Real Estate Market Evaluation Worksheet
Download REI Grove's real estate market evaluation worksheet to compare local economy, location, housing market, rental market, and more before choosing the location of your next investment.
Key Takeaways
- Evaluating a real estate market before buying reduces investment risk and gives investors a better understanding of local trends.
- Investors should compare market-level data like income growth, population trends, home prices, rental demand, and other relevant information.
- REI Grove's market evaluation worksheet is organized around local economy, location characteristics, housing market, rental market, and notes.
- By using this worksheet, you can evaluate markets more systematically and decide which cities or neighborhoods deserve deeper property analysis.
How to Evaluate a Real Estate Market
All real estate investors take on risk when they buy property, regardless of the market. However, knowing your market before you buy can significantly reduce the risks you take on and limit the scope of potential consequences.
If you're a long-distance real estate investor, you may be looking at multiple different cities or states across the country as you consider where to invest in real estate 2024. If you're a local investor, you may be comparing a few different neighborhoods within the same city. In either case, learning how to evaluate and compare real estate markets before making an offer on a rental property is pivotal to your future success in the market you choose.
In this article, we'll discuss how to perform a real estate market analysis and find the hottest real estate markets 2026 has to offer using our helpful market evaluation worksheet.
Benefits of Evaluating your Real Estate Market
Taking the time to thoroughly evaluate an interesting market can be tedious, but it's well worth the investment. Here are a few of the benefits of evaluating a real estate market before buying property.
- Deepens your understanding of local trends. Each local real estate market is different, and market dynamics can vary widely. Evaluating a market on the granular level, down to the specific neighborhoods or developments you're considering, will deepen your understanding of how housing and rental markets operate throughout the year and over longer periods of time.
- Helps you identify your target tenants. When you take the time to learn about the demographics of your potential market, it's more obvious which kinds of tenants you could seek out in that area. This can help you narrow your passive screening approach and focus on tenants who would most likely be interested in your properties.
- Manages your expectations. If you've only ever heard great things about an area, you may be surprised upon investing there that things weren't entirely as great as you heard. Rather than taking someone's word for it, take the time to evaluate the market yourself.
- Helps you predict future problems and concerns. While no market analyst can predict the future, many have accurate insights about the current problems plaguing specific markets and potential issues to look out for in the future. Over time, you can learn to recognize red flags to keep an eye on should you decide to invest in that market.
Factors to Consider
What Does the Evaluate a Real Estate Market Worksheet Cover?
REI Grove's market evaluation worksheet is organized into sections that guide investors through key market-level factors before they analyze a specific property. Instead of relying on scattered data or general impressions, you can use the worksheet to compare markets in a consistent format.
This worksheet includes:
- City or neighborhood being evaluated
- Local economy indicators
- Location characteristics
- Housing market statistics
- And more!
So, which factors should you consider in your market analysis? Let's look at a few of the most important:
City/Neighborhood
Before reviewing the market itself, the worksheet gives you space to name the city or neighborhood you are evaluating. This keeps each worksheet focused on one target market and makes it easier to compare multiple areas later.
Section 1: Local Economy
Learning about the local economy of a market is a good place to start. In your research, find out the median household income, income/job growth in the area, population trends, the unemployment rate, the largest industries or companies in the area, and the town's net migration. Each of these factors influence the housing market and are important considerations to track over time to observe trends.
Section 2: Location Characteristics
Now it's time to develop a more in-depth characterization of the market. This could include more detailed demographics as well as local amenities and laws, which affect property value in the area.
Be sure to consider the median age of residents in the town, the crime rate, local public school system, the homeownership rate, and the regulatory environment (for instance, find out whether local rent control laws apply and if so, the current cap or restriction).
Section 3: Housing Market
When researching the housing market specifically, key statistics like the median home sale price, the median days on market (DOM), and the number of months' of housing supply the market currently has will be helpful in your analysis. These stats will tell you about the fair market value of homes in the area, whether they're appreciating and how quickly, how quickly homes are sold in the market, and the overall demand for homes. Information about property taxes and insurance rates in the neighborhoods you're looking at is also helpful.
Section 4: Rental Market
Although the housing and rental markets are linked, real estate investors must pay extra attention to factors like the median rent, demand for rentals in the area, and the average rent-to-income ratio in the area. The eviction rate might also be helpful information to compare with employment trends. The goal is to learn about the behavior, wants, and needs of typical tenants in the area, which will help you decide if the market suits your picture of who an ideal tenant for your new property would be.
After you have an idea of the overall rental market, you can zoom in on a particular property to perform a rental property analysis. For example, you can also use your market research to conduct an expected cash flow analysis or estimate statistics like net operating income or gross rental income for a particular property based on the average monthly rent in the area. To make this process easier, consider using a rental property analysis spreadsheet to organize and calculate key financial metrics efficiently.
Section 5: Notes
The notes section gives you room to record additional observations that may not fit neatly into a data category. This can include market strengths, concerns, data sources, neighborhood impressions, follow-up questions, or details from conversations with agents, property managers, lenders, or local professionals.
Worksheet Summary
| Section | Key Metrics | Why It Matters |
|---|---|---|
| Local Economy | Income, job growth, population growth, unemployment, industries, migration | Measures economic strength and housing demand. |
| Location Characteristics | Age, crime, schools, homeownership, regulations | Assesses tenant demand, desirability, and risk. |
| Housing Market | Home prices, price trends, days on market, supply, taxes, insurance | Shows costs, appreciation, and market conditions. |
| Rental Market | Rent levels, rent growth, rent-to-income ratio, evictions, rental supply | Indicates demand, affordability, and competition. |
Conclusion
Identifying the best markets for real estate investing can be an involved endeavor. However, breaking your options down by the above characteristics can help you evaluate each market systematically and objectively. Completing this worksheet and moving forward with a comparative market analysis will help you see the big picture of a market, allowing you to recognize strengths, pitfalls, and considerations of each option. Start by downloading a copy of REI Grove's Evaluate a Real Estate Market Worksheet below.
FAQs
What is a real estate market evaluation worksheet?
A real estate market evaluation worksheet is a research and comparison tool investors can use to evaluate a market's local economy, location characteristics, housing market, rental market, and other key factors before buying property.
Why should investors evaluate a real estate market before buying?
Investors should evaluate a market before buying because local trends, tenant demand, home prices, rent levels, regulations, taxes, and expenses can all affect investment risk and profitability.
What does the Evaluate a Real Estate Market Worksheet include?
The worksheet includes sections for city or neighborhood, local economy, location characteristics, housing market, rental market, and notes.
What local economy factors should investors research?
Investors should research median household income, income or job growth, population growth, unemployment rate, largest industries, and net migration.
What location characteristics matter in real estate market analysis?
Important location characteristics may include median age, crime rate, public school systems, homeownership rate, and other local regulations.
Why does rent-to-income ratio matter?
Rent-to-income ratio can help investors understand whether local rent levels are affordable for the tenants who live in the area.
Can this worksheet help long-distance investors?
Yes. Long-distance investors can use the worksheet to compare multiple cities, states, or neighborhoods before choosing where to focus their property search.
Should investors only use this worksheet before buying?
No. The worksheet can be a strong starting point, but investors should also perform property-level analysis, review comparable properties, estimate cash flow, research regulations, and consult local professionals when needed.