Think about where you were in your investing career a mere twelve months ago. It is quite possible that what may have been a great investing market in the past has taken a turn. What was once a can’t miss opportunity is now something to avoid. Real estate markets change every day. In most cases, the changes are very small. However, over time, there can become shifts that can completely change how you view an investing area. This is the case, whether you are investing in a town ten miles away or have purchased a property four states over. Things will never remain constant in any area. The investors that stay on top of their investing markets will always make the best decisions.
There are many factors that can affect the strength of a particular investing market. Demographics, unemployment data, interest rates, new home starts, foreclosure rates, strength of the economy and government policies are just a few of these factors. Most of these are tied together, but each can be broken down individually and analyzed. This is one of the reasons that investing out of area is as easy as it has ever been. Most of this information can be found on the local websites or in the local town publications. This information was not accessible, even a few years ago, but now there are many websites and ways to obtain this information. Knowing what to look for is one thing, but knowing how they impact you and your investing decisions is what is important.
When evaluating a market, it can be misleading to look solely at which way home prices are headed. This can be an indicator, but in most cases this is the cause of certain effects. If home prices have taken a dip, it is likely that foreclosure rates may have risen. This could be caused by increased taxes, higher unemployment or a sudden drop in home prices. Taking it a step further, taxes may have risen because of an emergency budget deficit and the unemployment numbers may have been caused by a factor closing or stores moving out of the area both of which have a direct impact on property values. If you know the cause, you can determine if the trends are short term or if they will take years to get out from under. If they are short term, you may be able to time the market and get in at a good time. If the issues are only beginning, you want to stay away from this market for the foreseeable future.
Most of this information is available at town hall or on local government websites. You can find out about new home building permits, tax rates and foreclosure rates directly at the local town hall. Other information can be found by talking to local realtors or reading local town newspaper publications. Almost every town has a local weekly or monthly newspaper that is delivered only to town residences. Additionally, there may be a larger one that covers a few towns. If there is talk about a new school in town, it can lower taxes and make an area much more appealing. Conversely, if there is talk about businesses leaving the area or an increased number of retail vacancies, it will cause taxes to rise and leave plenty of homes for sale on the market.
You should also use your realtor to gain specific property information on whatever area you are investing in. They can provide you with the amount of time homes have been on the market, foreclosure rates, single and multifamily sales data and home price trends. You can look at the MLS listing sheets and break down properties that have sold. If it looks like an area is too good to be true, it probably is. The best way to avoid price fluctuations or even losses is by investing in good properties in good areas. If you know that homes have sold quickly and around asking price, you can be confident that this will remain the same and that your investment is solid.
It is also important to make sure you have the most up-to-date information available. If you are going to invest your hard earned money, you don’t want to base your decisions on inaccurate or old information. Information, even six months old, can leave you on the wrong side of a transaction. Use whatever data you find online as a starting point, but always verify that it is accurate through another source.
Markets are like interest rates in that they can change on any given day. In most cases, any changes are slow going and take some time to have an affect. However, the possibility is there. This is why it is so important to get any deals closed or rehabs back on the market as quickly as possible. You can withstand losing a small amount of money because of a price drop on one deal, but if this trend continues over time, your business will suffer. Regardless of your investing market, it is important to stay up to date and know what is going on with it at all times.
