The Geography of Real Estate Investing

The old adage about real estate investing remains as true today as it ever was. In real estate, identifying and tracking investment metrics in geographic markets is critical to understanding whether you are investing a strong and improving market or a troubled declining market. While prospecting for good geographical areas, it is essential that you follow a winning strategy; do thorough research and properly analyze the underlying trends in the market.

Identifying Trends

In general, markets create good investment opportunities when they have increasing demand and provide a good relative value. There are several ways to measure demand. For example, you can look at the number of home sales in an area in the current year compared to the previous years. Keep in mind that listings and sales are indications of market activity, but not necessarily demand.

Services like Zillow provide access to home value trends and other goo indicators. You can also review the average sale prices of apartments and houses in a particular area and compare them with the previous years. This will allow you to calculate the increase or the decrease in the average prices.

Are more tenants coming into the area? If so, then it could be profitable to buy an apartment building there. Are more people putting up sale signs on their homes? Why are they trying to leave the place? Finding out the answers to such questions can prove very useful in making the right decision.

Measuring Accessibility and Potential

Many investors prefer suburbs due to their proximity to the center of the city. The real estate prospector should identify whether the suburb is affordable and how much demand there is within the market. If you are looking for short-term investments (e.g., buy, refurbish, sell), first evaluate whether builders are available on your timeline and how long you reasonably expect to list the property prior to closing a sale.

It goes without saying that one should look out for land that is fairly valued. It should be a desirable location, accessible by public transport such as buses and roads and there should also be considerable investment by the government/public sector.

Job Growth

Locations attractive to the working families, students and the elderly are often very lucrative. If there are a number of students and industrial organizations in the area, this could provide strong long-term demand. You can access employment data from the Bureau of Labor Statistics. When there are a good number of students and employees, there will naturally be greater demand for rental properties as well as new houses and commercial complexes.

However, a sudden drop in jobs in a particular area can also be exploited by buying properties at very low prices and holding onto them until they appreciate back to normal prices. A savvy investor with a good eye for opportunity and the ability to plan for the long-term exit can generate a strong ROI in such a market.

A Final Word

Many successful real estate investors are geographic specialists. Others are product specialist and go for niche prospecting, such as looking for areas that are ideal for offices, industry, retail, residence and so on. Once you have zeroed in on your specialty, you can develop a depth of knowledge about the specialty, providing you an 'unfair advantage' and ensuring maximum returns on your investment.