Although every real estate market is unique and holds its own particular set of opportunities, there are four positive market characteristics that make any market in which they occur a little bit brighter. Can you have a good real estate market without all four of these characteristics? Absolutely! But if a market does have even one or two of them, it’s a good sign for an investor that there may be some good potential awaiting.

1| Low Cost of Living

The cost of living index measures the cost of goods and services needed for living, such as groceries, clothing, utilities, housing, transportation, health care, building materials, and eating out. For example, Phoenix, Arizona, has a low cost of living, especially given that it is such a big city. The cost of living in Phoenix is 34.6 percent lower than in Seattle, Washington, for a comparison. A person making $50,000 a year in Seattle would only have to make $32,692 in Phoenix to maintain their current standard of living.

TAKEAWAY:  Low cost of living gives potential renters more disposable income, allowing you to create a positive cash flow on investment properties.

2| Low Cost of Real Estate

Lower real estate costs mean buyers can get more house for their money and more households can potentially own their own homes. This makes a market attractive to both buyers and renters, since most Americans still want to eventually purchase their own property. It also makes a market attractive to landlords and turnkey investors, who can build out portfolios of multiple properties much faster than they might in an area with high real estate costs.

TAKEAWAY: When you can purchase below market or simply at a relatively lower cost, you more easily create a cash flow that allows you to produce income from your real estate investments.

3| Low Property Taxes

When you think about cash flow, you have to include all of the costs associated with owning property. Taxes can be a big chunk of the cost. Make sure you consider property taxes and other associated assessments and fees that may come with a property before you invest.

TAKEAWAY:  If you flip houses to retail buyers, they are likely to be more interested in a home with low property taxes. If you own rentals, then you need to remember you’ll be paying those property taxes yourself, and the lower they are, the better.

4| Great Investment Opportunities for Vacation Rentals

If you are thinking of buying a vacation rental, then you want to be sure the property you buy is in the middle of activities, events, and sight-seeing that people wish to enjoy. Look for warm weather that is pleasant even in the winter, tourism, and recreation, especially golfing. Areas where tourism is a big economic factor are often good vacation-rental investment venues.

TAKEAWAY: If a place is attractive to tourists, it might be a good location for a real estate investment in the form of a vacation rental. Just check the Airbnb policies on a city level!

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  • John Trautman

    John Trautman is founder and CEO of the Real Estate Knowledge Institute (REKI). An author, entrepreneur and longtime real estate investor, he is committed to inspiring and helping other aspiring real estate investors who have an interest in everything from home flipping to buying and selling rental properties to earning passive income through various real estate investments. REKI is the fulfillment of Trautman’s ambition to act as a credible and responsive expert who is available to mentor and counsel individuals about the fundamental rules of real estate investing in an intelligent and straight-forward manner.

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