It goes without saying that in order to maximize the return on a real estate investment, including investments in single family rental properties, you should buy at a good price in a market where home values and rents are increasing. But how do you spot those markets?
There are many statistical indicators of the economic health of an area. However, by the time these numbers are reported, other investors know the results too. Here are some things to look at to get ahead of the numbers, and can get a general sense of how a location is faring and how it will perform in the future.
High-Level Indicators of a Hot Market
Look for these indicators that your real estate investment will have a positive initial trajectory:
- Active economic development. Does the city or county have an aggressive plan to attract business? Look at the top 5 or 10 employers in the area – what are their plans for growth or are they stagnant or in decline? Good news in this area could lead to future job growth and rental demand.
- Few “For Sale” signs.When every third house on a street is for sale, you know that inventory is outpacing demand, and while that might be good for buyers in the short term, that’s not a good long-term investment sign.
- Employers are hiring.Check the online employment sites and see if there’s a strong job market today, as more employees mean more renters.
- No retail vacancies. When store fronts are full, it means local small businesses have customers who live in the area.
- Real estate agencies are hiring.When your local realtor is stretched so thin that he or she puts out the call for reinforcements, that’s a good sign. This is especially true since hiring is a long-term commitment, which indicates that at least this particular real estate pro sees the market staying healthy for a while.
If you spot some or all of these trends, then you can do a deeper dive to see whether the trend is likely to continue or may be reaching its peak, and where in the area to find good buying opportunities. Not surprisingly, well-informed single family real estate investors tend to be the most successful single family real estate investors!