Buying for the Market
Part of being successful in the real estate investment business is knowing what to buy and what to sell. That sounds obvious at first glance but by examining the issue a bit further it makes even more sense. You want to buy low and sell high but if you can’t sell the property it doesn’t matter what you paid for it, right?
When analyzing a potential real estate investment, look first at what the market is doing. If you’re interested in a single family home and want to rent it out for income and appreciation, what does the local market look like for a single family rental in the area you’re exploring? Are there other similar rentals in the area? If so, are any of them vacant? If there are no rentals in the area, would you be able to rent it quickly? And if so, why do you think that?
For example, in a neighborhood with an abundance of suburban-style, single family real estate, are there schools nearby and if so, are they good ones? A consistent draw in real estate is the quality of schools in the area. People will buy homes based upon the quality of education and people who can’t afford to buy can also rent. A single family rental in a neighborhood with quality schools is a sure bet to be rented, especially if it’s one of the few if not the only rental in the area.
Another way to buy for the market is determining who typically rents and what do they rent? Most renters fall into the category of single folk. Single people can be recent graduates or college students, divorcees or those who are retired. Such renters don’t need large real estate or otherwise can’t afford a three bedroom house. Real estate for this category means condos in a college town or one-bedroom units that cater to the single renter.
In other words, don’t try to invent a market. Determine ahead of time what people are buying and renting and cater to that audience.