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What do you look for when you research the potential real estate market for investment? We all know the basics:
- Look for below market value.
- Look for areas with good rental cash flow.
- Find affordable areas popular with renters.
this That leaves a lot of areas for potential investors to choose from.
The fact is, the United States yes The real estate market is extremely diverse and you will need time and patience to real Dig deeper into the local market Detailed to Identify areas with real potential.
sure choose Outsource your research to a local real estate team who will advise you on investment options. Great if you don’t have time to do your thing my own research or if you is a complete beginner and want to minimize risks.
anyway, The disadvantage of this approach is that you only have access to a limited range of options presented to you by your local team. Do yourself my own Research takes a lot of time and effort, and there’s always the possibility of making costly mistakes. However, in my experience, putting in the work pays off in the long run. you only Need to learn to think outside the box.
Here are the less researched, less traditional things I look for in the real estate market before investing.
1. The property just fits my budget
One of the first things to do as a real estate investor you are always told is to set a budget and make sure Stick to it. The question is: you Then purchase 10 Do you have the money to buy a cheap property or two high-end properties? How you answer this question will determine your placement ultimate search For investment properties.
Find areas where you can perhaps Affordable at your price point. This may mean buying fewer properties, but choosing to In the long run, it will bring more positive effects.
Yes, cheaper is better. Investors want cheap housing; renters think Rent is cheap. What are they No thinkHowever, low-cost housing is located in undesirable areas. Regardless, someone who does this is not the type of tenant you want.
You Want Unicorns: Homes Below Market Value OK, attractive area, rents are high, people want to live (more than a year). If this is your end goal, always consider the quality of tenants you want to attract, as well as appreciation. this It won’t be the cheapest property you can find, but it will perform better over time.
So once you determine what you can afford, you can look for markets have better one A house in that price range. have Absolutely no point in going 10 Cheap houses on the outskirts of expensive areas. You can get cash flow with this option, but you can also Finally got Dealing with the various ongoing hassles that come with less-than-ideal neighborhoods—ten times over!
2. Young local population
Surprisingly, many real estate investors still neglect Demographics when considering potential Investment areas. This is why automatic investing places like florida without doing your Research can be so dangerous.
a lot of People search for house prices online, discover that house prices in a particular area are high and rising, and deduce that this offers good investment prospects.
Incorrect. Rising house prices alone do not indicate an area’s investment prospects. if you final investment In a region with limited economic growth and an aging population, you’re going to run into trouble.
Because we’re using this as an example, Florida is a diverse state with some areas known for their wealthy retiree communities and seasonal economies. There are more in other areas Different kinds Demographically andcrucially, Having a diversified economy promotes employment for a young population.
The census data set is a gold mine it works message if you know something you are looking for. In short, you are looking for a rental demand and a growing diversified economy. I tend to extract the following details of local demographics real Gauge the potential of your local real estate market:
- age: Too young may mean migrants can’t afford higher rents; too old, and your main concern is homeowners, the local economy may be limited and stagnant. Ideally I would look for the area Where The number of young professionals aged 25 to 45 is strong and growing.
- Local unemployment rate: The lower the better. anything higher than national unemployment rate should give you pause because it means something is wrong with the local economy.
- Diversified local economy: Next, let me look at the employment status of local people. This is a important This is part of the puzzle because it will tell me whether the local economy is diverse. This data does not appear in the Bureau of Labor Statistics census, but you can easily Obtain from local county or city chambers of commerce and similar organizations.
For example, a quick look at Detroit Area Chamber of Commerce website Tell me, Detroit’s local economy is diverse, with job opportunities evenly distributed between the health, government, manufacturing, and retail sectors. This type of crash is good news for investors: If one element of the local economy declines, the entire economy declines. The local economy will maintain float.
3. Longer local occupation time
Strong rental demand in itself That doesn’t always translate into great real estate investment opportunities. Of course, if your goal is Rent to college students, then you’re looking for a college town.
But the problem in college towns is high tenant turnover. Your average student will move out within a year or two, and those quiet weeks or months during the summer before everyone else moves in will take its toll.
I like to focus on areas where rental demand is high and occupancy times are typically longer long. Longer occupancy means stable cash flow and less maintenance and repairs. Long-term tenants will take better care of your property. They tend to be better settled overall and have more stable employment. This is the gold standard for tenants as investors.
certainly,sooner or lateryou may be having a problem with one of your tenants. this is life. you need yes Ready Respond to a variety of eventualities, including squatters and evictions.
Again, you need to do your research here And make sure you understand local housing laws and regulations. Some areas are a lot of Support landlords more than others.
4. Look beyond metropolitan areas
this Here are my tips for success as a real estate investor. Most people only focus on metropolitan areas because they have only heard of large regions.
Everyone has heard of New York, Miami and Chicago. Likewise, you’d be surprised how many budding investors limit their property search to large metropolitan areas. or they simply don’t do anything Without any in-depth research, I automatically went to the big cities.
but Some of the best deals happen in emerging or secondary markets. These secondary markets are typically located within 30 miles of large metropolitan areas. They offer more affordable housing prices than big cities, But still offers high rental rates and demand.
The area around Orlando, Florida is a perfect example. Housing prices in Orlando are very high and there are strict rules regarding rent. My strategy is to invest in the suburbs and towns outside of Orlando. One such area is Polk County, just south of the city, where home prices are a fraction of those in Orlando but rents are still relatively similar to those in the metropolitan area.
You have to think like a potential tenant here. if you moving If your family moved to a new location, would you choose a super expensive condo in downtown Chicago/Miami/Orlando? don’t you quite Moving further away, say within a 30-minute commute, with more space, a nice yard and less air pollution?
Typically, bustling suburbs main As the number of households increases, so does the rental demand in the metro moving Go to cheaper suburbs and neighboring towns.
A rule of thumb: don’t go too far. Most people don’t want to trade city life for country life. They still want the same perks of city life, just better value for money and a slightly slower pace of life. small The difference is crucial here.
Take Harvest in Alabama. Technically, it’s located in the Huntsville, Alabama, metropolitan area, just a 25-minute drive from Huntsville. But it offers a different vibe than Huntsville itself, with its quiet, close-knit small-town feel and local parks.
Harvest’s median rent is very healthy $1,883—higher than Huntsville itself $1,478. this only suggests that people will still pay more for areas they find generally more attractive and commutable to their jobs.
final thoughts
With these less-studied details, you can build a real estate portfolio that provides better cash flow and is less likely to fail over time. Dig deep, do your due diligence, and you will be rewarded.
This article is provided by “Rent to Retirement”
Rent To Retirement is America’s leading turnkey investment company offering passive income rental properties in America’s best markets to maximize cash flow and appreciation! Rent To Retirement is your partner in achieving financial independence and early retirement through real estate investing. Invest in the best markets available today with a comprehensive team handling everything for you!
Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
