Making money investing in residential real estate takes a lot of diligence and hard work. But fortunately it can be done and has been done by many.
However, successful investing in residential real estate rarely happens by accident and it rarely happens overnight. Those who are able to achieve their financial goals develop a plan and execute on that plan.
But the question still remains – How does the investor determine if it is the right time to begin investing in residential real estate?
There is no doubt that this can be a challenging task. There are many statistics available to the investor that will assist in the process. However, the investor needs to be aware of many of the factors that impact real estate valuation.
Economic factors that influence investing in residential real estate
The investor should evaluate economic demand variables such as employment levels, wage rates, income levels and purchasing power, the availability of financing, interest rates, and transaction costs. The relationship of the local economy, the regional economy, and the national economy require scrutiny by the investor to properly identify the effects of all the variables on residential real estate prices.
Social factors that influence investing in residential real estate
People have the basic desire for territory and companionship. Also, cost and prestige of certain locations motivate people to desire one location over another. The social factors of age distributions, education, crime rates, and pride of ownership, need consideration when analyzing residential real estate use patterns.
Legal, governmental, and political factors that influence investing in residential real estate
Local, regional, and national policies require evaluation to determine any effect on residential real estate prices in a given area. These policies affect the demand, and thus help drive sales prices. Policies on taxation, zoning, use controls, and rent controls can hasten real estate development or retard economic growth. The presence of amenities such as access, schools, public transportation, and fire and police protection influences demand and residential real estate valuations.
Physical, environmental, and locational factors that influence investing in residential real estate
Site and situation attributes enable the investor to analyze and determine patterns and trends in real estate values. Site attributes establish value by allowing the owner to use the inherent resources and features of the property. Common features for consideration in an analysis include size and land topography. Situation attributes establish value by virtue of proximity or accessibility to other resources such as the central business district, a shopping center, a school, a freeway, a waterfront, a sewage treatment plant, or a dump.
There are never any guarantees in real estate. But if astute investors carefully analyze the factors that influence investing in residential real estate, they will be one step ahead of the rest.