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Thinking of buying in Davis, California? Get our financial spreadsheet tailored to the city.
Davis, California, offers a unique and vibrant real estate market.
Located in the heart of the Sacramento Valley, Davis is renowned for its strong community spirit, excellent schools, and the prestigious University of California, Davis. The city's commitment to sustainability and its extensive network of bike paths make it a haven for eco-conscious residents. Plus, the local farmers' markets and farm-to-fork dining options add a special charm to the lifestyle here.
But is now the right time to invest in residential real estate in Davis? Should you dive in or hold off? Are property values on the rise or decline? Which neighborhoods are seeing the most growth? What are the experts predicting?
In this article, we will provide you with a comprehensive and up-to-date analysis. To ensure you make the best decision, run your numbers through our customized spreadsheet, specifically designed for Davis’s real estate market, offering all the critical data you need to make a well-informed and confident investment choice.
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How's the 2024 housing market in Davis, California?
Are many properties changing hands?
The Davis housing market is experiencing, in 2024, a noticeable decline in property transactions.
Over the past year, the number of properties changing hands has significantly decreased, diverging sharply from historical norms. This isn't just a minor dip; it's a substantial shift.
The primary factor driving this change is the rise in mortgage rates. These elevated rates are making borrowing more expensive, effectively sidelining potential buyers and dampening demand. Additionally, the broader economic uncertainty—marked by rising inflation and fears of a recession—is causing both buyers and sellers to hesitate. People are reluctant to make significant financial commitments in such an unpredictable environment.
Affordability is a persistent issue in Davis. While not as extreme as in larger cities, real estate prices in Davis have been steadily climbing, making it increasingly difficult for many to invest in property in Davis. This isn't a trivial problem; it's a significant barrier that's stifling the market.
When comparing Davis to other major cities in California, such as Sacramento and Fresno, the differences are evident. These cities are also experiencing fewer transactions, but the decline isn't as pronounced. Davis's unique economic landscape, heavily influenced by the presence of UC Davis, makes its real estate market particularly sensitive to economic fluctuations. Sacramento, with its more diversified economy, isn't as susceptible to the same pressures that Davis faces.
The timeframe for selling properties in Davis has also lengthened.
In the past, homes would sell within a few weeks, but now, properties are staying on the market for several months. This is a clear indication of the cooling demand and increased buyer caution. The era of quick sales has given way to extended waiting periods and a more sluggish market.
Are housing prices going up or down?
During the first months of 2024, housing prices in Davis, California have shown a slight increase.
This uptick is primarily driven by the city's unique position as a university town, home to UC Davis. The steady influx of students, faculty, and staff creates a consistent demand for housing. Additionally, the broader economic stability in the region and the appeal of Davis's quality of life contribute to this trend.
Luxury homes in Davis are experiencing a moderate price increase, fueled by the demand from affluent university staff and professionals seeking a quieter, more community-focused lifestyle compared to nearby metropolitan areas.
In contrast, according to the data we have pulled out to build our financial spreadsheet for real estate investing in Davis, affordable housing prices are rising more sharply. This is due to a combination of limited supply and high demand from students and young professionals who prefer to live close to the university.
Compared to other major US cities, Davis's price changes are relatively modest. Cities like Austin and Miami are experiencing sharper increases due to high demand and new residents. However, Davis's growth is steady and sustainable, reflecting its stable local economy and consistent demand.
Supply and demand dynamics are crucial here. Davis has strict zoning laws and limited new construction, which restricts supply and typically drives prices up. The consistent demand from the university community further exacerbates this issue, leading to higher prices.
Davis's housing price trends are closely tied to its status as a university town. The steady demand from students and university staff, combined with limited housing supply, drives prices up. The luxury market is also seeing growth, reflecting the city's appeal to higher-income residents.
For someone looking to invest in buying and renting out properties in Davis, now could be a strategic time, especially for affordable housing. With prices rising, there may be opportunities to purchase properties that will appreciate in value. Given the city's limited housing supply and strong demand from the university community, rental demand is likely to remain robust. This stability can offer a reliable income stream.
However, the economic uncertainties and shifting demand should obviously be considered (remember - we are not financial advisors!).
Investors like you need to be strategic, focusing on locations with strong rental demand and properties that can attract long-term tenants, so they can maximize their investment returns.
