1. When looking for investment on a small apartment building, I would do research on following aspects to identify a sub-market:
* First of all, defining the outlook of the macro economy is the most important. The job growth and the unemployment rate as well as the income per capita in the target area should be considered. For example, it is not wise to buy a cheap apartment in a dead market, where most people in this area are unemployed or are unable to afford the rentals. * Second, studying the local real estate market is also essential. Before we make investment on a specific apartment, we should know the demand and supply in the market, the change of the occupancy rate, the current rental rates, and so on. * Third, do detailed market research on the target area to identify a favorable or a potential sub-market, including comparing the rental changes in each sub-area, and identifying the possible factors that will change rentals. For this step, we can use sources such as Craig’s list and rent.com to find the favorable sub-market. * Last but not least, preparing the budgeting would help us to find out the most suitable apartment in the favorable sub-market. In this process, we should consider how much is financed by mortgage, the related interest rate, debt service, as well as the monthly cash flow.
2. To determine the price to pay for a property, we should do the below analysis: * First, we should do market research on the target area. For example, we should figure out the demand and supply, the trading volume, and the environment in neighboring. After knowing these information, we should also estimate the possible trend of the property value. * After having a thorough understanding of the market, we have several approaches to determine the property price. If we choose the comparable method, we should find a property that is just sold in neighboring with similar characters and use it as a reference to price the...
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