When should I invest in the housing market?

Real Estate Blog

Real estate investing is my favorite form of investing. It’s active, gets you involved and is one of the easiest to understand and get stared in. Many people invest with no clue if the market they are buying into is a good investment market or not. Some make money this way, some lose money this way.

I have been investing in real estate for years and have learned through the experience of both losing money and gaining money that these 6 characteristics will help make sure you’re not overpaying for property and that you are getting a good investment.

  1. Make sure that prices are not more than 2-3 times median income. Search online for the median income and the median sales price of a home in the area that you are looking into. Divide the income into the price and you will have your answer.
  2. Make sure that the monthly rent returns are 1-1.5% of purchase price. It is not the cost of the house that it important. It is actually what the property will rent for that is the most important! When looking at any property, always ask: How much will it rent for?
  3. Be sure the housing supply is diminishing. Analyze the supply and demand of the area by looking at Zillow or a similar website or ask your realtor to help. Divide the houses for sale by the houses sold in one month. That will give you the housing supply. If the housing supply is under 6 months, do not buy! When the housing supply is 6, 7, 8 or 9 months that is a good time to buy!
  4. Check that job growth is taking place. Job growth is extremely important for the overall health of a market. If the economy is on a good path, the demand for housing will be high!
  5. Buy when property taxes are low. Property taxes must be factored in when you purchase a property. It is one of your expenses, so do some research on the cost of taxes. Realtor.com is one website that will show you property taxes.
  6. Buy when prices are still flat or slightly increasing. When the housing market is on the rise is when you want to buy. Do not buy when the prices are high.

A huge part of investing in real estate is knowing how to identify the best markets in which to buy. Using these 6 characteristics will definitely help you value the price of a home. If you have a property you are considering, how does it look using these 6 characteristics? Are you ready to invest or wait a bit longer?

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