Growth Markets, or markets poised to appreciate in value, are where the seasoned real estate investors like to invest. Growth market real estate investing can prove to be a very lucrative investment.
A seasoned investor knows that to be an investment, the property MUST generate positive cash flow. When there are sudden market changes, the smart investor who purchased for a variety of different reasons always have cash flow to fall back on.
There are many reasons that people invest in real Estate. Believe it or not the number one answer is NOT cash flow real estate investing, it is long term growth. This is my personal favorite as well. Many people want long term growth, but do not do the diligence to get it. Sometimes we need to go out side of our comfort zones to get what we want. There is a saying “if we are always in our comfort zone you are not growing.”
Why Growth? Wealth is created by growth. I mean, if you have a $100k property and a $250 positive cash flow each month you have earned $3000 per in Cash flow. With a 25 Year National average of a 6% appreciation your growth can generate you $$6000 per year. The next year this appreciation grows off of the new $106k price. Appreciation when purchased in the right location can always trump cash flow.
Truth be told: we are in a global economy now and your backyard may not be positioned for growth. What does the person making a median income in your neighborhood need to pay for housing expense? This should be your number 1 question. A lenders standard is that the total living expense should be 28 percent or less.
What if this was 15%? Do you know markets exist where houses can be purchased for as little as 15% of the area’s household income ? What if you buy in markets with extra low housing costs versus median to high housing costs, which market do you suspect will give you the best growth that can be sustained over time.
Some things to consider are population growth, employment growth, baby boomer appeal. Truth be told, there are many many factors that can and should be considered before purchasing an investment property. There is plenty of growth (appreciation markets) out there, you just need to look for them. This is why so many Foreigners invest here in the USA.
Where to find the best Growth Market Real Estate Investing Opportunities?
The answer to this question ios a moving target and requires some diligence, but hey it is worth it because the growth can be the difference between a great Balance sheet and a balance sheet that will scare the pants off your accountant.
Your Growth Market needs to have sustained growth to get the best outcome so be sure it has:
- A growing population
- A market that is undervalued
- A market that has job growth
- A market that has diversification to its employment industries
- A Market that has a strong need for housing
- A market that has Baby Boomer Appeal
The really cool part is when you do your diligence you can have great Cash Flow AND Growth.
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