The 10 million dollar question: What will real estate investing be like in 2017. This is a very common question in any new year, however it is like asking what will the weather be like in 2017.
Everyone is trying hard to determine what stocks to buy and what stocks to sell in the new year with a new Republican run House and Senate and of course a Trump presidency.
In some regards you may be thinking we are navigating unchartered territories with all the changes happening in the political scene. In some respect we are navigating unknown waters.
For you real estate investors, you too are wanting to know what the housing market will look like in 2017. To this point you may see a mixed bag of information making it difficult to assess your investment strategy. Many are asking why so many people have such a different perspective into what the market for real estate will look like?
The reason of course is because real estate is such a broad topic and there is no such thing as one answer that can answer such a blanket question. Just as you cannot give a national weather forecast, you also cannot give a national real estate investing forecast which is why you are seeing such a broad array of ideas as to what the investing landscape will look like.
Removing the cloud of mystery
Markets always rise and fall, they always have and they always will. Real estate is the same exact way. Locations will rise in value and fall in value. Cash flow will rise in availability and will fall as well.
There fortunately is a way to invest in real estate and safeguard your investment dollar to insure you are investing in a safe and sustainable investment.
The solution of course is making sure you are investing in affordable markets. Not to be confused with affordability to your pocket book but instead the industry standards. You simply want to identify affordable markets. The cities that you invest in you want to be an affordable market. Markets that are running below the national average for affordability is an even safer bet.
Additional Resource: 3 Ways To Know If Your Market Is An Affordable Market
Let’s make it simple
On a national scale, homes are considered to be affordable when it takes only 1/3rd of your income to pay for housing. So looking at the median income of the city you want to invest in, you should be able to pay for the median priced house in this city for 1/3rd (33%) of the median income.
In the simplest terms, median income times 3 should be the median home price. The city you invest in should fit within this rule to be a sustainable investment. If you want to invest in a city where it takes more than 3 times median income to purchase a home you may be in an overpriced markets. The window for sustained value growth or even cash flow growth may be limited.
The flip side is, if you can purchase a median priced home for less than 3 times annual income you may have found an undervalued market which creates a longer sustainable time frame for your investments.
Fundamentals of real estate markets
Of course there are a number of key things to look for:
- Population growth
- Job growth
- Job diversity
- Cities 5 and 10 year vision plans
Seeing it big and keeping it simple will make investing more fun and much more lucrative. Following these simple principles will allow you to make great investments even when you are not sure what the political landscape is looking like.
Investing in affordable markets with strong economic fundamentals will provide you sustainable investments in a time of uncertainty. Whether we have a new political landscape or companies come and go the principles of investing in sustainable markets will always be the same.
Outside forces may change where these markets exist but there will always be investor advantaged markets that are poised for better sustainability and the seasoned investors will always find them with these simple principles.