4 Tips to Picking The Best Real Estate Investment MarketAug 08, 2023
You’ve made the decision to become a real estate investor. Congratulations! You’ve become part of a select group of individuals who are committed to building generational wealth through the power of real estate investing.
Choosing to invest in real estate was likely a difficult decision to make. Now comes the really hard part; how do you select the right market to invest in?
Luckily, you don’t have to blindly make this decision on your own. In this post, we’ll break down four of the most influential factors to help you select the right real estate market to invest your capital and grow your portfolio.
How to pick the right real estate market to invest in
You’ve likely run through many scenarios in your head. How much money can you make from real estate? What kind of financing do you need to acquire? Is there more value in multi-family real estate investing than limiting yourself to single detached properties? The list goes on.
Every one of those questions is viable and deserves critical thinking to come up with the right answer. However, every one of those hypotheticals is predicated on the type of market to which you choose to invest your capital.
Here’s what you need to consider when selecting the right real estate investment market.
1. Population growth rates
Here in Canada, there are six metropolitan areas with populations that exceed one million people. Another half a dozen areas have populations between 500,000 and 1 million people.
It’s natural to believe that the big cities are your best opportunities to build a lucrative real estate empire. But what you should really consider is the rate of population growth in other cities across the country.
According to Stats Canada, the fastest growing communities are mid-sized cities on both the east and west coasts of the country. Cities like Moncton, Fredericton, Kamloops, and Kelowna, reported some of the highest annualized population growth rates in recent years. Non-coastal cities like Saskatoon and North Bay also reported tremendous population growth rates.
Use this data to get a more holistic view of the country’s migration patterns. Look for markets where growth rates are accelerating because that means real estate is in high demand. Put your money towards a valuable piece of property in one or more of those markets to maximize your rate of return on the investment.
2. Number of high-paying employers
Growing populations means rising demand for real estate. This data gives you a great starting point to zero in on markets with great potential to accumulate more wealth. Just remember that demand is one thing; having the means to follow through on that demand is the other x factor.
Look at the fastest growing markets and the types of employers based in those regions. Are there high-paying jobs waiting to be filled by people who relocate to those communities? If yes, you know that people can afford the type of housing you plan to invest in.
Use Stats Canada’s earnings and payroll data to analyze year-over-year earnings reports broken down by province. A quick search of the existing data highlights Manitoba as the province with the highest year-over-year earnings increases, measured in both national percentages and real dollars.
You can also research local markets online and search the municipal census data for insights into annual incomes by household. Look for the regions that show high numbers of current households making enough money to afford the types of properties you want to invest in. This will help you pick a real estate market with high growth potential.
3. Current demand for real estate investors
By collecting both demographic and employment data in multiple markets, you have a holistic picture that paints the potential return from each market. The next step in your selection process is to determine the demand for real estate investments.
This is the step that new real estate investors often overlook. Market conditions may paint the perfect scenario for a lucrative investment, but those conditions could be a red herring. If there aren’t a sizable number of new developments underway, it suggests that real estate investing is not a scalable business model in those markets.
Similar to your search for employment data, use local census reports to surmise the number of new construction starts in each region. You can also visit Canada Mortgage and Housing Corporation (CMHC) for a summarized view of the number of new housing starts by province.
The CMHC’s data breaks down the construction by different types of housing. According to the numbers, Ontario reports the highest number of single and semi-detached homes currently under construction. However, if you intend to invest in apartments and other multi-family real estate, Quebec reports the highest number of new multi-family developments.
4. Don’t commit to investing in your own backyard
Finally, the fourth biggest tip to selecting the best market to invest in real estate is a psychological consideration. Many investors feel like they have to invest in property that’s close to home so they can keep a close eye on it.
This line of thinking places a serious limitation on your earning potential from real estate. As this post outlines, there’s opportunity to profit from real estate in cities all across Canada. It’s a safe bet that you won’t live in all or even any of the most promising markets.
And that’s ok. You don’t need to invest in your own backyard, especially if you’re investing in multi-family properties. You can hire a building manager to take care of the day to day maintenance and tenant issues with the building. Your job is to simply make sure rent payments come in so you can grow your own personal wealth.
Join a real estate investment community for mentorship
Real estate investing is a big undertaking, and it can feel overwhelming if you’re doing it all on your own. Rather than tough it out as a one-person investment army, consider joining a real estate investment community.
Real estate investment communities are dedicated to helping people just like you accelerate their real estate investing IQ to achieve success. You’ll receive coaching from experienced mentors who can help you avoid the mistakes of early real estate investing ventures. You also can learn from other new investors undergoing the same process and learn from each other as you grow your respective portfolios.
Join the leading real estate investment community today, and learn how to make the most of your investments to achieve game-changing success!
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