After seeing certain markets experience huge
gains in the past couple of years, such as Las Vegas and
San Diego, prospective investors are in search of the
next great investment area. Realty Times
columnist, Anthony Carr, provides some helpful advice on
where to make your next investment, in his article,
“Picking and Choosing the Next Real
Estate Boom Area.”
There are ways to invest
and places too invest that should return a nice profit.
You just have to have enough initial cash flow and be
educated to make the right decisions.
“Real
estate, unlike stocks or bonds, is a good investment any time … you just
have to know where to buy. Like the old adage goes:
location, location, location. The location is key and
depends on the economic picture of that location at the
time.”
For example, seven years ago, the
Washington D.C. market experienced a 153 percent profit
within a short period of time. Investors who purchased
multiple properties in the D.C. market during that time,
made an easy and large profit.
The best way to
find the next booming market is to start looking at
smaller markets that show an increase in federal
spending and funds. Once you have an idea of where you
would like to invest, you should follow a few steps
before executing your plan.
First you should
locate low housing prices. “Where do the prices stand as
compared to the potential for rental income? If a rental
unit can be purchased so that the monthly rent covers
the mortgage and tax payments, then this makes for a
good start on the investment road.” A good investment is
if you can make 8 to 12 percent annual return on the value
of a home in rental income.
Next, you should
familiarize yourself with the area’s economy. “You'll be
looking for economic growth as compared to the U.S.
economy and how it's headed as compared to the past few
years. Look for economic forecasts, charts,
employment/unemployment data, etc.” Your main focus at
this time is to decipher whether the area’s economy is
headed up or down.
Another way to help predict
the area’s economy is by looking at its potential
growth. “Are new corporations moving in to the market?
Are current companies expanding their facilities? Are
there job cuts or job growth?”
The last thing to
check out before making an investment is the rental
vacancy rate. “Is there a lot of it? Is there too much
of it? The vacancy rate let's you know how long your property will be on the market
and how much rental income you'll be able to pull in
each month. Will you have a positive or negative cash
flow each month?” Regardless of how the area, economy
and potential for growth looks, it is not wise to invest
in rental properties if the vacancy rate is
high.
There is no magical answer that will link
you to the perfect investment. If there was, everyone
would do it. Research the area and statistics. You
should be confident before committing to an investment.
If there are doubts, you may want to reconsider. |
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