The UK Telegraph recently ran a story stating the only way for certain cities in the US to survive was to bulldoze down big sections of the city’s homes. Flint, Michigan was the main target of the article, but they referenced many areas in the North East States.
It was not a feel good kind of story, and it should be a wake up call for all real estate investors.
Not all real estate goes up in value. Period.
As a real estate investor, you can buy a well built house at a great price, but it’s not going to matter if you are in a terrible location. It’s why you hear over and over “location, location, location”. Location will determine the tenants you’ll attract, the rental rate you’ll get and your resale value. Even the worst house will increase in value in the right area. But the best house badly located could be doomed to become unsalable and worthless.
So – as a new real estate investor – how can you be certain that you’re not investing in the next city to be bulldozed down?
Market research! It’s Step 2 of our real estate investing process – right after step 1 which is to know your goals.
And with so many new and integrated tools hitting the internet everyday, market research from the comfort of your own home is just getting easier and easier.
Check out some of our favourite market research tools and websites:
- Walkscore: Calculates a walkscore for the property address you input. We love this because you’ll find that the best rental properties are those that are very well located for tenants to walk to schools, mass transit, parks, shopping and other amenities. This program takes it a step further and even breaks it down to show you what is nearby – naming the restaurants, parks, schools, libraries etc. that are within a reasonable walking distance from the property.
- City-data: Trends are your friend as a real estate investor – and in this case you’re looking for trends that indicate that more people are moving into an area AND that those people are making money. So you need to find sources like City-Data that provide you with population, income, and employment statistics. Stats Canada and CMHC are your best sources (for the most part in Canada), but in the U.S. this website is fabulous.
- Trulia: I have some serious envy for our American friends that have awesome websites like Trulia to use for their real estate research. I recently sent a note over to Rudy Bachraty who Tweets on behalf of Trulia (http://twitter.com/trulia) asking if we’d ever see Trulia in Canada and he said “never say never” so I will keep hoping. They have an easy to use search interface, great stats and trends for sub areas within the US and plenty of great resources. Zillow is another great resource that is miles beyond what we’ve got to work with in Canada too … and they have an IPhone App that almost makes me want to turn in my Blackberry AND my Canadian Citizenship.
- Rentometer: If you’re looking to buy a property you want to make sure it’s well located so that it holds it’s value AND attracts good tenants. You also have to understand what kind of rent is reasonable for your property and the area. This little tool is fabulous for quite ballpark estimates of rental rates for properties. We’ve talked about this one over and over – but it’s such an easy to use tool. And while it’s not perfectly accurate – you still have to do comparisons of properties of similar quality and similar amenity offerings, it’s a great little tool for simple rental rate gauges. And they are in Canada. THANK YOU THANK YOU Rentometer!!
- Google Satellite Maps are a great resource for the investor. Even better is Google Streetview – however we don’t have it in Canada just yet. There’s an option for some places in Canada for Streetview-like maps though – head on over to http://www.canpages.ca/ and once you select the business or address you’re looking for click on “Street Scene”. Here’s an example … it’s out front of our favourite local coffee shop in Burnaby.
Of course – we wouldn’t buy a house without knowing an area intimately. There are things you just can’t learn by looking online – like how the area smells, what’s new in the area, what the people are doing to their homes, and other things that you just have to be there to see and understand. But, these tools will sure save you a lot of time and gas money in choosing areas, monitoring them and researching properties when you find out about them!
The only way you can be certain that you are INVESTING your money and not just gambling is to do your research. If you ensure that there are more people moving into an area than leaving, that there’s a sustainable and preferably growing employment base in the area, and that there are amenities near the property you are looking at that will attract and retain good tenants for years to come then you can feel confident that your investment won’t be one in a line up of homes to be bulldozed 5 or 10 years from now!