Preliminary Market Research

Deciding where one will farm his market can be approached in a myriad of ways. Presumably, where one lives in the United States usually sets the cornerstone, and the rest follows. For example, someone living in Florida may prefer to concentrate their efforts in the Southeast region of the United States, as opposed to someone in the Northwest who may find the Portland or Seattle markets more to their liking. It could also be said that the market itself will dictate where the activity is, and as such, someone living in Iowa City may find themselves looking at markets that are far removed from where they live. Many speculators, investors, and flippers will literally travel to the ends of the earth to penetrate a market to initiate flip candidate opportunities. You might call these people equal-opportunity flippers. Being a plane ride away is no obstacle for a truly dedicated investor who enjoys the hunt as much as the chase.

In terms of preliminary market research, I recommend focusing on markets that offer the most apparent upside as deemed by bona fide news accounts and real estate data. As a web source, try HomeBuilder. com and to start out. Both of these sites will give you access to all fifty states and developer activity in those respective areas in terms of specific builders, sites, locations, and cities, and what type of homes and how many homes they are building, and the prices. You should also utilize the myriad of Web sites that offer for free in some cases, lists of preconstruction opportunities in various parts of the country. Just type the key words into a search engine, and off you go. In terms of a fee-based membership, don’t shun those services too quickly. Organizations like NREIA (National Real Estate Investment Association) and REIClub (Real Estate Investment Club) are well worth the nominal sign-up fee. I can’t understate the importance of leads, leads, leads!

This will be the lifeblood of your business, and fortunately, the latter organizations and sites just mentioned will give you a start in the right direction. Do be aware, however, that not all preconstruction leads are created equal. Brokers, developers and syndicators tap into these Web sites, clubs, and organiza-tions in order to remain “inventory neutral”-and, as a result, the pre-construction opportunities they advertise may not be slamming good deals. Also, the deals presented on the sites may not be geographically located within a market that is on an appreciation trajectory that meets the parameters of a quick flip deal. So be sure to research, research, research before you buy.

During the research you may come across some hurdles. Case in point, there are some markets that are clearly anti-investor. This literally changes depending upon whether it’s a buyer’s or seller’s market. In a seller’s market, you’ll tend to find that builders are rather miserly toward investors. Conversely, in a buyer’s market, things are flipped on its end and seller/developers are much more generous and welcoming. Although there may be many legitimate reasons why a homebuilder will not sell to investors, many of the explanations fall short of good reason and don’t hold logic. It’s a well-known fact that investors are a hidden supply-in that you can always count on them to buy-yet some builders refuse to sell homes to investors and/or limit the number of homes per development to a specific allocation for investor activity. My experience is that many builders will not allow investment because they themselves are not investors. Those vice presidents down to the regional level are parsimonious and didactic toward investors. Hence, a form of “buyer envy” sets in and just plain old jealousy dictates a “no investor” policy. No matter what the reasons, investors are forced to “lick their salted wounds” and ego and prey upon other regional markets-with their checkbook in tow-that are investor friendly and welcome their commerce.

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