The market comes before the building
A lot of investors fall in love with a property first. We don't. Before we underwrite a single unit, we underwrite the market it sits in. A great building in a weak or hostile market is still a weak deal. We've passed on plenty of nice-looking properties because the market underneath them didn't hold up.
What we actually screen for
Here's what goes into our market evaluation, in plain terms:
- Population and job growth. A shrinking population means a shrinking pool of renters, no matter how nice the unit is. We want growth that's durable, not a one-year spike.
- Employment diversity. Markets anchored only by education, healthcare, or government can still work, but we want private-sector growth stacked on top. Companies moving in or expanding is a sign the rental base will keep growing, not just hold steady.
- Household income and home values. These tell us whether renters can afford rent increases over time and whether homeownership is pulling tenants away or pricing them back into renting.
- Crime rate. This affects both resident safety and how hard it is to keep a property occupied and insured.
- Landlord-friendly laws. We want to operate where city, county, and state rules support owning and operating real estate. A market can check every other box and still be a poor fit if the regulatory environment works against operators.
Why this order matters
Location, operator, and market are the three things a deal comes down to. When we're not confident in all three, we pass. It's tempting to underwrite the building first because it's the tangible thing, the renovated kitchens, the new roof, the rent bumps you can model. But none of that matters if the market itself is declining or hostile to landlords. We'd rather walk away from a well-renovated building in a bad market than chase the upside and hope the market cooperates.
What a good market looks like in practice
It's rarely the hottest market in the headlines. We're less interested in explosive growth stories and more interested in steady, diversified demand: enough population to support multiple employers, income growth that keeps pace with rents, and a legal environment where operators can do their jobs. That combination is what lets a B-class property built since the 1990s, with room to grow, actually realize that growth.
Our assumptions are conservative, not best case
Even in a market that checks every box, we underwrite with worst-case rent growth, stress-tested exit cap rates, and conservative occupancy from day one. A strong market reduces risk. It doesn't eliminate it, and we don't pretend it does.
If you're comparing markets yourself, or comparing how different syndicators choose them, read our full thesis or schedule a call with John.