Your First Criteria For Investing

REIN GDP Graph.jpgThe idea of investing *locally* sounds great, right?  The term “local” really helps narrows your focus and allows you become a targeted investor.  Well, theoretically, that’s how it should work.  However, the local real estate market must still be analyzed for solid investment opportunities.

So, where should you start?  What core criteria can you use to help evaluate the local market?

First and foremost: Jobs.  Job growth drives real estate appreciation and rent growth through increased demand.

Ideally, you want to identify markets that are adding manufacturing jobs as those types of jobs have a multiplier effect that acts as a magnet for more job growth. This multiplier effect has been cited in numerous studies. For example, Chattanooga, TN is where Volkswagen manufactures cars sold in the US market. The plant presently employs 2,400 people directly, but there are thousands more indirectly employed through VW suppliers and other ancillary organizations.

VW recently announced it will start building a second line (an SUV) here in Chattanooga starting in 2016. That second line means another 2,000 direct jobs at the plant and thousands more as suppliers start to ramp up their own infrastructure to meet demand.

So how does this job growth tie in with real estate? Well, all those people need a place to live. For many people, the increased wages they earn will provide them the opportunity to afford to buy or rent a better house or apartment. Developers rush to meet that demand by constructing new apartment communities or building new sub divisions of homes. Other real estate investors buy and renovate existing homes to sell for profit or rent out as a longer term hold for cash flow. In other words, most everyone wins.

Armed with this knowledge you can now jump on your computer to research various markets. There are some sites like Sperling’s Best Places that attempt to aggregate that info for you. There are also trade magazines (also online) that rank different states and cities for job growth and attractiveness. Census data is another. Generally speaking population growth means job growth. So, growing cities will naturally have more jobs, and vice versa.

Use this information to your advantage and let it act as a guide to your success. Good investing!