Have you ever wondered how some real estate investors unfailingly identify the next hot real estate market or sub-market? Have you found that many of these experts keep this a closely guarded secret?
It really isn’t that hard to do your own due diligence when buying real estate. We’ve provided a list to get you started. Please add your own criteria, based on your specific needs. For example, we will not consider a real estate market unless we are willing to visit the area, and visit often. That’s just a personal rule. You can add your own as you go.
People invest in real estate for the strangest reasons. They take the information a realtor gives them as fact. They buy into their own wishful thinking — often convincing themselves a real estate market is great when it may in fact be on the brink of disaster. They fall in love with a property and fail to see it as a very important investment, one they may have for years and years.
Simply put, many people fail to take the time to do some homework when buying or investing in real estate.
If you are considering relocating to a new area and/or purchasing real estate in a new area, the following criteria can be highly effective in locating hot real estate markets. This list will assist you in doing some homework before investing your time or money in a personal visit to a real estate market, which should always be your next step.
The top real estate markets should have:
- Solid job growth and employment outlook – companies are hiring.
- Growing employment base and jobs – improving economy.
- Good population growth and density.
- Strong rental demand.
- High average market rents OR, rental rates on upward move (at low point).
- Increasing leasing activity without tenant concessions.
- Room for growth; second or third-tier city (population – million or less).
- Mild climate; located in Sunbelt.
- High rating in national quality of life surveys — growing in popularity.
- Median price of homes at 3-4 times median household income.
- Income properties selling for 10 times annual rent or less.
- Average vacancy rate of 7% or less.
- Low crime rates.
- Solvent financing in cities.
- Lower tax rates than national average.
- Location in the county seat.
- Cultural activities, universities, and diverse economies.
- Well established, long histories.
- Low housing inventory.
- Low housing foreclosure numbers.
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Where can I find the listings for potential multifamily and apartments as a newbe to the industry.
Hi Jay,
Your best bet? Networking! Network, network, network—especially with property owners and property managers in your market of choice. Also you’ll find some excellent ideas in my post: Using Apartment Building and Multifamily Property Listing Services to Your Advantage. It might surprise you to know that LoopNet can actually come in handy! Best of luck to you. Thanks so much for your comment!
~Theresa
Hi Theresa, I love your site. Not sure what you mean by “Income properties selling for 10 times annual rent or less” – why this criteria? What specifically do you mean? Thank you so much!
Great question, Juliana. This ratio refers to what’s known as a Gross Rents Multiplier (GRM). The GRM is a very rough screening tool used to compare properties within the same market. GRM’s will vary from market to market and by property class. For more information read Terms All Real Estate Investors Should Know and Understand.
I appreciate your comment, thanks for stopping by!
Best,
Theresa