Real estate investing isn’t always a bed of roses, especially in a tough market. However, given that the vast majority of real estate investors say that at the end of the day, they prefer to invest in their “own backyard,” it is vitally important for every investor to understand how to make a less-than-perfect market a perfect fit for them. Fortunately, it doesn’t actually have to be all “rainbows and roses” in your market in order for you to be hugely successful as a real estate investor. In fact, you might be better off it’s not. Here are five tips from Think Realty experts that you can put into action today for better buying, selling, and ROI action tomorrow:
We’ve all heard of “zombie” foreclosures that eventually “ate” the entire neighborhood and pulled property values down while houses sat empty, decaying, and essentially ownerless. A lot of times, that neighborhood blight is the bane of individual investors because it is hard to change things all on your own, but if you can buy up blight where big money is already active, you can ride the wave and benefit from improvements and development on someone else’s dime. Baltimore, Maryland’s “Harbor 2.0” Initiative, a master plan for restoring the city’s historic and somewhat neglected waterfront area, is a great example of this. With a number of publicly-supported institutions already in place, such as the National Aquarium and the Maryland Science Center, and new funding for further updates in hand, investors who purchased blighted properties against the last undeveloped spaces in the area have benefitted from rising property values and new demand for their properties. “The people who bought blighted properties in neighborhoods in the south harbor area a few years ago are pretty happy right now,” observed Carmen Fields, Think Realty’s director of strategic partnerships, after a recent field excursion to the area. Just remember: all blight does not represent opportunity; if you can’t find solid evidence for future growth, your ROI will be in jeopardy.
“Watch for the Cranes”
Whether you’re buying blighted properties or looking out for opportunities to flip already-inhabited homes or add to your rental portfolio, your ability to accurately spot signs of new growth and development will play a crucial role in your profits in your less-than-perfect housing market. “I always watch for the cranes,” Sherman Ragland, a commercial real estate investor in the Washington, D.C. area who also founded RealInvestors’ Academy, told Think Realty. Looking for signs of construction and growth in an area and accurately applying it to your own investing strategy (for example, if you want to court millennial renters then you might buy in a mixed-use area with high walkability) is a great way to optimize your odds in a tough market.
Beware of Municipal Landlord Aggression (Tough Market Indicator!)
Don’t worry: “municipal landlord aggression” isn’t really as complicated as it sounds. It’s just a nice way of saying “If your city has a ‘renters’ bill of rights’ that lets your tenants stay for free for six to 12 months after they stop paying their rent, factor that into your strategy!” Some cities have legislation that usually is very well-intentioned but that puts landlords in serious danger if they place a tenant who fails to pay rent or who damages their property. “The average small business and independent landlord, the majority of rental property owners in fact, are often unaware [of these ordinances],” explained Brian Wojcik, founder and CEO of diyRealty Inc. and president of his local chapter of the National Association of Residential Property Managers. While you may love the idea of owning rental property, if you live in a tough market for landlords you might need to consider investing elsewhere.
Pursue the “Path of Progress”
We’ve already talked about cranes, but now it’s time to talk about roads. If they’re being widened, or if you spot new roads in previously undeveloped or underdeveloped areas of your city, take a second glance. Often this type of expansion can be a precursor to a big job-generator, such as a hospital, manufacturing site, or corporate expansion. New plans for bus routes and other types of transit can also serve as this type of indicator. “Look for the path of progress, literally!” Tammy Phelps, founder of Capital City REIA, a real estate investors association for both residential and commercial real estate investors throughout Washington D.C., Maryland, and Virginia, told Think Realty. “Then, follow it. Carefully, of course!”
Know Your Niche Inside and Out
Real estate investing educators have been talking about niches pretty much since the beginning of real estate investing. There’s a reason: niched investors succeed. Knowing the strategy that is right for you and right for your market plays a key role in your ability to navigate a tough market in a way that others simply cannot replicate – and less competition tends to be a good thing! Whether your specialty is spotting progress where others see nothing but pitfalls or turning gravel pits into multifamily goldmines, the old axiom, “know thyself” will never steer you wrong…as long as you know your market as well.
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Carole VanSickle Ellis is the editor-in-chief of Think Realty Magazine. She can be reached at firstname.lastname@example.org.