Making solid, profitable investments in real estate at all levels is as much an art as it is a science. Don’t feel alone if you’re more familiar with the “art” of the investment than the science involved, but that’s not because it isn’t as important. The fundamentals of the real estate market may be complex, but by and large, the information is available locally or online, and isn’t hard to interpret. Real estate pros know that it pays to spend plenty of time researching the market, but some data is weighted more heavily than others when it comes to getting the biggest return on your investment (ROI).
You can find most of the data you need to get started from local real estate agencies or online regarding these important elements of the market:
The hard work of real estate research starts at finding suitable locations for rental properties. After you’ve identified the demographic segments you want to serve, begin looking for price ranges that match their incomes. Although it’s not necessarily difficult, it is a tedious undertaking unless you work with a realtor or professional real estate agency that typically have these data at their fingertips.
If you want to do your own work, search for your city’s home sales data online. Some local real estate groups provide these data in sufficient detail on their websites and over a long enough time period to provide you with a reliable idea of market pricing.
Property taxes can take a big bite out of your budget, and making them a criterion for property selection as you do your due-diligence could save you money over the long term. Online resources can be helpful, and a good way to start is to search for the county or city real property tax rates. Finding ballpark property tax rates may also be as easy as contacting the jurisdiction’s tax assessor’s office or a local real estate agent.
You’ll find the mill rates, which are expressed as a percentage that is applied to the property’s assessed value.
The laws of supply and demand have a major impact on real estate appreciation, and you can stay on top of the trends by paying attention to:
Local newspapers could be your best resource for these trends. Although it takes some legwork, visit the county and city’s planning and zoning departments to review their meeting agendas, look at maps and talk to a planner about new development submissions.
The U.S. Census Bureau collects building permits from every jurisdiction in the U.S. that are available at www.census.gov/construction/bps/. They’re useful to track and compare to local employment trends. Under normal conditions, building permits and new job formation track closely and indicate growth or decline in market performance.
The first priority of families with children is typically finding a home in an area with a good school district. Public school districts report their testing scores online by state and districts within cities and counties. The website, PSK12.com and a few others, list school districts by state and local area. Some provide spending per pupil, another indicator of performance.
It’s good to know what makes the market tick and where to find the indicators, whether you do the legwork yourself or rely on the expertise of experts, such as a turnkey property management company. In the end, making informed decisions adds a layer of certainty and security about moving forward.