99% of successful investors meticulously planned their investments!
Don’t make costly mistakes with your next property in Davis. Make sure you have all the necessary information and data before making a decision.
What about rents and rental yields?
Rents and rental yields in Davis, California have shown notable trends over the past year, reflecting the unique dynamics of this college town.
On average, rents have seen a moderate increase. Currently, the average monthly rent for a one-bedroom apartment ranges from $1,500 to $1,800. For two-bedroom apartments, the range is about $2,200 to $2,600. This rise is largely driven by the consistent demand from students and university staff, coupled with a relatively limited housing supply.
Over the past year, the average rental prices in Davis have climbed by approximately 3-5%. While this increase isn't dramatic, it is significant enough to impact both renters and investors.
Historically, Davis has maintained a stable rental market, primarily due to the presence of the University of California, Davis (UC Davis). Comparing current rent levels to historical averages, today's rents are slightly higher, reflecting the steady demand and limited new housing developments.
Specific neighborhoods in Davis like Downtown Davis, South Davis, and East Davis are experiencing more significant changes in rent prices.
Downtown Davis, with its proximity to UC Davis and vibrant local amenities, sees higher demand and, consequently, higher rent increases. South Davis, known for its family-friendly environment and good schools, is also popular among renters, pushing prices upward. In contrast, areas like North Davis and West Davis are seeing more moderate increases, providing slightly more affordable options.
Properties that tend to generate the highest gross yields in Davis are typically multi-family units and student housing complexes. These types of properties allow landlords to maximize rental income through multiple tenants, especially given the high turnover rate associated with student renters.
Single-family homes in prime neighborhoods like Old North Davis and Central Davis also command high rents but may not offer the same yield percentage as multi-family units due to higher maintenance costs and lower tenant turnover.
When comparing rent prices in Davis to neighboring cities like Woodland and Dixon, Davis remains higher.
Rents in Woodland and Dixon are generally 15-25% lower, making them more attractive to some renters. However, the proximity to UC Davis, the quality of life, and the amenities offered by Davis justify the higher rents for many.
Government regulations and rent control policies play a significant role in the current rental market. While Davis does not have the same stringent rent control laws as cities like San Francisco, there are local ordinances and tenant protections that impact rental practices.
These regulations aim to protect tenants from sudden and drastic rent hikes, but they can also influence property owners' decisions regarding maintenance and upgrades, potentially affecting the overall quality of rental properties available.
What data supports a positive forecast for the housing market in Davis, California?
If you're considering buying and renting out property in Davis, California, there's some compelling data and trends that suggest a positive outlook for the housing market.
Even when national trends fluctuate, Davis often stands out due to its unique local factors.
The presence of the University of California, Davis (UC Davis) is a significant economic driver. The university attracts a steady stream of students, faculty, and staff, all of whom need housing. This constant demand helps keep the rental market strong.
Additionally, Davis has a reputation for being a desirable place to live, with its high quality of life, excellent schools, and vibrant community. These factors contribute to a stable and often increasing demand for housing.
For the market to move positively from a buyer and landlord perspective, certain conditions need to be met.
Condition | Explanation |
---|---|
Interest Rates | Interest rates should remain low or decrease further, as this makes financing more affordable. Lower interest rates reduce the cost of mortgages, attracting more buyers into the market and increasing demand for properties. |
Economic Stability | Economic stability, particularly within the education sector, is crucial as it directly impacts employment and income levels. Stability in the job market, especially in high-paying sectors like education and research, ensures that more people can afford to buy or rent homes. |
Job Market Recovery/Growth | A continued recovery or growth in the job markets ensures that people have the financial means to afford home purchases and rentals. Strong employment rates correlate with increased demand for housing. |
Government Policies (Zoning Laws) | Government policies that relax zoning laws or provide incentives for new constructions can slightly ease the supply crunch in the housing market. However, as long as demand outpaces supply, property values and rental income will remain strong. |
Demand vs. Supply | The balance between demand and supply is critical. As long as demand for properties exceeds the available supply, property values and rental income will continue to rise. This dynamic benefits both buyers (through increasing property value) and landlords (through higher rental income). |
Favorable Tax Policies for Landlords | Favorable tax policies for landlords, such as deductions or incentives for property improvements, increase the financial attractiveness of renting out properties. These incentives can reduce the overall tax burden on landlords and enhance their rental income. |
Given the current landscape, the likelihood of these conditions aligning is reasonably high. Interest rates are currently at historic lows, and while they might fluctuate, they are unlikely to spike dramatically soon. The education sector's stability, particularly with UC Davis, provides a buffer that many other sectors lack.
