Before you buy a home, whether to live in or buy it as an investment property, you want to understand the state of the market. And ideally, you’d like to buy a home that will not only retain its value but increase in value over the long term. This protects the value of the investment and justifies increased rents for investment properties. Here are a few tips on how to identify the best real estate markets for your purposes.
Define Your Goals
Some people have a goal of simply living rent free. Some people want to get wealthy through rental real estate; their goal is to build up a portfolio of properties, living off part of the income and investing the rest. Some people love the restoration aspect, looking for properties to buy, fix and flip.
Once you define your goals, you can start looking for the right properties to buy. For example, if you’re looking for steady rental income regardless of where you personally live, you could invest in multi-family housing or several single-family homes to rent out to others. If you’re buying properties to flip, neighborhoods that are at their low and climbing up are a good choice as would be retrofitting an older home in a neighborhood with luxury infill development. If you want to actually live in the complex you manage, your own preferences on local amenities and school districts now matter.
Study the Trends
A real estate market that is hot and has been hot for a long time is going to peak, and the only place it can go from there is down. You know that a market is peaking when demand in that general area is driving people to buy in nearby, less popular neighborhoods. Those are the ideal places to invest, because they are going to go up in value as secondary markets before becoming the “go to” place for the next generation.
Conversely, any market that is going down and has been for a while should be avoided, since you don’t want to take the risk associated with them. Consult with realtors like Murphy Realty - Ulster County to find the neighborhoods that have a strong demand now and in the future.
Don’t forget to study the trend on property tax rates. The last thing you want is a home value and property tax rate going up 10% a year each, causing your total bill to increase roughly 20% a year.
Understand the Laws
Too many would-be real estate investors ignore the legal aspects of owning rental real estate beyond matters like incorporating to minimize personal liability and their taxes. But they don’t take into consideration local landlord laws. In some jurisdictions, landlords have much more obligation, and legislation tends to favor unlawful tenants. So, if you want to deal with minimal legislation and red tape, then you should be looking for a market that respects landlord rights.
If you want to find the best real estate markets, define your goals first, study trends from home values to crime to property tax rates and understand the laws involved, since this can make it impossible to manage a property and still earn a profit.
