Choosing the right market when investing in real estate is the key to high returns. You can select a market that provides a high rate of return with almost certainty. The markets can change and economies can crash, so there’s never a 100% guaranteed return, but doing your due diligence can help.
When we select markets to invest in, we do the following:
Research Tax Incentives
Some markets have tax incentives that make them more attractive to buyers. We look for any available incentives on multiple levels:
For example, the New Markets Tax Credit is an opportunity that all real estate investors should know about because it incentivizes 39% of your total investment, over a period of seven years, in the forms of tax credits.
Low-income areas are often looking for investors, too.
In these areas, it may be possible to leverage tax benefits that allow you to buy rental units, fix them up and recuperate some of the costs in the process.
Research Markets for a Variety of Indicators
Market indicators can help you navigate risks and find real estate that is truly worth your investment. The indicators that we look into to help us choose only the best possible investment properties with the lowest risk are:
- Job market. We analyze the job market to make sure that the property is in or close to a thriving job market. When the market is strong, this means that you’ll have less of an issue renting out a property and can reduce the risk that tenants won’t be able to maintain or find a new job.
- Monitor. Renters want to live in areas that have low crime rates and good schools. We monitor both the crime rates and schools to find properties in areas that people can see themselves living and starting a family in.
- Growth and Expansion. A good investment is one that you can rely on today and five years from now. We forecast the city’s state by looking at current city growth and plans that are in motion over the next five years.
- Employers. One sign of a strong local economy is the presence of big companies coming to the area. If Amazon, Microsoft, Google or other large companies are starting to open facilities in the area or have plans to expand into the area, it’s usually a good sign that the local economy and rental market will remain and even grow stronger.
- Tenant or Landlord State. In the ideal situation, we always prefer a state that has laws protecting landlords. A landlord-friendly state removes much of the red tape you have to deal with as a landlord and makes the entire rental process move along smoothly.
- Infrastructure. A city with a strong infrastructure will be a great opportunity for rental investments. Airports or public transportation in or near the city, parks and hospitals are all infrastructure bonuses that we prefer in a rental investment.
When you know what the entire picture is for your potential investment, it makes it much easier to increase your chances of an investment with high returns and low risk.
Click here to learn more about how we select markets to invest in and how we can help you grow your portfolio.