Moreover, there's ongoing political pressure to address housing shortages, which could result in incremental policy changes that favor property investors.
In this context, investing in multi-family properties or small apartment buildings could yield the most benefit. These types of properties spread risk across multiple units, ensuring steady cash flow even if one unit is vacant. They're also in high demand as many students and university staff prefer renting over buying due to the flexibility it offers. Moreover, multi-family properties often have better economies of scale when it comes to maintenance and management.
Single-family homes in desirable neighborhoods can also be lucrative, especially if you plan to hold onto the property for a while. These areas tend to appreciate faster and attract long-term tenants.
However, the initial investment is higher, and the management of multiple single-family homes can be more challenging than a single multi-family property.
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What data supports a negative forecast for the housing market in Davis, California?
Thinking about investing in Davis, California, and making money through rental income? A negative forecast for the housing market might actually present some unique opportunities, but understanding the local data and conditions is crucial.
Right now, several factors are converging to cast a shadow over the housing market in Davis.
Firstly, let's talk about the data. If you need fresh numbers, they are already included in our real estate spreadsheet for an investment in Davis.
Home prices in Davis have been relatively stable, but recent trends show a potential cooling off. Inventory levels are rising, which means there are more homes on the market. When supply increases and demand doesn't keep up, prices tend to drop. Recent reports have also noted a decline in the number of sales and an increase in price reductions.
This isn't just a seasonal trend; it’s a sign of a broader shift. Mortgage rates have been fluctuating but remain higher than the historical lows we saw a few years ago, which reduces affordability and further dampens demand.
For the market to move negatively, several conditions need to align.
Condition | Explanation |
---|---|
Economic Uncertainty | Davis is heavily influenced by the University of California, Davis. Any significant changes in university funding, enrollment, or employment could impact the local economy. If the university faces budget cuts or reduced enrollment, it could lead to a decrease in the population of renters and buyers, directly impacting housing demand. |
Inflation and Rising Living Costs | Inflation and rising living costs put pressure on disposable incomes, making it harder for people to afford high rents or take on mortgages. This reduces overall housing demand as fewer people can afford to buy or rent homes. |
Regulatory Factors | Davis has its own set of local regulations and tenant protections. Any changes in these laws, particularly if they become more stringent, could make owning rental properties less attractive, reducing investor demand and pushing prices down further. |
The likelihood of these negative trends continuing is quite high. Economic indicators suggest a potential slowdown, and the university's financial health adds a layer of risk.
As an investor, you need to be wary of the broader economic signals and how they might play out locally.
The biggest risks in the property market of Davis include continued economic instability, significant changes in university funding or enrollment, and potential changes in housing policies that could make owning rental properties more burdensome.
The worst-case scenario would involve a combination of these factors hitting simultaneously. Imagine a situation where the university experiences significant budget cuts, leading to layoffs and reduced student enrollment. This would decrease the number of potential renters and buyers, leading to an oversupply of housing.
If this coincides with rising interest rates, the cost of mortgages could become prohibitive, further reducing demand.
Layer on stricter rental regulations, and you could see a substantial decline in property values.
In this scenario, your investment could lose value, and finding tenants willing to pay the rents needed to cover your costs might become challenging.
Which property investment is best for rentals in Davis?
Property types
If you're considering investing in rental properties in Davis, California in 2024, your best bet is to focus on multi-family units. These properties offer the most attractive yields and cater to a diverse tenant base. Davis, known for its university town vibe and strong community feel, presents unique opportunities for rental property investors. You can estimate all the profitability metrics precisely with our spreadsheet tailored to Davis’s housing market.
Multi-family units with 4-10 apartments in Davis typically yield 5-7%, slightly higher than in larger cities due to the consistent demand from university students, faculty, and young professionals. Expect to pay between $1 million and $2.5 million for these properties. These units are particularly appealing to students from UC Davis, young professionals, and small families.
