Good Long-Term Markets

To maximize your success in real estate, you need to pick your markets carefully. Not all markets in real estate perform the same. In fact, some real estate has not even kept up with inflation over the past 30 years. To maximize your returns, pick good long-term markets and then find the good deals within those markets.

Overview

Look to invest in the markets where people want to move to and are slow to move from. You need to also consider state and local governments and their policies. Pro-business governments attract businesses, which creates jobs, and increases the population and the population's ability to purchase. Also consider scarcity of land that can be developed.

Invest Where People Want to Live

Real estate price increases are a function of supply versus demand. Since, as the saying goes, "They aren't making new dirt", generally, demand is increasing and the supply is staying the same. This causes prices to rise. Cities with faster growth will see this much more profoundly because their demand for housing, recreational land, office space, etc will be increasing faster than a town that the population is hardly changing. Growth can be caused by only a few different variables. Job growth, retirement living, and increasing tourism are the major factors that come to mind. When analyzing your investment areas, part of your strategy for investing should include an understanding that high growth areas stand a better chance of having higher real estate appreciation than low growth areas.

Scarcity is a Major Factor

Scarcity explains why California is one of the most expensive real estate markets and also why Arizona and New Mexico will follow. Though there is no scarcity of land in any of these three states, there is a scarcity of developable land for one reason or another in all three. In California, land is very difficult to develop due to the focus on environmental concerns, creating a shortage. In Arizona and New Mexico, the scarcity is caused by the small portion of land that is held privately vs what is owned by the state and federal governments or the Indian tribes. At some time in the near future, this will become even more apparent as the private land becomes mostly developed and most of what is left is the government and Indian tribal lands.

Demographic Changes

Making good investments requires knowledge of demographic changes. A very obvious one in our day is the upcoming retirement of the "Baby Boomers". This event will have an enormous impact on real estate values in select markets. It is estimated that as many as 60 million "Baby Boomers" will be retiring in the next twenty years. Many of these "Baby Boomers" are looking for a nice place to retire with hopefully some nice mild winters, year-round golfing, and friendly people. Do you think that it will have a major effect on some markets? You bet it will.

But don't stop the demographic analysis there. A rising generation called the "Echo Boomers", a generation with a rough estimated population of 60 million, is taking the stage as some of them now cross into their twenties. Many of them will be renting and many of them buying their first homes over the next ten years. They will also create a major change in the demographics of the country and should be considered in helping you find the right markets.

Look to the Sun-belt States

In addition to having good golfing weather in the winter, the sun-belt states (California, Arizona, New Mexico, Texas) are working very hard right now to attract new businesses (with the exception of California). With business growth, follow new jobs. With new jobs, follows home appreciation.

Arizona and New Mexico Real Estate Markets

The real estate markets that I think are set to maximize the criteria discussed before are Arizona and New Mexico. With their great winter climates, business friendly environments, and high job growth, they are looking to maximize their population growth potential over the next twenty years. Wouldn't it make sense to get involved with the real estate markets in these states early on?

I hope that you have found my analysis insightful. If real estate investment is something that you are interested in, whether you are a pro with a large real estate portfolio looking to add some additional properties, or just looking for someone to help them learn the process and help them get started on their first investment, please call me so we can get started on building wealth for you through real estate.