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Why Real Estate Investors Must Understand the Path of Progress


Jul 23, 2020 by Brad Cartier

As a real estate investor, you may have heard the term path of progress before. The path of progress simply refers to where positive demographic trends are heading in a chosen geographic location. For example, if new public transportation systems, highways, housing developments, and major new employers are beginning to present themselves south of your city center, then that is your path of progress.

That said, it’s not always easy to understand the long-term trajectory of positive economic activity in your area. What should you look for? What are the positive and negative indicators of a path of progress? Here's an overview of the path of progress and what goes into the calculus of uncovering the path of progress in your local markets.

Employers

You have to know which employers are coming into your region. Positive inward migration of businesses shows a healthy and growing business community that will bring with it employees, economic development, and renters.

This includes all types of businesses: warehousing, high tech, industrial, manufacturing, automakers, major consumer brands, and the list goes on. The best ways to stay on top of incoming businesses to your specific location:

  • Read local business journals or newspapers.
  • Join business groups or chambers of commerce.
  • Stay on top of commercial listings to see if there's an abundance of businesses for sale.
  • Talk with local commercial brokers.
  • Map out the last 20 commercial spaces that opened in your general area (see point above for help with this).
  • Set up Google alerts for announcements of new business in your region.

Has a major employer entered your area in the past few years? Are new businesses opening or closing? Has commercial development increased or decreased over the years? All of these will help you understand whether the employment picture in your region is in the path of progress.

Inward migration (residential housing)

Can you name a few new housing developments being constructed in your area? Take a look at the overall map of your city or state, and mark down all of the major housing developments. Where do they seem to converge?

When was the last time there was a city boundary expansion in your city? Where was the bulk of the expansion?

Suburban development appears when a critical mass of residential buyers support the housing market. Builders, for the most part, are multi-million and billion dollar companies who spend significant amounts of time analyzing whether or not to build in areas. If the demand isn’t there, they’ll stay out.

Check the last several census reports for your region. Are the population numbers growing over time? If so, and there are no major anchor employers who have left, then you can assume the population growth trajectory will likely continue. The Census Bureau also provides population projections you can use in your path of progress analysis.

Public infrastructure

Public transportation, highways, public-private partnerships, and government employment are all public infrastructure projects you want to keep an eye on.

Transportation and highways are a big part of the path of progress. If a new highway or light rail system is being proposed or planned, then this is a good sign of the path of progress. A lot of traffic, demographic, and environmental studies go into these types of public infrastructure projects. Therefore, if the government is proposing them, then there’s usually a good reason.

The best way to do this is by reading local and state newspapers, understanding the political environment, and networking with plugged-in business people, not just those involved in real estate. Part of being a good investor is knowing what the local, state, and federal government have planned for your general area. This means bookmarking and following press releases from each, particularly at the local level.

The bottom line

Coming up with your local path of progress is more of an art than a science. There are so many inputs that need to be considered before making investment decisions. Take out a map of your state or city, and begin plotting some of the above data points.

You’ll be surprised at how quickly you end up noticing patterns. Are your current investment assets located on the path of progress?

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