Real estate investors are always on the
There are only two ways to respond. You can stay with the familiar or you can teach yourself to analyze real estate markets from a distance. Investors who stay with the familiar may choose this path because they want to avoid risk. But concentrating your investments in a single location can also be risky. Your entire portfolio could be wiped out in an economic downturn or in a disaster.
On the other hand, buying in far off locations gives resilience to your portfolio because you will minimize your exposure to the threats in your current location. But the question is how do you evaluate the potential of property investments in an unfamiliar city? Is there a reliable method for assessing the viability of their property markets from distance?
The answer is yes. You can successfully buy property in distant cities if you understand how to evaluate the potential of each city.
Upkeep Media Inc., a property management marketing agency, explains factors to look out for in a potential investment location.
#1: Number of Fortune 1000 companies in the city
The Fortune 1000 are the top one
#2: Median household income
This divides the population of a city into two halves, with one half earning more than the median income and the other half earning less than the median income. The higher the median income, the more prosperous the citizens are. This measure gives an indication of the financial resources available to families. And household income is one of the best pointers of the average educational levels of people in an area.
#3: Home value appreciation in the last 10 years
Trends in the prices of homes
#4: Home value appreciation in the last 12 months
Short-term appreciation in the value of homes often happens in response to immediate developments within an area. Home values will surge upward if a major highway or rail line is planned for an area. Home prices also respond to the creation of new school districts and if a major corporation announces plans to site facilities within a city. Home value appreciations over a twelve-month period indicate slowing or accelerating growth.
#5: Median home value
Half of the homes in a city are priced above the median home value, while the other half is priced below it. This is not the same as the average price of homes in an area. Median home value is a better indicator of the performance of an area’s real estate market. This is because the presence of a few homes with unusually low or high prices can skew the average property values in the area. Median home price does not suffer from this problem.
#6: Average rent on 3-bedroom apartments
The reason to focus on homes
#7: Cost of living index
The cost of living index gives
Finally, these numbers are nothing in themselves; they only become significant when used as a means of comparing one location against another. For instance, if two cities show the same promise of economic growth but property prices are lower in one city, the city with lower property prices offers better opportunities. That’s because there may still be a lot of room for home values to appreciate in that location.