As you know, one of my very favorite topics is real estate investing. There is great potential to build a flourishing real estate business with rental properties and vacation homes!
But one of the most important things to consider when starting out in the business is the demographics of an area. This is key! It’s a no-brainer that you want to be where the people are when you buy. After all, people are the ones renting and buying.
So, it is well worth your time to research the size and health of a market long before purchasing a property. In addition, you should look into where the market is heading in the coming years.
Finally, always remember this helpful hint: the #1 key is finding out how much a property can rent for when you buy.
The following are four questions to ask about real estate markets before purchasing property.
1. Is it a metro area with one million or more in population?
This sort of market is guaranteed to be active and property will consistently be moving. While you don’t have to stick to areas with this size population, know that looking at hugely-populated metro areas will be a good place to start!
If you stick to markets with one million or more in population, you will not have trouble renting your property. That’s what you want, right?
2. Is the population increasing?
You may read this and think it sounds obvious. But you still might not think to check population when considering markets. Don’t forget to check!
Here is some (maybe obvious?) secret sauce for you: if the population is increasing significantly, then people are moving in. And if people are moving in, then you can rest assured that you own a hot property.
3. Is the housing supply diminishing?
If supply is diminishing, then you know the market is active and demand is high. You want to look for a market that has about six months (or more) of supply!
Ask a realtor for the number of listings on July 1st of the last five years and the price per square foot – this will help you determine housing supply.
4. Finally, is job growth taking place?
Job growth is extremely important for the health of a market. This signifies that the overall economy of an area is likely on a good path. And that means that demand will have the chance to be high!
In addition, when job growth is on the uphill, your tenants will be more likely to remain regular with their rent payments and bills. People struggling for jobs will not be looking for a nice home to rent, and they will not (usually) remain as consistent with their payments.
Like I said, demographics are huge. Take these four questions into consideration, and don’t be afraid to ask around to ensure that your questions are answered. There are always markets that meet these four key points, so never limit yourself by staying in a market without good demographic growth.
Have you been in the real estate business long? If so, what would you add to this list? I’d love to hear in the comments!