If real estate investing was simple, everyone would be doing it. The truth is, no matter how hard you work on your investment property, certain factors are driving the real estate market that you simply can’t control. These factors will change everything from housing prices to the optimal rental strategy, to your potential return on investment. To become a successful real estate investor, you need to be aware of these factors to evaluate how your real estate market is doing and determine whether or not buying an investment property is a smart decision. Here are 4 of these factors:
Demographics
While demographic factors (such as age, race, gender, and median income) are often overlooked, they’re significant to property investors. Such factors will help you anticipate real estate market trends which, in turn, will influence your investment decision.
Demographic factors also tend to affect the housing market in terms of demand. Property investors should be aware of whether the population is increasing or shrinking. Investing in an area with a growing population means a larger pool of potential tenants and higher occupancy rates. Moreover, when the demand in the real estate market increases, so will home prices and rental rates. As a result, you can charge tenants of your rental properties higher rents and make a good return on investment!
Economic Conditions
There’s a positively correlated relationship between the economy and the real estate market – when one rises, the other rises as well, and when one falls, so does the other. This is why the economy gets blamed for every real estate downturn. First of all, the overall health of the economy plays a major role in the value of real estate properties. Secondly, the job market contributes to the amount of money available for people to buy homes. A city with a stable and growing job market will have a stable and growing housing market.
Job market growth, by itself, is an important factor seeing as it’s tied to the increase in population – markets offering more job opportunities will attract new residents.
Supply of Homes
For many reasons, property investors should keep a close eye on supply vs. demand. To begin with, this determines whether a real estate market is a seller’s or buyer’s market. Additionally, a shortage of supply will push up rental property prices while, on the other hand, a surplus of supply will cause prices to fall.
Geographic Location
The geographic location where the investment property sits also has its influences on the housing market – it explains why some cities are more expensive than others.
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