Finding the best real estate investment markets is not hard. But, it is a meticulous procedure that you must be careful with.
Understanding that making money in real estate is also about the market you choose to invest in is vital. As a matter of fact, it is almost impossible to find the best real estate investments in the wrong market. So, follow this guide to learn how to find the right real estate markets for your business.
The wrong real estate market may only be one reason you’re not making money in real estate. Learn more: What’s Stopping You from Making Money in Real Estate
Understand the real estate market:
The first thing you must understand about the real estate market is that it’s not perfect. With that in mind, you can easily start your search for the one that makes the most sense for your agenda. Therefore, you just have to get started and make adjustments along the way. Your choice of the best real estate markets must be based on opportunity. After all, an opportunity will always lead you to the best places to invest in real estate.
Your real estate investment strategy is a big deal:
Know for a fact that the best real estate investment markets are those that compliment your investment strategy. In other words, your market of choice must be suitable for whatever investment strategy you choose. For example, you might decide to invest in residential rental properties. In this case, housing markets with high demand for rental property would make for the best real estate investment markets. For that purpose, you want to check the rental demand in that market to make sure the occupancy rate is as high as you want it to be. Moreover, you want to check what type of rental property is on demand in the same market.
Related: How to Make Money in Real Estate? Buy a Rental Property!
Believe us, if you really want to know how to make money in real estate, you want the market to be a match for your strategy. Otherwise, you are risking buying an investment property that is not profitable at all. After a while, you will find yourself trying to sell it for cheap in an attempt to compensate for what you have already lost.
The best real estate investment markets indicate high returns:
You might think that for the best real estate investment markets you only need to look at the surroundings of the investment property. That’s not all you need to consider if you want profitable investment properties.
The best real estate investment markets are also found by performing an investment property analysis. This process helps find the best income properties by calculating the return on investment. As a real estate investor, you want your income property to have a higher return on investment and therefore, higher cap rate and cash on cash return. These are also indicators of great real estate markets as well as a good rental income, especially, if you are interested in the housing market.
Market analysis:
Obviously, for the best real estate investment markets, you want to perform a market analysis. Once you have chosen a location of interest it is time for the two parts of market analysis: the real estate market analysis and the comparative market analysis.
The real estate market analysis is a great indicator of a location’s profitability. After considering all the data you have on a certain location, you will be able to determine two things:
1) You will be able to determine the annual rate of appreciation. As we all know, properties experience a rise in value over time. So, the higher the better.
2) You will be able to determine the median property price of investment properties. This will prevent you from paying much more than what other investment properties are worth in the same market.
On the other hand, the comparative market analysis is also an important part. However, it looks more into the property in comparison to other properties around it. These similar properties are also called the real estate comparables (comps). A real estate investor simply looks into other investment properties that are similar and that have been sold in the last 6 months. This type of analysis will also help you in two ways:
1) It will give you an idea of the median rental income in that specific real estate market. This means that you can determine how much you should charge your tenants for rent.
2) It will also help you estimate the fair market value based on other similar properties in that same market.
Using the right tools:
The right investment tools will help you spot the best real estate investment markets as well. For instance, the rental property calculator is best for rental property real estate investors. Here is how it helps to find the best real estate investment markets:
1) Remember the investment property analysis? Yeah, the rental property calculator calculates just that for rental properties.
2) The rental property calculator, as well as other types of investment tools, will also help analyze locations. In other terms, it performs the real estate market analysis as well as the comparative market analysis for you. As for how it does that, through the heat map analysis, of course. You know how the GPS works. You simply type in the location you desire and it gives you directions to it. That is exactly how it works with the heat map analysis. Click here to learn more about it!
Related: Every Real Estate Investor Needs These Real Estate Analytics Tools
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