TL;DR
- Right market + average execution = 15-25% ROI
- Wrong market + excellent execution = 5-10% ROI (or losses)
- Market selection accounts for 50% of the "Strategy" layer in the Success Pyramid
Market Comparison Matrix
Here's how to evaluate multiple markets side-by-side:
Sample Market Analysis
| Metric | Phoenix | Tucson | Albuquerque | El Paso |
|---|---|---|---|---|
| Cash buyer % | 48% | 34% | 29% | 26% |
| Pre-foreclosure rate | 1.2% | 1.8% | 2.1% | 1.9% |
| Median price | $425K | $305K | $285K | $215K |
| Price-to-income | 7.2x | 5.8x | 5.1x | 4.3x |
| Months inventory | 2.1 | 3.2 | 3.8 | 4.1 |
| Population growth (5yr) | 12% | 8% | 3% | 2% |
| Investor opportunity | C+ | B+ | A- | A |
Phoenix has great fundamentals but intense competition. El Paso has less competition and favorable economics despite slower growth.
Investor Competition Analysis
Competition determines your CPD more than any other factor.
The Inverse Competition-CPD Relationship
Client Results
“I was chasing deals in Phoenix with 52% cash buyer activity. Switched to Tucson (34% cash buyers) and my CPD dropped from $4,200 to $1,800. Same strategies, same team, different market dynamics.”
— Arizona investor, 89 deals/year across 2 markets
| Cash Buyer % | Typical CPD | Deal Flow |
|---|---|---|
| 20-30% | $800-1,400 | Abundant |
| 30-40% | $1,400-2,200 | Moderate |
| 40-50% | $2,200-3,500 | Constrained |
| 50%+ | $3,500-5,000+ | Very limited |
The math is simple: In a market with 25% cash buyers, your mail arrives alongside 2-3 competitors. In a market with 50% cash buyers, your mail arrives alongside 10-15 competitors.
Market Entry Process
Stage 1: Screen (Week 1)
Filter to 5-7 candidate markets using: - Population >200K (deal flow) - Cash buyer <40% (competition) - Median price $100K-400K (deal math) - Pre-foreclosure >1% (distress opportunity)
Stage 2: Deep Analysis (Week 2-3)
For each candidate: - Pull all Tier 1, 2, 3 metrics - Build comparison matrix - Rank by overall opportunity score - Identify top 2-3 markets
Stage 3: Pilot Test (Month 2-3)
Before committing budget: - Mail 1,000-2,000 pieces in each test market - Track response rate - Analyze lead quality - Calculate projected CPD
Critical: Don't commit significant budget until pilot data confirms opportunity.
Stage 4: Scale or Exit (Month 4+)
Based on pilot results: - Scale: CPD below $1,500 and deal math works - Maintain: CPD $1,500-2,500, monitor for improvement - Exit: CPD above $2,500 consistently
Market Exit Signals
Know when to reduce or exit a market:
Client Results
“We had been in Memphis for 4 years when cash buyer percentage jumped from 32% to 48%. Our CPD went from $1,600 to $3,800. We pivoted budget to Little Rock (26% cash buyers) and CPD dropped back to $1,200. Sometimes the best move is leaving a market.”
— Multi-market operator, 140 deals/year
| Signal | Threshold | Action |
|---|---|---|
| CPD rises 50%+ | 3 consecutive months | Reduce budget 50% |
| Cash buyer % increases | +10 points in 6 months | Monitor closely |
| Response rate drops | Below 0.5% for 90 days | Evaluate list sources |
| Deal math breaks | Can't hit 70% ARV consistently | Exit market |
| Major employer exit | Large layoffs announced | Pause and reassess |
Ongoing Market Monitoring
Monthly Review Checklist
- [ ] Check cash buyer % trend (Redfin data)
- [ ] Review pre-foreclosure rates
- [ ] Track inventory levels (MLS data)
- [ ] Monitor your CPD by market
- [ ] Review response rates by market
Quarterly Deep Dive
- [ ] Full market comparison matrix update
- [ ] Competition assessment (mail volume, wholesaler activity)
- [ ] Economic indicator review (jobs, wages, migration)
- [ ] Buy box adjustment for market conditions