Real estate investing requires an investment analysis that examines economic, financial, and operational data for a specific existing investment property, taking into consideration the unique requirements of the investor.

Ultimately, the analysis of a given investment intends to answer the following question: Will the investment property perform under the constraints set forth as performance criteria?

In other words, a wide-range of information about a property must be collected and carefully evaluated for an investor to make sound real estate investment estimates.

A market analysis that identifies the sub-market segment in which the property is located is required inside that analysis because it determines the size of that market and the implications for market share for the property.

Here are several factors about the property’s sub-market segment upon which the investment analysis should focus.

1. Current and forecast economic conditions include inflation estimates, interest rates, and the general availability of mortgage funds.
2. Trends in population include demographics of the sub-market and sex-age distributions. Income and employment levels provide a picture of the near-term stability of the economy and the market in which the property competes.
3. Demand for the subject space includes identifying potential demanders, the market segment to be targeted, and an estimate of the absorption rate of the market to include the share of the subject property.
4. Information on the supply of competing space in the sub-market would include the number of existing properties and their quality, size of units offered, amenities such as parking, recreational facilities, etc., units planned or permitted, units under construction, and units “vacant-for-sale” or “vacant-for-rent.”

Assuming all data was available, and time constraints did not impede the analysis process, the findings of the market analysis should reveal how the property will perform within the market it is positioned.

Weighing the conclusion against the requirements imposed by the investor, along with examination of other data for the property, is what real estate investing is about, and ultimately what should trigger an investor’s investment decision.