Real estate is historically one of the most sought-after investments options because if you’re smart about it, assets that tend to increase, or at least hold, their value over time.
As urbanization takes root in previously less-populated places and larger American metros continue to improve, real estate stakeholders have been cashing in larger and larger investments for urban property. There’s still room, however, for the smaller fish to swim. If you want to take a chance on real estate in a bigger city, it’s not too late to find investments with a lot of upside.
It’s normal to have a little hesitance when making such a large investment. For one, investing in urban property does not usually come cheap. But, if done with a level-headed mentality, you can still rake in huge returns from it.
To guide you through it, here are three truths to investing the smart way.
Cast A Wide Net
You cannot simply throw money in any direction and find an amazing deal. Foreclosures are down, competition in the real estate market is taking off in major metros, and banks are once again offering up attractive deals for loans.
One good way to look at is from a general consumer perspective.
Say, you want to buy some coffee. You decide to go out to buy one, since there’s a shop every couple of blocks. You’re probably going to get a nice hot cappuccino for a price of $4. At the store a few minutes further, you can get it at $3. All other things being equal, you have to decide what’s more important to you — convenience or value.
Often, consumers take what’s given to them at first glance. If you take a hard look around for better deals, like the off-the-beaten-path coffee shop, you can usually find a better value.
The same logic applies to real estate. You can speed up the time by having very defined standards that you follow, but in the end you need to cast a wide net and look at a lot of properties.
Proximity is Necessary
A large part of the appeal of being in a metro area is the proximity to a viable job market.
This is something you need to assess. If you’re looking for real estate in a few different cities, find basic figures on the local employment rate, and learn which industries are expanding and which are declining. A smart way to do this is to cruise local job posts. It’s not foolproof, but can give you a snapshot of what you’re dealing with before you investigate further.
The job market makes a property more valuable, whether it’s commercial or residential. Businesses want to rent office space that’s in proximity to cities, people want to be near these businesses for convenience.
If public transportation is efficient or infrastructure makes driving suitable for your target area, that’s even better. In places like this, the value of the city bleeds into the suburbs and surrounding towns because people have easy access to the city center.
If you’re looking to invest in areas on the outskirts of a city, it’s best to talk it over with a good real estate agent. Find the best location with the lowest prices and focus your efforts there. If you still find that there are no decent locations nearby that you can invest in, perhaps it’s time to look outside your area and consider other properties for investment.
Some Cities Are Better Than Others
Some big cities are maxed out and some are ripe for investment.
Real estate isn’t easy to gauge, and that’s why everyone isn’t investing all the time. The market can be volatile, neighborhoods rise and fall, and ultimately, it comes down to a little luck.
The “safest” thing you can do is invest in markets that are historically stable. It may not set your financial world on fire, but it’s your best bet if you’re worried about losing money.
In the United States, these markets are pretty easy to find. There are studies that can lead you in the right direction.
For example, a 2016 study showed that potential investors would be well advised to look in Florida and Texas for real estate opportunities, as 6 of the top 15 cities are located in those states.
At the same time, in four cities among the top 15, it takes 17 to 19 years to pay off median home values based on yearly rents. As with most things, the high-return investments tend to be a little less secured.
As they say, the bigger the risk, the bigger the reward.
Susan Ranford is an expert on job market trends, hiring, and business management. She is the Community Outreach Coordinator for New York Jobs. In her blogging and writing, she seeks to shed light on issues related to employment, business, and finance to help others understand different industries and find the right job fit for them.