Andrew Vaughey, Real Estate Investor

Author: Seth Joiner

Regardless if we know intimately the area we would like to invest in or if it is across the world we need to understand that in rental markets just like housing markets it is based on supply and demand. If there are a small number of renters and a large number of properties available then we have an imbalance in the market, which always benefits one side over the other.

So then we need to ask what are the factors that we can look for to discover what the supply and demand are for any given area? There really are four main factors to look at when trying to figure out if we should invest or not.

Location

We always hear about location, location, location and to some extent I would agree. When we are talking about real estate we need to look at it from a little different perspective. Do people want to live there? Is it on a busy street? If it is on a busy street then our rental signs will be highly visible and potentially can save us money on advertising the property. Is there a unique quality to the property? Is it on a golf course, great mountain views or on the water?Employment trends

Next we need to find out what the local employment trends are doing. Let’s face it people live where they can find a job and if we can find out if there is job grow or is the job market in decline then we can understand what the market is going to do. Is a big employer leaving or coming into the area?

Now we can say the people might consider commuting great distances to go to and from work, but that will only take us so far. We might be able to draw a 30-45 minute window around the major employers to discover the safe distances, but if we don’t want to gamble with our money then we need to be realistic and find our properties close to where the employers are.

Population growth

Again we need to take a look at the trends. Is there population growth or is the population in decline? This is also has direct correlation to employment so we can use both of these numbers together to discover if our market is right to invest in or not.

Often times the population has a tremendous effect on job growth even though it might be temporary. As in times of great population growth there are new jobs created around the building industry itself to compensate for the population growth. Construction jobs, architects, engineers, real estate professionals etc are all directly affected in a population boom or bust.

Inventory

Even in boom times when every thing is going well there still might be a problem of over build. In other words there are too many houses for too few people to live in them. We need to be very aware of the overall industry and have team members that can help us know what the market is doing.

Property managers and real estate brokers will be invaluable in telling you what the vacancy rates are (high vacancy rates are a clear sign of over build), what the market rents are and what are the different promotions going on to get people into properties. When there are a lot of promotions then you know that supply out paces demand.

The funniest part about all of this is that the market regardless if you are looking in your back yard or across the country is constantly changing and you have to keep up what is happening now and then far into the future. The more that you know the better prepared to make a solid educated decision regarding when or where you should invest.