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When looking for your future investment in real estate, location should be one of the most important selling points for any potential market. Strengthen your existing portfolio or expand into new territories after doing thorough market research on what makes a good home for your next real estate investment.
This article will equip you with the knowledge to identify strong real estate markets, maximize your return on investment, and choose the perfect location for your next property.
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What should I look for?
There are several methods that investors use to identify the best real estate markets for their next investment.
of the best markets for real estate investment have high rental demand – this may mean there are many young people or other demographics who are in transitional stages of their lives. When looking for places with high rental demand, keep in mind that people are looking to rent they are usually under the age of 35. Areas that have college students or young professionals can be strong contenders for the location of your next rental.
High rental rates are another thing to consider as a potential investor. It's a good idea to look for areas that aren't hindered by rent control. If you can find places that have consistently increased their rental rate every year, those areas will have a higher chance of getting you the best return on your investment. Cities with new businesses or large corporations moving in are a great opportunity to see an influx of tenants and rising rental prices.
Other things to look for include lower interest rates and affordable home prices. Keep in mind that landlord-tenant laws vary by state, so settle in a state that has laws that benefit you as much as possible.
Generally, you want to look for real estate appreciation over time. Properties that are in good markets will maintain their value and increase that value year after year.
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It's zooming in
In addition to the general guidelines listed above, what are the macro factors that investors should consider before buying a rental property?
The economy:
It's important to consider the overall health of the economy when buying one investment property. Employment data, GDP and commodity prices will show whether the economy is in a good place or not. If the economy isn't doing well, chances are the real estate market isn't either.
Government policies and subsidies:
The government has ways to temporarily increase the demand for real estate. They supplement this by offering tax credits, rebates, subsidies and other government incentives that can change market supply and demand.
These government incentives can create spurious trends. Without proper knowledge of why demand for real estate is booming, investors may falsely assume that the interest is here to stay when in reality it is temporary and due to a government initiative.
Neighborhood Plans:
Are there plans for new equipment or infrastructure in the area? Green spaces, sidewalks, parks, retail stores or new methods of public transportation can have a strong impact if there is increased interest in neighborhood.
It's also a good idea to consider whether the current equipment in the neighborhood indicates success for your rental business. Consider your ideal tenant – what kind of neighborhood do they live in? Does the neighborhood you're considering have all the elements you just thought of? If not, are there plans to add them in the near future?
What are people saying?
As with any business, Networking and connecting with experts in the space is a great way to expand your knowledge of the area and real estate in general. Meet other experienced real estate agents, developers and investors who have had success in the areas you are considering. Ask them if they have any advice for you and consider their advice when buying your next property.
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US cities with strong markets
Recently, smaller Midwestern and Mid-Atlantic cities have become promising real estate markets. While historically growing markets have focused on the Sun Belt, cities with housing prices that are closer to the national average are now becoming more popular.
Here are some of the best markets to invest in real estate in 2024:
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Raleigh, NC
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Charlotte, NC
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Memphis, TN
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Columbus, OH
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Atlanta, GA
While this list is far from exhaustive, it can potentially guide your search for strong real estate markets and give you a starting point for your search in specific neighborhoods.
When looking at these cities, you should also ask yourself some personal questions to see if the city is right for you. Are you located near the market? If not, do you have existing and trusted contacts in that city, such as property manager or the maintenance contractor? Can you travel to that city several times a year? If you live close to your potential market, consider property tax rates and the overall trajectory of the market based on the metrics discussed above.
Every decision about yours real estate business it must be accomplished with extensive research and much planning. While it is important to note that every investment involves a level of risk, if you do your due diligence and consider all of the above tips, you will have a higher chance of success.