Starting Out in Residential Real Estate – How to Assess the Market?
More and more real estate investors seem to be under the impression that one can get rich by using a loan to buy and renovate low value property. It is true that for most investors traditional real estate can a better investment option than the volatility of trading stock. The localized market, inefficiencies and long term prospects all make investing in property a wise choice.
However, to become a true real estate professional, you must understand some key elements of the market. Today we deal with number 1: Understanding when the national market is strong.
Some seasoned professionals will be able to make money, no matter how weak the economy is. However, it is tough to enter the game as newbie when the market is in a bad shape. Rising interest rates and reduced demand for real estate leads to falling property prices. A disheartening situation.
Hence, you should start out when the economic climate leads to dropping interest rates. You are likely to get cheaper loans and more potential clients. Similarly, growing gross domestic (GDP) rates are a sign of improving economy. When you are looking at a minimum of 2.8% annual growth, you can be confident that the real estate market will be going strong for some time. Finally, another way to assess the market is by looking at the official unemployment data in your chosen region. When people lack opportunities in their city/state, sooner or later they will move. This of course quickly leads to the reduction of home price appreciation (HPA).
To sum up: When starting out on the real estate market, look for a local market with strong GDP and acceptable unemployment rates. Making sure to keep on top of these numbers could determine if you make it or break it in real estate.