Current trends indicate a growing demand for properties that offer more than just a place to live. Amenities such as in-unit laundry, modern kitchens, communal study areas, and proximity to UC Davis and downtown Davis are highly sought after. Properties featuring bike storage, green spaces, and energy-efficient appliances command higher rents and experience lower vacancy rates.
Single-family homes in Davis offer good appreciation but come with lower rental yields (3-5%). These properties are more expensive, ranging from $800,000 to over $1.5 million, and primarily attract families who tend to stay longer. However, they are less popular among the transient student population.
Condos in Davis offer yields of 4-6% with prices ranging from $500,000 to $1 million. They attract young professionals, university staff, and empty nesters. However, condo association fees can impact overall profitability.
In terms of property appreciation, multi-family units in Davis often see consistent value increases due to their income potential and steady demand. Single-family homes appreciate well but are subject to higher market fluctuations. Condos appreciate steadily, especially those located near the university or downtown, but usually at a slower pace compared to multi-family units and single-family homes.
To maximize rental income with a reliable tenant base in Davis, multi-family units are your best option. They offer a balance of affordability, high demand, and steady appreciation. Including desirable amenities will help you stay competitive in the Davis rental market.
Here is a small summary table to make it easier for you:
Property Type | Average Price Range | Rental Yields | Target Tenants | Key Features & Amenities | Property Appreciation |
---|---|---|---|---|---|
Multi-Family Units | $1M - $2.5M | 5-7% | Students, young professionals, small families | In-unit laundry, modern kitchens, communal study areas, proximity to UC Davis | Consistent value increases due to income potential |
Single-Family Homes | $800K - $1.5M+ | 3-5% | Families | Larger living spaces, yards, more privacy | Significant appreciation but higher market fluctuations |
Condos | $500K - $1M | 4-6% | Young professionals, university staff, empty nesters | Security, maintenance services, proximity to downtown | Moderate appreciation, slower compared to multi-family units and single-family homes |
Don't lose money on your next property in Davis!
Unprepared first-time buyers often end up losing money. Invest only after reviewing all the performance metrics. Get our spreadsheet tailored to Davis, California.
Best neighborhoods in Davis
For long-term rental
When considering long-term residential rental investments in Davis, California, several neighborhoods stand out for their unique appeal and potential for solid returns. Let's dive into the specifics of these areas to help you make an informed decision.
South Davis, Central Davis, and North Davis are among the top neighborhoods to consider. These areas are highly sought after for their distinct characteristics, convenience, and amenities.
In South Davis, you'll find a suburban feel with plenty of parks and family-friendly amenities. Central Davis offers a vibrant, walkable environment close to the University of California, Davis (UC Davis), making it ideal for students and faculty. North Davis is known for its quiet, residential atmosphere and excellent schools.
People are drawn to these neighborhoods for long-term living due to the high quality of life they offer.
South Davis attracts families and professionals who appreciate its suburban charm and proximity to parks and recreational facilities.
Central Davis is popular among students, faculty, and young professionals who value the convenience of being close to UC Davis and the downtown area.
North Davis appeals to families and retirees who seek a peaceful, community-oriented environment with top-notch schools.
Average rental prices in these neighborhoods reflect their desirability. In South Davis, you can expect to pay around $1,800 to $2,200 for a one-bedroom apartment. Central Davis rents are slightly higher, ranging from $2,000 to $2,500 for a one-bedroom. North Davis sees one-bedroom rentals averaging between $1,900 and $2,300.
When it comes to rental yields, these neighborhoods offer competitive returns. South Davis provides yields around 4-5%, while Central Davis and North Davis offer slightly lower yields, around 3.5-4.5%. These yields are attractive, especially considering the long-term appreciation potential in these areas.
The demographic and socioeconomic profiles of tenants in these neighborhoods vary. In South Davis, you'll find a mix of families, professionals, and some retirees. Central Davis is home to students, faculty, and young professionals. North Davis attracts families, retirees, and some professionals.
Looking ahead, these neighborhoods are likely to see continued demand and appreciation. Davis's strong educational and research institutions, particularly UC Davis, will keep drawing high-quality tenants, especially in areas close to the campus and downtown.
