How To Examine The Real Estate Market Prior To Investing

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How To Examine The Real Estate Market Prior To Investing (1)

One of the best investments to make is real estate. It’s a stable investment that brings in passive income, stabilizing your financial situation. However, before you can enjoy that steady flow of income, you must be making the right choice as to what real estate investment to go for. Several markets can bring the income you desire. The best ones are more of an asset than a liability to your finances.

For that to be the case, it’s a must first to examine the Canadian real estate market, among others. This is achieved through analyzing and going through information to help make the right choice. Because real estate is a highly technical industry, performing a market study or analysis can be daunting. So many factors control a real estate market, so even that alone can make the whole process confusing even to start.

This article will go through a detailed discussion that can guide you through studying the real estate market before investing.

Do A Property Analysis

The first step in examining the real estate market is assessing and studying the property you’re keen on investing in. Go as detailed as that before moving to the bigger picture of the area it belongs to.

To do this, as an investor, you should evaluate the following property characteristics:

  • Number of floors of the property;
  • Area and neighborhood it belongs to, such as commercial or central business district, or residential;
  • Amenities and added features;
  • Property size;
  • Proximity to important establishments like schools, hospitals, and a supermarket.

How To Examine The Real Estate Market Prior To Investing (1)

Only when you clearly understand those factors can you stand firm in your choice that the property you’re looking to buy could be a strong potential. Moreover, the characteristics mentioned above also serve as points of comparison, usually between three to five properties around the same area, before finally making a final decision.

Study The Local Pricing

The price per square foot or square meter of real estate properties can differ significantly depending on the area’s location. As a clear example, business districts generally cost more than those in the suburbs or are classified as residential or agricultural lands. Because of those differences in classifications, it’s also important to study local pricing.

Once you’ve determined the land or property classification, compare the property’s price per square foot versus the average fair market value of properties in the same area. Doing so gives you a better idea of whether you’re charged a reasonable price or if the property is too expensive, which is the potential for haggling.

Furthermore, knowing the local pricing in that particular market is also necessary for an investor to compute the return on investment. A smart investor puts a premium on this, so you can be confident that a few years down the road, the real estate property and market you choose to penetrate still stands as a profitable decision.

Get To Know The Demographics

Demographics is another key factor that drives a real estate market. This refers to the composition of the population—like age, gender, race, population growth rate, and average income. Some investors may overlook these facets, but they’re some of the most important when studying how in-demand properties in a specific market are.

There are many ways by which demographics can affect the real estate market. Consider answering questions like:

  • How does the average income in a particular market affect the demand for larger homes as a family grows if the income continues to be small?
  • How does the shift from a big home to a demand for smaller homes once children have moved out affect the average price of real estate in a particular market?
  • Is the market a popular vacation spot? If so, how does the demand for vacation homes, often considered second properties, affect the price per square foot of real estate in that market?

The questions above can be challenging to address, especially if you’re not a resident of that area. However, you can’t go wrong with asking for help from real estate agents or assessors who can explain all those answers to you. Their knowledge-based opinion can help you make an information-based decision, so it’s not simply made on a whim.

The Bottomline

Successful real estate investors have one thing in common: they have an in-depth knowledge of the real estate market they invest in. No one signs the check without having every property and market studied.

Hence, it’s best to ask them any questions about the areas their properties are situated in, and they can give you a clear and thorough answer. It can be much work, but if you want to secure your income potential, it should be done as every prudent investor would.

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