Market Analysis
When selecting markets in which to invest, Paragon's overriding goal is to provide consistent cash flow and strong potential for capital gain. We focus on major metropolitan areas with favorable metrics comparing rental income and household income to home prices. Following are the primary criteria used to determine those markets:
- A low Price-to-Rent Ratio relative to other markets. Paying a low price relative to the cash flow on a property can provide both a superior yield in the short term and the best chance for capital gain in the long term.
- A low Price-to-Income Ratio relative to other markets. Paying a low price relative to the median income usually coincides with a low cost of living in that, which can lead to price increases before other markets begin to rebound.
- A low Median Price is also an important consideration since rent does not increase in direct proportion to price. In general, the higher the median price, the higher the investment, which tends to diminish cash flow.
- The Size of the Market is a major factor as there are some markets that may meet the previous criteria, but are simply too small to be attractive in the long term as housing demand increases; or those markets may be more susceptible to weak rental demand and/or high unemployment.
- The Stability of the Market is essential to support steady or increasing rental demand and eventual appreciation. We choose markets with redeeming qualities that are economically diverse, vibrant and offer abundant opportunities and activities.
