Top 10 Criteria to Look Out For When Choosing a Market to Invest
You have decided to take the plunge and dive into multifamily real estate investing. Whether you’re investing passively or actively, you should still equip yourself with the basics on how any investor finds a ‘GOOD DEAL.’ Let me walk you through this.
The last thing you want to do is invest in any rental market where it has a multitude of weak factors and low property demand. With that said, here are some things you will need to check off before moving forward with your investment.
Here are 10 factors to consider:
Job Growth: Job opportunities drive population growth, and a strong job market is a good indicator of a strong future population growth in your rental market.
Population Growth: Important criteria when it comes to keeping up with the demand for housing. Lots of people equal lots of demand for housing, resulting in a shortage in some areas! Migration patterns through U-Haul data is one example on how to look at more recent population growth trends.
Job Diversity Look for a market with a variety of industries supporting the local economy. Seek a market with diversity, avoiding dependence on a single industry such as an oil town. Instead, opt for areas with diverse job markets like Tech, Healthcare, etc.
Landlord/Tenant Laws: Understand the landlord/tenant laws pertaining to each state and identify states with very favorable, landlord-friendly laws. Also, get acquainted with local tenant laws that differ according to jurisdiction or county. Stay informed.
Taxes: Taxes impact your bottom line. State income taxes and property taxes will both impact your operating budget, adding to or improving upon your expenses. Some states have higher property tax rates than others, while some economic growth regions offer property tax incentives for investors.
Geographical Features: Examine nearby geographical landscapes of your property address and area. Look out for physical barriers like bodies of water, mountain ranges, or other geographical features that could inhibit local development.
Cost of Living: Seek out areas where the cost of living is low, especially in comparison to the median income in the area. This is a good way to identify areas that experience growth.
Local News: Stay informed about what’s happening in the area politically, weather-wise, or in current events to understand your investment property and the people you’re serving. Understanding the community can help you make the best investment decision.
Local Government: The local government will have an effect on the area’s future standing. Invest in an area with strong, local leadership aligned with the goals of your business plans. Uncover any favorable incentives that local government initiatives support and align with the city’s vision for future development.
Any Unfair Advantages?: Consider if you already know anyone in the prospective rental market you are considering. There is a chance you might have an advantageous edge, especially if you already know someone that lives in your rental market. Pay closer attention to that local market because you might know someone with a connection that can put you ahead of other investors. Use this advantage!
Hopefully this list helped you get acquainted with some of the basic things we look out for when determining where to look to find GOOD DEALS. If you'd like to learn more and you’re ready to take the dive into passive multifamily real estate investing, be sure to tell your sponsor you want to learn much more about the deal at hand, if applicable. Understanding where your sponsor team finds a good deal and how they determined it is a good deal will make you much more confident in such a big decision, and you’ll be happy and at ease once you get some clarity.
The number one thing to keep in mind when deciding if you should or should not invest in the real estate market is your very own personal situation. What are your goals for the next 5 years? Are you looking for a potential place to live, a potential investment opportunity, or something else entirely?
The differences between these markets may not be the fit for you as it could be the perfect fit for a different investor. While there is no one-size-fits-all answer for any investors, the factors provided above will help you narrow down which investment opportunities make the most sense for you to invest in.
We are here to help walk you through your opportunities to invest and help guide you on deals that truly represent your own unique needs when it comes to investing in real estate.
Cheers to your Success!
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