Blog | Real Estate

Why Demographics Matter in Real Estate

Demographics are Data

When someone mentions the word “demographic”, what do you think of?

Population? Gender? Income? The answer is: all the above, plus more.

Demographics include age, race, ethnicity, gender, income, education, occupation, and even marital status. These characteristics help determine moving patterns and population growth but are often overlooked when it comes to real estate. The reality is, demographics are a huge factor that can determine pricing, demand and reliability in the real estate market.

Why Demographics Are Important To Me

I request to review every single lease and every single application before I even think about buying a building. Why? I want to see the type of people that are living there. Do they have jobs? If so, do they have stable jobs? I want to figure out if the tenants are reliable when it comes to paying their rent. Are the tenants single or do they have families? This will help me determine some of the needs that the tenants are looking for (i.e. multiple bedrooms, washers and dryers, etc.).

But I don’t stop there. I take it a little further by analyzing the neighborhood. Is the quality there? If there’s no potential, then the asset will never perform the way it needs to. It can be the best real estate market we’ve ever seen, but if the neighborhood is bad, we know that means little to no stability and a lot of headaches.

It seems simple, right? It is. But I know too many people who don’t even stop to think about these factors. They look at the numbers on paper, and that’s it. They don’t step outside the “financial statement box” to think how the elements surrounding the asset can affect a property’s performance. That’s not being a wise investor…

To make sure I don’t get stuck in that box, I have a method that makes me look at the whole picture. Every time I go to look at a property, I go through some questions. One of the most important questions I ask myself is:

“Does the property land in a school district?”

If so, is it a good school district that’s sought after? If the answer is yes, I’ve struck gold.

I’ll give you an example:

My company owns a property in Plano, Texas. Now, Plano is home to several leading Fortune 1,000 businesses, but that’s not what caught my attention. What made me interested was the fact that Plano had the number one rated school district in the State of Texas. When I looked at the value of the homes in Plano, they ranged from $500,000 to $1 million with hardly any apartment buildings.

After looking at the demographics, I decided that I wanted to own one of those apartment buildings. Why? Because families were moving to Plano to give their kids a strong education, but they couldn’t afford the homes. So, I bought an apartment building knowing that I’d be offering an option for those relocating families and their kids.

Again, this isn’t a factor that a lot of people think of, which is why I bring it up. I was able to add value to my asset by having reliable tenants, and at the same time help families give their kids a better education. Not something that’s done everyday!

If you’re interested in learning more about how I use demographics to find investment opportunities, make sure to read my book The Advanced Guide to Real Estate Investing: How to Identify the Hottest Markets and Secure the Best Deals.