The city's ongoing efforts to enhance public spaces, bike paths, and community amenities will also boost the appeal of these neighborhoods.
And a little summary table to make it clearer for you.
Neighborhood | Characteristics | Average Rental Prices (1-Bedroom) | Rental Yields | Tenant Demographics | Future Prospects |
---|---|---|---|---|---|
South Davis | Suburban feel, family-friendly, parks | $1,800 - $2,200 | 4-5% | Families, professionals, retirees | Continued suburban appeal, enhanced amenities |
Central Davis | Vibrant, walkable, close to UC Davis | $2,000 - $2,500 | 3.5-4.5% | Students, faculty, young professionals | Sustained demand from UC Davis, urban improvements |
North Davis | Quiet, residential, excellent schools | $1,900 - $2,300 | 3.5-4.5% | Families, retirees, professionals | Strong community, continued demand for quality schools |
For short-term rental
If you're looking to capitalize on the short-term rental market in Davis, California, you'll want to focus on areas that attract a steady influx of visitors and temporary residents, such as students, visiting scholars, and business travelers.
One of the top neighborhoods for short-term rentals is Downtown Davis. Known for its vibrant atmosphere, proximity to the University of California, Davis (UC Davis), and a variety of dining and entertainment options, Downtown Davis attracts a mix of students, visiting academics, and business travelers.
Average rental prices for short-term stays here can range from $1,800 to $2,500 per month for a one-bedroom apartment. Rental yields in Downtown Davis are generally high due to the constant demand and the willingness of tenants to pay a premium for convenience and proximity to the university.
Another prime area is South Davis. This neighborhood is popular among young professionals and families, given its quieter residential vibe and easy access to both the university and the freeway for commuting. It’s also a favorite among visiting scholars and business travelers due to its suburban feel and amenities.
Short-term rentals in South Davis typically command prices between $1,700 and $2,400 per month for a one-bedroom unit. The rental yields in South Davis are robust, thanks to the high turnover rate and the premium prices driven by tenants seeking a more residential environment.
For a more eclectic and culturally rich experience, the Old North Davis neighborhood is a great choice. This area is popular among tourists looking for a taste of Davis's historic charm and among students and young professionals for its unique character and proximity to the university.
Rental prices in Old North Davis are slightly lower, ranging from $1,600 to $2,300 per month for a one-bedroom apartment. While the yields might not be as high as in Downtown Davis or South Davis, the consistent demand ensures a steady income stream.
Demographically, Downtown Davis attracts a mix of students, visiting scholars, and business travelers who appreciate its vibrant environment and proximity to UC Davis. South Davis, with its quieter residential streets and family-friendly amenities, draws young professionals, families, and visiting academics. Old North Davis sees a diverse group, from young creatives and students to tourists looking to experience its historic charm.
In the coming years, the demand in these neighborhoods is expected to remain strong. The continued growth and reputation of UC Davis will keep Downtown Davis in high demand, while South Davis’s residential appeal will always draw families and professionals. Old North Davis might see an uptick in demand as more people seek neighborhoods with unique character and historic charm.
Neighborhood | Average Rental Prices (1-Bedroom/Month) | Rental Yields | Primary Tenants | Future Outlook |
---|---|---|---|---|
Downtown Davis | $1,800 - $2,500 | High | Students, visiting scholars, business travelers | Consistently strong demand due to proximity to UC Davis |
South Davis | $1,700 - $2,400 | Robust | Young professionals, families, visiting academics | Sustained demand from residential appeal |
Old North Davis | $1,600 - $2,300 | Moderate | Young creatives, students, tourists | Likely increase in demand for historic charm |
Don't lose money on your next property in Davis!
Unprepared first-time buyers often end up losing money. Invest only after reviewing all the performance metrics. Get our spreadsheet tailored to Davis, California.
Other trends to keep in mind
Here is a detailed table of innovations and trends specific to the Davis, California real estate market for buying and renting out properties.
