Get To Know Your Market
September 28, 2008
People invest in real estate all the time. And many fortunes were created with real estate. These fortunes were able to be built because someone took the time to get to know their market. But not understanding what the real estate market is doing can cause serious problems for the investor.
The first thing you should look at is previous sales. You want to know what the selling price of each property was over the last 3 to 6 months. It doesn't matter if the asking price was $200,000. It does matter if the property only sold for $170,000. When you see what properties in the area sold for then you can get a good understanding of what they are worth. And keep in mind that this may NOT always be what the appraisal says. The selling price is what the market will bear - in other words it is what a buyer is willing to pay in today's market!
You will also want to know how long those properties were on the market before they sold. A property that sold for $175,000 may get you excited. But how excited will you be to learn the property was on the market for 2 years before someone bought it? The other houses which sold for $150,000 sold in 3 months. This will help you determine what the market can support whether you plan to purchase new or used.
Researching an area is not hard work, but it can be time consuming. It is worth your time to investigate everything you can about a market. This is your money and you want to make sure it will grow. You do not want to lose money on a deal. Without researching the market and the property, you could lose your hard earned cash.
As you get to know the market you will be able to tell which properties are going to sit and which are going to move. For example, a large property in a small senior area will most likely sit for some time. Many older people are looking for single story homes that are smaller in size. The maintenance and upkeep is cheaper. It is easier to keep clean. And the taxes and insurance are cheaper. To find a two-story four-bedroom property in the middle of two-bedroom ranches may be nice, but it's not a good real estate investment. The market will not support it and the people who are looking in that area will drive right by.
Another area of interest when assessing a property is square footage. When you start to understand the market you will realize this can make a big difference as to whether the is good or not. Just because it's small does not mean it's worth looking at. Determining the square footage of a house is easy. You just measure the total livable space above grade (ground level). A room that does not have a natural heat source, a natural light source, and walk in access cannot be included. This means most rooms in a basement because of a lack of normal size windows, but you can include a finished attic that has a staircase and windows. Large properties can sell or rent quickly in a market that caters to families. And a property that has a small floor plan would likely be better suited for an area where senior citizens reside.
There will be investment properties you run across that seem like a steal. They have everything you might think an investment property should have. But if it's not in the right market then it's probably not a good investment. When you get to know your market, you will know what to buy and what to avoid with confidence.
Marco Santarelli and Norada Real Estate Investments has helped take the guesswork out of real estate investing. From researching top investment markets, to structuring complete turn-key real estate investment property, they empower investors to succeed by maximizing profitability and minimizing risk.
Informative articles and membership are FREE at http://www.NoradaRealEstate.com.
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