Your local market plays an important role in what properties are the best
investments. While you should always be looking at prices of property in your
local market, you must also consider what kind of property is selling well. You
may have your eye on a million dollar home that will net you a significant
return when it sells. But if there are few homes of this caliber actually being
bought in the local market, you have to ask yourself whether you can tie up this
kind of money long term.
On the other hand, if there are lots of $100,000 homes changing hands in your
local market, you may be much better off to invest in several houses in this
price range.
And it’s not just because of the amount of the initial investment. If you do
your research, you may find that $100,000 homers are selling much faster than
homes in the $40,000 - $50,000 price range. People tend to buy at the upper end
of what they can afford – true of any local market.
Your local market is likely going to reflect the local economy. For that
reason, your local market research shouldn’t start and stop with what kind of
property is “hot.” Keep an eye and ear to local news. Are there major employers
who are talking about expanding or cutting back? Actions like that will have a
major impact on the local market and real estate trends.
If you’re considering property to offer for rent, you’ll find that the houses
that sell quickly in your local market are probably in the price range of what’s
also being rented most often. Even if you are planning to rent the property
instead of offering it up for sale, your research of the local market will
likely help you make good decisions.
While economic conditions likely play the biggest role in the local market,
don’t overlook the impact that social norms have. If the majority of people in a
particular neighborhood approve of mobile homes as housing, mobile homes are
likely a good investment. This is arguably much less important as people are
more mobile, but social standards do still have a role in the local market.
Another very important (and often overlooked) factor in the local market is
the history of the property itself. If there was a murder that occurred in a
particular house, the local market trends may not apply at all. Those who
remember the event will be more likely to shy away from that particular
property. While you’ll likely still be able to rent or sell the house, the
number of people who know of a negative history will limit the number of
potential buyers or renters.
By the same token, a house with a positive past may very well bring a premium
price on a local market. If someone famous lived (or visited) there, there may
be an increased demand for the property which will raise the price.
There’s no doubt that many factors play into the local market demand for a
particular piece of property. Taking time to consider the potential impact of
details such as the property’s history and the area’s economy will help you make
more informed decisions, earning a better return on your investment.
