Millichap website and download the area reports for, I think, 28 different markets. This is exactly what I'm talking about, as it relates to the sub-market trends.
Look at this.
This is here in Boston, Rockingham, in Southern New Hampshire.
There’s South Essex County, like Queen Anne.
East Middlesex County, like Lowell.
Fenway, right there in the city of Boston.
There's also Lowell proper and Southwest Boston.
This goes to show you all the different sub-markets in Boston.
So, let's take a look at the vacancy rate in Boston. This is why there's so much construction going on in there. Then, there’s Intown Boston at 4.2. Then, there’s Rockingham, Southern New Hampshire. Isn’t it John Child’s buying up everything in Southern New Hampshire? It’s with a vacancy rate of 1.85.
Then, we're seeing a drop or it's all going down. Waltham actually went up a little bit. But look at the average effect of rents in these areas. Now granted that it's not breaking down by the number of beds, that's the type of information you want to capture.
Also, look at the increase in Boston. If you don't have this data or if you're not looking at this type of information, you're never going to know it.
$3,000 in Fenway? What is in Fenway? Well, it's where all the students live. You're seeing such a huge number in Fenway because of these student housing. So, they're renting it out by the bedroom. Schools like BUB, Wentworth, Simmons, it just goes on and on. It's a student housing area.
So, this is the type of information that you want to have ready to go for your investors. Cause listen, you have to be able to sell it to them. And, look at all this additional information, you need to know all the trends in your particular marketplace. Remember you've got to put together your own offering memorandum about your deal to your investors. This type of information is exactly what you want to have in the discussion, all right. And this all comes from the Marcus and Millichap report on Boston and they have them for 20 different marketplaces.
Now, look at this.
It talks about the vacancy and about the rent. Vacancy will fall to 3.4% in 2019 after declining 50 basis points last year. Availability lies under 3% in multiple market segments. This is why the building going on here in Boston is crazy.
I’ll give you another example of some other things that are in here.
More vacancy, more rent information. This is essentially taking it and creating more of a narrative. This type of information is what you use when you sit down with your investors.
When you have a phone conversation with your seller, I want you to know this information. So that when you start talking to them, you can talk knowledgeably about what's going on in that marketplace. And you will sound like, “this is why I am strong and bush on this particular marketplace.”
What you really might want to do is put together almost like a white page for everyone, so we have this information too, when we go and get on the call with you. This type of thing makes you look like a genius and gets you the deal.
Where to find this in or other markets, tertiary cities. Listen, the ones I'm pulling up right here are not the tertiary markets. These are primary markets and there are about 28 markets that Marcus and Millichap uses.
Go into the product library in the Multifamily Business Building in the first module, I talk about choosing your markets and there are a couple of websites in there and City Data. That gives you some phenomenal information. Also, there's some great stuff in census.gov too.