If you’re considering investing in real estate one of the first things that you should do to set yourself up for success is to learn your market. As with any profession, in order to be considered the best at what you do, you need to be an expert in your field. As it pertains to real estate, you need to know your target market like the back of your hand. You need to know the neighborhoods, property prices, trends, and growth patterns in that area.
Knowing this basic but fundamental information will not only make you a better investor but also help you to make offers and take action faster. Imagine that a homeowner contacts you to sell their home or house gets listed on the market, and you’re not informed about the neighborhood, don’t know the price points associated with that area, and take forever to do your analysis. What do you think happens next? You guessed it; you miss out on a potentially great opportunity. The cost of not knowing these key pieces of information is that you’ll take longer to assess potential deals and ultimately miss out on an ideal property to a competitor who is better equipped.
In addition to being able to make decisions faster, having this knowledge will serve you greatly when interacting with sellers, buyers, lenders, contractors, and others. Not only can you keep up with the conversation, but it also shows the other party that you take what you do seriously. Knowledge is your greatest weapon in this business.
A few key metrics that you should know include:
- Market Inventory
- Average Days on Market
- Median Sale Price
- Foreclosure Rate
- Zoning Laws
The foreclosure rate is determined by the number of foreclosure filings in a given area divided by the total number of homes in that area. The higher the foreclosure rate is, the more likely it is that the property values in that location will decrease over time. Depending on the area, the foreclosure rate is released either monthly or quarterly.
Zoning refers to local laws or regulations that stipulate how property can or cannot be used in a certain geographic area. A zone is often identified as residential, commercial, industrial, or recreational. Zoning laws often change over time with the growth or development of a city and determine whether existing structures can be added on to or replaced with something new altogether. An example of this would be, the ability to convert a residential property to a commercial property. Another example is being able to add an additional level to a single-family house.
As I mentioned before, zoning laws change, so it’s vital that you keep up with these changes as they occur. Being able to anticipate upcoming changes in your market can help you to focus your investing efforts better, as well as give you an advantage by being one of the first to know. The faster you are able to take action, the better you position yourself to benefit from potential deals ahead of your competitors.
- Tip: Buy a zoning map of your market and get to know the different zones that exist, in addition to the regulations associated with that zone. Also, attend a local zoning meeting if you can.