Trend | Description | Impact on Buying/Renting Out |
---|---|---|
Smart Home Technology | Integration of smart home devices such as thermostats, security systems, lighting, and appliances. | Attracts tech-savvy tenants and increases property value. |
Co-living Spaces | Shared living arrangements that offer private bedrooms with shared common areas and amenities. | Popular among UC Davis students and young professionals; can lead to higher rental yields. |
Sustainable and Green Buildings | Properties designed with energy-efficient systems, solar panels, green roofs, and sustainable materials. | Appeals to environmentally conscious tenants; potential for tax incentives and lower utility costs. |
Rent Control and Tenant Protection | Local regulations that limit rent increases and provide strong tenant protections. | Important to understand local regulations to avoid legal issues; limits on rent increases. |
Micro-Apartments | Smaller, more affordable living spaces optimized for efficiency. | High demand among singles and students; lower rental rates per unit but potentially higher occupancy rates. |
Mixed-Use Developments | Projects that combine residential, commercial, and retail spaces in a single development. | Creates vibrant communities; convenience for tenants; potential for higher property value. |
Remote Work Adaptations | Properties with dedicated home office spaces, high-speed internet, and work-friendly amenities. | Attracts remote workers and tech professionals; increases desirability and rental rates. |
Urban Farming and Community Gardens | Incorporation of urban farming spaces and community gardens within residential developments. | Appeals to eco-conscious tenants; promotes community engagement and healthy living. |
Transit-Oriented Developments (TODs) | Developments located near public transportation hubs to reduce reliance on cars. | High demand due to convenience; can lead to higher property values and rental rates. |
Short-Term Rental Regulations | Local laws regulating short-term rentals like Airbnb. | Potential for high income but must comply with strict regulations to avoid fines and legal issues. |
Technology-Enhanced Property Management | Use of apps and software for property management, maintenance requests, and tenant communication. | Streamlines operations; improves tenant satisfaction and retention. |
Neighborhood Revitalization Projects | Investment in improving infrastructure, parks, and public spaces in certain neighborhoods. | Increases property values; makes areas more attractive for tenants and buyers. |
Senior Living Communities | Properties specifically designed for senior citizens with amenities like healthcare, social activities, and accessibility features. | Growing demand due to aging population; stable and long-term tenants. |
Affordable Housing Initiatives | City programs and incentives to develop affordable housing options. | Opportunities for grants and subsidies; important for meeting regulatory requirements and social responsibility. |
Innovative Financing Options | Creative financing solutions such as crowdfunding, real estate investment platforms, and green loans. | Makes property investment more accessible; can provide alternative funding sources for buyers and developers. |
How to maximize your yield and ROI when you invest in residential property in Davis, California?
Investing in the Davis, California real estate market can feel like navigating through a maze of bike paths.
The uncertainties and complexities can be overwhelming, making it difficult to see the potential risks and rewards clearly. But getting the clarity you need isn't as hard as it seems.
Our spreadsheet tool provides a comprehensive overview of your property investment in Davis.
With this tool, you get all the key metrics you need, such as Net Operating Income (NOI), Loan-to-Value (LTV), cap rate, net yield, and more. It's specifically tailored to the Davis market, incorporating the latest real estate data, so you don't have to spend hours researching.
What's unique about our spreadsheet is its user-friendly design. We’ve made sure that everything is explained in plain English, making it accessible even if you’re not a finance expert. You don’t need to worry about complex calculations or confusing setups. Our tool is straightforward and intuitive, helping you make informed decisions without the hassle.
One of the standout features of our spreadsheet is its comprehensive data set. It includes all the average and median values for sale price, price per square foot, cash on cash returns, rental income, and occupancy rates for Davis. This means you can make accurate, data-driven decisions specific to the city's market conditions.
We've also included a dedicated scenario analysis tab. This allows you to modify key parameters like interest rates, rental income, and operational costs to see how different scenarios impact your investment.
By exploring best, worst, and most likely cases, you can uncover hidden risks and opportunities, giving you a solid foundation for decision-making.
Our spreadsheet is designed to ensure you input accurate and meaningful data. We provide guidance and context for every entry, helping you avoid common pitfalls like incorrect NOI or cash flow calculations. This feature alone can save you from overpaying for a property or missing out on a good investment.
If you have any questions, feel free to reach out to us at team@whatsmycashflow.com. Also, you can read this detailed article that explains how the Davis spreadsheet works.
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Our tool covers everything: NOI, COC, Cap Rate, Gross Yield, Net Yield, LTV, ROI, and numerous other metrics and charts.