There are great profits to be found in the U.S. real estate market. However, few and far between are the ones who actually know where the profits are to be made. Where is this profit? Where are the deals?
While some are griping as American real estate prices continue to climb their way back, others continue to find great deals and profits each month. So what’s the difference between these two types of real estate investors? Is it just about having the right sources? Maybe it is about looking towards other out of area markets?
For the thousands of U.S. real estate investors that have gotten into the market since 2008. property prices are certainly higher. Those that own property are ecstatic about the rise in equity, and rents. However, those out there actively looking for deals are definitely noticing how much higher asking prices are, and how much more competition there is in the market. We’ve been spoiled.
Real estate investors must remember where asset values were before, and where they are going. This is not about speculating, but rather understanding the true value of American real estate.
We have been recovering, but the market has also been waiting for fundamentals to catch up. Look at Phoenix, AZ. It was one of the first cities to start out on the path to recovery. Now, AZ Central reports almost two dozen employers hiring 100 to 1,000 employees in August 2015 alone.
The Factors That Determine Property Value
Most real estate investors are familiar with the concept of comparable market value (aka using comps). However, there are more factors that impact property value and where it is going. They include, but are not limited to:
- Appeal of a given destination
- Demand for housing and land
- Amount of money and credit in the marketplace
- How different destinations compare to each other
- Population growth
- Affordability
Everything down to local weather, the availability of great coffee, and the cost of gas can impact lifestyle, and the appeal of a destination. None of this can be overlooked. This is where visionaries uncover massive value that others overlook. This is where the big leaps in wealth are made.
To win here, investors must invest in their education and knowledge. They need to know historical data and real estate cycles. Travel can help with understanding the larger market, while local stats and an intimidate understanding of the forces at play can aid in pinpointing great individual opportunities.
Understanding ‘Undervalued’
Some properties are clearly on sale in comparison to neighboring properties. Others are ‘undervalued’ because they are ripe with untapped potential. This can be done through rehabbing, renovation, development, and community revitalization. Some markets which may not appear cheap have to be put in perspective in order for real estate investors to see and appreciate their value.
Travel and more data can help with perception, but so can simply watching international home buyers and real estate investors. To the vast majority of the world, America is cheap, even in its most expensive areas. Consider that, while some are shocked at new Miami condos going for over $6,000 per square foot, London property prices are now pushing over $10,000 per square foot. You can bet Miami has a lot better weather. So what if you can find properties selling for less than $400 per square foot with strong local fundamentals and a great lifestyle? Is that a steal?
Value can be found in some really unexpected places. Have you been to Las Vegas recently? Despite the fanfare and international draw of the strip, some may be shocked at just how cheap local properties are selling for.
Then there is San Diego County. San Diego County covers many different and diverse markets. It has become one of the fastest rebounding, and healthiest markets in America. Prices are up, and so is competition. To outsiders that hear this, but have never visited, San Diego may sound like an over-built extremely dense urban core like NYC or San Francisco, where there is no room for growth. Take a trip to downtown San Diego in 2015 and you’ll discover a trendy city, a popular tourist and vacation destination, yet one which offers an amazing spread between older properties ripe for renovation, and cranes putting up brand new skyscrapers. Put simply, the potential for growth is just barely being unwrapped.
Pinpointing the Best Real Estate Investments in America
Whether looking at raw land, new construction, aged neighborhoods or popular cites, pinpointing the best investments for you is really about finding the right match for your personal goals and resources. As far as finding specific opportunities, investors can work on getting better at marketing for deals, leverage local agents, or tapping real estate wholesalers.
