We see articles every day that tease us and get us thinking.
10 Housing Markets Poised to Rebound Soon!
15 Under-priced College Towns!
10 Best Rental Markets!
Should we invest in a market because the headlines are good?
While these headlines are fun to think about, and may offer great insights, they are not enough information to establish whether they are sound investment markets.
You may even look for property in these markets and find you can buy a property that will generate good returns. Are you now satisfied that this is a good investment market? I hope not yet.
There is work still be done. You want to focus your attention on the market’s strength and stability to provide long-term growth and steadily increasing rental rates and values.
It is easy to read a headline that says, “Top 10 rental markets” and get excited. But you want to understand the criteria that led to that conclusion. If it was decided based on the fact the vacancy rate was low, that does not mean the properties there will make a good and sustainable investment. It simply means it is easy to find a tenant.
Making sound and informed decisions requires work. Make a list of criteria that you check and apply to every investment decision you make. Once you fine tune the art of making informed decisions on how to find the best property in the best areas, your investment portfolio will grow safer and stronger.
When you are driving a car, if you are a good defensive driver, you look in the distance. But at the same time, you observe close-by obstacles, red lights and other things that may put you in harm’s way. Real estate investing should be given this same attention to detail. You want to be sure the market you choose has all green lights and no obstacles to threaten your long-term, sustainable returns.
The keys to informed decision making:
- Is there job growth?
- Is there proper job diversity?
- Are incomes on the rise in this market?
- What is the markets income to housing expense ratio? Is it undervalued?
- Is the median home price rising?
- Is the population growing?
- Does the local government have a five, 10- or 20- year economic growth plan?
- Does the market have baby boomer appeal?
- Are insurance and tax rates affordable?
Seasoned investors like Donald trump and Warren Buffet make informed decisions every day. They understand that evaluating information from many different aspects, both macro and micro, is paramount to making sound and informed decisions.