Factors in Finding Top Real Estate Investment Markets
Everyone has heard that location is the most important factor when investing in real estate, right? However, what does that really mean? What factors should you know about a location before buying a rental property? Buying a property just because you live nearby, or because your brother lives in the same town and can look after it for you, are the wrong reasons.
Buying in a location with poor returns will make building your real estate business much more challenging. In fact, you are better off buying properties out-of-state than staying local if there is a better possibility for strong returns. The essential strategy for any business is to limit your exposure to risk while maximizing profits. Don’t you agree?
Thanks to the combination of the internet and generally inexpensive travel, more and more real estate investors are seeking opportunities outside their local markets. This is especially true for investors from areas like Southern California, where the price-to-rent ratios often don’t create a good, positive cash-flow. Consequently, many of these investors inevitably start researching places like Ohio, West Virginia, Western Pennsylvania, and other areas of the country for properties to buy and hold.
When it comes to real estate investing, it is all about simple economic concepts, like supply and demand. As with any business, and no matter what your strategy, there needs to be ample demand for the product. This does not mean finding a “hot market” or a “boom town.” It simply requires finding a location in which demand is stronger than the supply. Below are listed several factors you should consider when evaluating buying within a particular real estate market:
Of course, the above list should not be your sole determining factors when investing in rental real estate. Nevertheless, they should be used in conjunction with other measures and metrics. This will boost your confidence in any new out-of-state investment property. Regardless, the most important factor in any real estate market is stability. An ideal location will have historical trends that show low volatility, but with a current economic and population growth upswing.
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