Investing In "Investor Advantage" Real Estate
“Don't wait to buy real estate, buy real estate and wait”. This is one of my favorite quotes’ from T Harv Eker. Also, this is one that many people from all around the world are taking heed to.
Real estate investing is not just for the wealthy anymore
Many people from all over the world are investing and at a very young age. I personally started my real estate investing at age 15. I have conversations every day with investors from all over the globe and I see many people who want to invest in real estate. I also see that often they miss- understand the principle of “Buy and Hold Investing”.
The idea of “Buy and Hold” does not necessarily mean you buy a property and hold it forever or until the day you die. You simply want to hold a property until the market suggests you sell. As any seasoned investor can tell you it simply means to buy and hold real estate in your portfolio.
The goal is to ride the wave of market performance. When the market says sell, you can then sell and reposition the asset to the next investor advantage markets.
Own real estate in “investor advantaged markets”
Yes, with a global and digital economy we now live in, the number one rule of real estate (location) is easier than ever to follow and use as leverage to your investment success. You may notice that the serious investors of the world such as Warren Buffet do not buy in their own backyard. They buy in “investor advantage markets”.
They follow market trends and see where their investment dollar has the best possible chance of making long term sustainable investments.
Skate to where the puck is going
For you hockey lovers this quote may resonate with you. Perhaps one of the best hockey players of all times, Wayne Gretzky says he wins his games because his playing strategy is different than most. He says. “While most players skate to where the puck is, I skate to where the puck is going”.
This philosophy is paramount for real estate investors to understand
Like the hockey puck, the best real estate investing markets are always moving. The difference is you cannot visually see the move, making it harder to stay ahead of the best cash flow and equity growth markets. Most people rely on listening and learning what others are doing. Once they determine where everyone else is investing and where the best real estate investing markets are, guess what? Correct! The market has already moved.
Keeping your eye on the “investor advantage markets”
Knowing what to look for and watching the trends that make up the investor advantage markets will allow you to invest and win just as Wayne wins in hockey.
Job growth: Look for markets with growing businesses that create new jobs.
Job diversity: Think of markets like Detroit (The Motor City) which had lots of jobs but they were all related to one industry, when the auto industry left, the economy of motor city was devastated.
Similarly was Las Vegas during the recession. It was hit hard as the lion’s share of the economy was driven from the gaming industry. When people could not afford to go do their gaming, the city suffered massive losses.
So an emerging market should indeed have a number of industries fueling the economy. This way if one industry should falter the market can still move forward.
Population growth: Where there is job growth, population growth typically follows. It is important to insure your investing market has a growing population since this increases demand for housing which we all know grows home values.
Undervalued market: A number of markets may fit the top three categories, but for a market to be a sustainable investing market it is important that the market be undervalued. This essentially means that home prices should be less in this market than the national average (the ability to buy a median priced home for 3 times that of a median income).
Long term sustainable growth:
This one is simple but imperative to understand. I was investing for years before even thinking of this concept. For a market to provide long term sustainable growth in prices and rentability, the housing market should afford the average person who makes a median income the ability to buy a median priced home. (Median income times 3) should be the median priced home and then the market is considered an affordable market.
City vision plans: To help insure sustainable growth to a market, I always like to look to markets that have a growth plan. Commonly known as a city’s 5 or 10 and sometimes a 20 year vision plan. When a city has a plan to continue to attract businesses and properly executes that plan, you have a nice sustainable market.
With these 5 guidelines into investor advantage markets you may better understand where your investing markets are heading and you too can be a winner. Just as Wayne Gretzky skates to where the puck is heading you now can invest where the best emerging market trends are heading.