When you are looking to evaluate anything usually real estate, you have to understand why it is where it is at. There are many key variables to lookout for when you are doing your evaluation. Job growth, permits, even the school system are things to look at when you are trying to understand the income growth of the area. There are some things that are different in growth like Home Price vs. Income Growth. Those are two very different things.
- We’ll use the compound annual growth rate from the period of 2010 to 2019.
- Around 28% of the change in rent growth from the period can be explained by income growth.
- To forecast income growth, I like to look at historical data, employment rates, and job growth.
“The problem is that if you pick too many variables, you can get stuck in analysis paralysis. Pick too few, and your analysis is overly simplistic. It’s important to use variables that are simple to measure, easy to understand, and able to answer your questions.”